Report of the congressional committees investigating the Iran- Contra Affair : with supplemental, minority, and additional views

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100th Congress — 1st Session • January 6-December 22, 1987

Senate Report

No. 216

IRAN-CONTRA INVESTIGATION REPORT

United States Congressional Serial Set
Serial Number 13739

United States Government Printing Office
Washington : 1989

Union Calendar No. 277
100th Congress, 1st Session
S. Rept. No. 100-216 H. Rept. No. 100-433

Report of the Congressional Committees Investigating the

Imn-Contra Affair

With
Supplemental, Minority, and Additional Views

Daniel K. Inouye, Chairman,
Senate Select Committee

Lee H. Hamilton, Chairman,
House Select Committee

U.S. Senate Select Committee

On Secret Military Assistance to Iran

And the Nicaraguan Opposition

U.S. House of Representatives

Select Committee to Investigate

Covert Arms Transactions with Iran

November 17, 1987. — Ordered to be printed.
November 13, 1987. — Committed to the Committee of the Whole House
on the State of the Union and ordered to be printed.

Washington : 1987

For sale by the Superintendent of Documents. U.S. Government Printing Office. Washington, DC 20402

DANIEL K INOUYE. HAWAII CHAIRMAN
WARREN RUDMAN NEW HAMPSHIRE. VICE CHAIRMAN

GEORGE J MITCHELL MAINE
SAM NUNN GEORGIA
PAUL S SARBANES MARVLANO
HOWELL T HEFLIN ALABAMA
DAVID L BOREN OKLAHOMA

JAMES A McCLURE. IDAHO
ORRIN G HATCH UTAH
WILLIAM S COHEN MAINE
PAUL S TRIBLE. JR VIRGINIA

ARTHUR I LtMAN.
CHIEF COUNSEL

MARK A BELNICK
EXECUTIVE ASSISTANT
TO THE CHIEF COUNSEL

PAUL BARBADORO.
DEPUTY CHIEF COUNSEL

MARY JANE CHECCHI,
EXECUTIVE DIRECTOR

ASSOCIATE COUNSELS

C H ALBRIGHT. Jn
DANIEL FINN
C H HOLMES
CHARLES M KERR
JAMES E KAPLAN

JOEL P LISKER
RICHARD D PARRY
JOHN 0 SAXON
TERRY A SMILJANICH
TIMOTHY C WOODCOCK

lanited States Senate

SELECT COMMITTEE ON SECRET MILITARY

ASSISTANCE TO IRAN AND THE NICARAGUAN OPPOSITION

WASHINGTON, DC 20510

November 17, 1987

Honorable John C. Stennis
President pro tempore
United States Senate
Washington, DC

Dear Mr. President:

We have the pleasure to transmit herewith, pursuant to

Senate Resolution 23, the final Report of the Senate Select

Committee on Secret Military Assistance to Iran and the

Nicaraguan Opposition. We will submit such other volumes of

Appendices to the Report as are authorized and as they become

available.

Sincerely,

Daniel K. Inouye
Chairman

U>Xtu»\^^ /^^^m^eU#u>\^

Warren B. Rudman
Vice Chairman

DKI:WBR:cp

(III)

U.S. HOUSE OF REPRESENTATIVES

DICK CHENEV WYOMING
WM S BROOMFieiO MICHIGAN
HfNHY J HYDE ILLINOIS
JIM COURTEH NEW JERSEY
SILL MCCOLLUM. FLORIDA
MICHAEL DiWINE. OHIO

LEE H HAMILTON INDIANA CHAIRMAN

DANTE B EASCELL Fl QRIDA VICE CHAIRMAN

THOMAS S FOLEY WASHINGTON

PETER W RODINO JR NEW JERSEY

JACK BROOKS TEXAS

LOUIS STOKES OHIO

lES ASPIN WISCONSIN

EDWARD P BOLAND MASSACHUSETTS

ED JENKINS, GEORGIA THOMAS R SMEETON MINORITY STAFF DIRECTOR

SELECT COMMITTEE TO INVESTIGATE george van cleve. chief minority counsel

JOHN W NIELDS JR CHIEF COUNSEL RICHARD LEON, DEPUTY CHIEF MINORITY COUNSEL

w NEIL EGGLESTON DEPUTY CHIEF COUNSEL COVERT ARMS TRANSACTIONS WITH IRAN

CASEY MILLER STAFF DIRECTOR

UNITED STATES CAPITOL

WASHINGTON, DC 20515
(202) 225-7902

November 13, 1987

The Honorable Jim Wright
Speaker of the House
U.S. Capitol
Washington, D.C.

Dear Mr . Speaker :

Pursuant to the provisions of House Resolutions 12 and 294,
100th Congress, First Session, I transmit herewith the Report
of the Congressional Committees Investigating the Iran-Contra
Affair, which the Select Committee to Investigate Covert Arms
Transactions with Iran ordered reported to the House on
November 5, 1987. The report includes findings, conclusions
and recommmendations, together with supplemental, minority and
additional views.

Within the next 30 days, the Select Committee will file for
printing the accompanying appendices to the report. The
complete set of appendices will include volumes containing a
chronology of events; a testimonial chronology; miscellaneous
documents used as sources in the committee report; depositions
conducted by the Committees; and an index to the report and
appendices. After filing, the appendices will, where
appropriate, be declassified before they are printed. If
necessary, the Committees will also file an appendix containing
classified information. The appendices will be published as
soon as possible after declassification.

ly yours.

Lee H. Hamilton
Chairman

(V)

United States Senate

Select Committee on Secret Military Assistance
To Iran and the Nicaraguan Opposition

Daniel K. Inouye, Hawaii, Chairman
Warren Rudman, New Hampshire, Vice Chairman

George J. Mitchell, Maine

Sam Nunn, Georgia
Paul S. Sarbanes, Maryland
Howell T. Heflin, Alabama
David L. Boren, Oklahoma

James A. McClure, Idaho

Orrin G. Hatch, Utah

William S. Cohen, Maine

Paul S. Trible, Jr., Virginia

Arthur L. Liman
Chief Counsel

Mark A. Belnick Paul Barbadoro

Executive Assistant Deputy Chief Counsel

To the Chief Counsel

Mary Jane Checchi
Executive Director

Lance I. Morgan
Press Officer

(VI)

United States House of Representatives

Select Committee to Investigate Covert Arms
Transactions with Iran

Lee H. Hamilton, Indiana, Chairman
Dante B. Fascell, Florida, Vice Chairman

Thomas S. Foley, Washington

Peter W. Rodino, Jr., New Jersey

Jack Brooks, Texas

Louis Stokes, Ohio

Les Aspin, Wisconsin

Edward P. Boland, Massachusetts

Ed Jenkins, Georgia

Dick Cheney, Wyoming, Ranking Republican

Wm. S. Broomfield, Michigan

Henry J. Hyde, Illinois

Jim Courter, New Jersey

Bill McCollum, Florida

Michael DeWine, Ohio

John W. Nields, Jr.
Chief Counsel

W. Neil Eggleston
Deputy Chief Counsel

Kevin C. Miller
Staff Director

Thomas R. Smeeton
Minority Staff Director

George W. Van Cleve
Chief Minority Counsel

Richard J. Leon
Deputy Chief Minority Counsel

(VII)

United States Senate
Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition

Arthur L. Liman
Chief Counsel

Mark A. Belnick Paul Barbadoro

Executive Assistant Deputy Chief Counsel

to the Chief Counsel

Mary Jane Checchi
Executive Director

Lance I. Morgan
Press Officer

Associate Counsels

C. H. Albright, Jr.
Daniel Finn
C. H. Holmes
James E. Kaplan
Charles M. Kerr
Joel P. Lisker

W. T. McGough, Jr.
Richard D. Parry
John D. Saxon
Terry A. Smiljanich
Timothy C. Woodcock

Committee Staff

Assistant Counsels

Legal Counsel
Intelligence/ Foreign

Policy Analysts
Investigators

Press Assistant
General Accounting Office
Detailees

Security Officer
Security Assistants

Chief Clerk
Deputy Chief Clerk

Steven D. Arkin*
Isabel K. McGinty
John R. Monsky
Victoria F. Nourse
Philip Bobbitt
Rand H. Fishbein
Thomas Polgar
Lawrence R. Embrey, Sr.
David E. Faulkner
Henry J. Flynn
Samuel Hirsch
John J. Cronin
Olga E. Johnson
John C. Martin
Melinda Suddes*
Robert Wagner
Louis H. Zanardi
Benjamin C. Marshall
Georgiana Badovinac
David Carty
Kim Lasater
Scott R. Thompson
Judith M. Keating*
Scott R. Ferguson

Staff Assistants

Committee Members' Designated Liaison

Senator Inouye
Senator Rudman

Senator Mitchell
Senator Nunn

Senator Sarbanes
Senator Heflin
Senator Boren

Senator McClure
Senator Hatch

Senator Cohen

Senator Trible

Peter Simons
William V. Cowan
Thomas C. Polgar
Richard H. Arenberg
Eleanore Hill
Jeffrey H. Smith
Frederick Millhiser
Thomas J. Young
Sven Holmes
Blythe Thomas
Jack Gerard
Dee V. Benson
James G. Phillips
James Dykstra
L. Britt Snider
Richard CuUen

Administrative Staff

Secretaries

Receptionist

Computer Center Detailee

Part Time*

John K Appleby
Ruth Balin
Robert E. Esler
Ken Foster*
Martin H. Garvey
Rachel D. KaganofT*
Craig L. Keller
Hawley K. Manwarring
Stephen G. Miller
Jennie L. Pickford*
Michael A. Raynor
Joseph D. Smallwood*
Kristin K. Trenholm
Thomas E. Tremble
Bruce Vaughn
Laura J. Ison
Hilary Phillips
Winifred A. Williams*
Nancy S. Durflinger
Shari D. Jenifer
Kathryn A. Momot
Cindy Pearson
Debra S. Sheffield*
Ramona H. Green
Preston Sweet

Assistant Counsel
Hearings Coordinator
Staff Assistants

Interns

Document Analyst

Historian

Volunteers

Peter V. Letsou
Joan M. Ansheles
Edward P. Flaherty, Jr.
Barbara H. Hummell
David G. Wiencek
Nona Balaban
Edward E. Eldridge, III
Elizabeth J. Glennie
Stephen A. Higginson
Laura T. Kunian
Julia F. Kogan
Catherine L Udell
Lyndal L. Shaneyfelt
Edward L. Keenan
Lewis Liman
Catherine Roe
Susan Walsh

•The staff member was not with the Select Committee when the Report was filed but had, during the life of the Committee, provided services.

(VIII)

United States House of Representatives
Select Committee to Investigate Covert Arms Transactions with Iran

Majority Staff

Special Deputy

Chief Counsel
Staff Counsels

Press Liasion
Chief Clerk
Assistant Clerk
Research Director
Research Assistants

John W. Nields, Jr.
Chief Counsel

W. Neil Eggleston
Deputy Chief Counsel

Kevin C. Miller
Staff Director

Charles Tiefer

Kenneth M. Ballen
Patrick J. Carome
V. Thomas Fryman, Jr.
Pamela J. Naughton
Joseph P. Saba
Robert J. Havel
Ellen P. Rayner
Debra M. Cabral
Louis Fisher
Christine C. Birmann
Julius M. Genachowski
Ruth D. Harvey
James E. Rosenthal

Systems Administrator
Systems

Programmer/Analysts
Executive Assistant
Staff Assistants

Catherine L. Zimmer
Charles G. Ratchff
Stephen M. Rosenthal
Elizabeth S. Wright
Bonnie J. Brown
Christina Kalbouss
Sandra L. Koehler
Jan L. Suter
Katherine E. Urban
Kristine Willie
Mary K. Yount

Minority Staff

Associate Minority Counsel
Assistant Minority Counsel
Minority Research Director

Thomas R. Smeeton
Minority Staff Director

George W. Van Cleve
Chief Minority Counsel

Richard J. Leon
Deputy Chief Minority Counsel

Robert W. Genzman
Kenneth R. Buck
Bruce E. Fein

Minority Staff Editor/ tyriter Michael J. Malbin

Minority Executive Assistant Molly W. Tully
Minority Staff Assistant Margaret A. Dillenburg

Committee Staff

Associate Staff

Investigators

Director of Security
Security Officers

Editor

Deputy Editor
Associate Editor
Production Editor
Hearings Editors

Printing Clerk

Robert A. Bermingham
James J. Black
Thomas N. Ciehanski
William A. Davis, III
Clark B. Hall
Allan E. Hobron
Roger L. Kreuzer
Donald Remstein
Jack W. Taylor
Timothy E. Traylor
Bobby E. Pope
Rafael Luna, Jr.
Theresa M. Martin
Milagros Martinez
Clayton C. Miller
Angel R. Torres
Joseph Foote
Lisa L. Berger
Nina Graybill
Mary J. Scroggins
David L. White
Stephen G. Regan
G. R Beckett

Representative Hamilton
Representative Fascell

Representative Foley

Representative Rodino

Representative Brooks
Representative Stokes

Representative Aspin

Representative Boland
Representative Jenkins
Representative Broomfield

Representative Hyde
Representative Courier
Representative McCollum
Representative De Wine

Michael H. Van Dusen
Christopher Kojm
R. Spencer Oliver
Bert D. Hammond
Victor Zangla
Heather S. Foley
Werner W. Brandt
M. Elaine Mieike
James J. Schweitzer
William M. Jones
Michael J. O'Neil
Richard M. Giza
Richard E. Clark
Warren L. Nelson
Michael W. Sheehy
Robert H. Brink
Steven K. Berry
David S. Addington
Diane S. Dornan
Dennis E. Teti
Tina L. Westby
Nicholas P. Wise

General Counsel to the Clerk Steven R. Ross

(IX)

Contents

Origins of This Report XV

Section I: The Report

Part I Executive Summary

Executive Summary 3

Part II Central America

Chapter 1 Introduction: Background on U.S. -Nicaragua Relations 25

Chapter 2 The NSC Staff Takes Contra Policy Underground 31

Chapter 3 The Enterprise Assumes Control of Contra Support 59

Chapter 4 Private Fundraising: The Channell-Miller Operation 85

Chapter 5 NSC Staff Involvement in Criminal Investigations and Prosecutions 105

Chapter 6 Keeping "USG Fingerprints" Off the Contra Operation: 1984-1985 117

Chapter 7 Keeping "USG Fingerprints" Off the Contra Operation: 1986 137

Part III The Arms Sales to Iran

Chapter 8 U.S. -Iran Relations and the Hostages in Lebanon 157

Chapter 9 The Iran Arms Sales: The Beginning 163

Chapter 10 Arms to Iran: A Shipment of HAWKs Ends in Failure 175

Chapter 11 Clearing Hurdles: The President Approves a New Plan 193

Chapter 12 Arms Sales to Iran: The United States Takes Control 213

Chapter 13 Deadlock in Tehran 237

Chapter 14 "Taken to the Cleaners": The Iran Initiative Continues 245

Chapter 15 The Diversion 269

Chapter 16 Summary: The Iran Initiative 277

Part IV Exposure and Concealment

Chapter 17 Exposure and Concealment: Introduction 285

Chapter 18 October 1986: Exposure Threatened 287

Chapter 19 November 1986: Concealment 293

Chapter 20 November 1986: The Attorney General's Inquiry 305

Part V The Enterprise

Chapter 21 Introduction to the Enterprise 327

Chapter 22 The Enterprise 331

Chapter 23 Other Privately Funded Covert Operations 361

Part VI Conclusions and Recommendations

Chapter 24 Covert Action in a Democratic Society 375

XI

Chapter 25 Powers of Congress and the President in the Field of Foreign Policy 387

Chapter 26 The Boland Amendments and the NSC Staff 395

Chapter 27 Rule of Law 41 1

Chapter 28 Recommendations 423

Section II The Minority Report

The Minority Views of Mr. Cheney, Mr. Broomfield, Mr. Hyde, Mr. Courter, Mr.

McCollum, Mr. DeWine, Sen. McClure, and Sen. Hatch 431

Part I Introduction

Chapter 1 Introduction 437

Part II The Foreign Affairs Powers of the Constitution and the Iran-Contra Affair

Chapter 2 The Foreign Affairs Powers and the Framers' Intentions 457

Chapter 3 The President's Foreign Policy Powers in Early Constitutional History 463

Chapter 4 Constitutional Principles in Court 471

Part III Nicaragua

Chapter 5 Nicaragua: The Context 483

Chapter 6 The Boland Amendments 489

Chapter 7 Who Did What to Help the Democratic Resistance 501

Part IV Iran

Chapter 8 The Iran Initiative 519

Chapter 9 Iran: The Legal Issues 539

Chapter 10 The Diversion 549

Part V Disclosures and Investigations

Chapter 11 The Disclosure and the Uncovering 561

Chapter 12 The NSC's Role in Investigations 567

Part VI Putting Congress' House in Order

Chapter 13 The Need to Patch Leaks 575

Part VII Recommendations

Chapter 14 Recommendations 583

Part VIII Appendixes

Section III Supplemental and Additional Views

The Additional Views of Sen. Inouye and Sen. Rudman 637

The Additional Views of Mr. Rodino, Mr. Fascell, Mr. Foley, Mr. Brooks, Mr. Stokes,

Mr. Aspin, and Mr. Boland 639

The Additional Views of Mr. Rodino, Mr. Fascell, Mr. Brooks, and Mr. Stokes 643

The Additional Views of Sen. Boren and Sen. Cohen 651

The Additional and Separate Views of Sen. Heflin 655

The Additional Views of Sen. Boren 657

The Supplemental Views of Sen. McClure 659

The Additional Views of Mr. Broomfield 661

The Supplemental Views of Sen. Hatch 665

The Supplemental Views of Mr. Hyde 667

XII

The Additional Views of Sen. Cohen 673

The Supplemental Views of Mr. McCollum 675

The Additional Views of Sen. Trible 679

Section IV Appendix

Organization and Conduct of the Committees' Investigation 683

XIII

Note on Citations in This Report

Footnotes appear at the end of the each chapter and refer to a variety of sources
available to the Committees. The most common are:

1. Hearings. Refers to The Iran-Contra Investigation: Joint Hearings Before
the House Select Committee to Investigate Coveri Artns Transactions with Iran
and the Senate Select Committee on Secret Military Assistance to Iran and the
Nicaraguan Opposition, 100th Cong., 1st Sess. (Washington: Government Print-
ing Office, 1987, 13 vols.). Most page references in the footnotes are to these
volumes. Because of publication production necessities, however, some references
are to the original transcripts of the hearings. A table converting transcript page
numbers to hearings page numbers is published in the Hearings.

2. Dep. or Depo. A sworn deposition taken in the presence of one or more
Members of the Committees and/or counsel for the Committees, and counsel for
the deponent. Please consult other volumes of the Committees' publications for
further information.

3. Int. An unsworn interview conducted by one or more Committee Members
and/or Committee counsel, with counsel for the interviewee present if the
interviewee wished.

4. PROF Notes. Messages generated on a computer system used by the
National Security Council staff. The exact time and date of the message are
recorded.

5. Tower. Report of the PresidenVs Special Review Board, John Tower,
Chairman (Washington: Government Printing Office, Feb. 26, 1987).

6. Letter and Number Codes. Source and Document File Codes for materials
that have been assigned a Senate letter code and stamped page number. These
materials are stored in the Committees' archives in Washington, D.C.

Preface
Origins of this Report

On November 3, 1986, Al-Shiraa, a Lebanese
weekly, reported that the United States had
secretly sold arms to Iran. Subsequent re-
ports claimed that the purpose of the sales
was to win the release of American hostages
in Lebanon. These reports seemed unbeliev-
able: Few principles of U.S. policy were
stated more forcefully by the Reagan Ad-
ministration than refusing to traffic with ter-
rorists or sell arms to the Government of the
Ayatollah Khomeini of Iran.

Although the Administration initially
denied the reports, by mid-November it was
clear that the accounts were true. The
United States had sold arms to Iran and had
hoped thereby to gain the release of Ameri-
can hostages in Lebanon. However, even
though the Iranians received the arms, just
as many Americans remained hostage as
before. Three had been freed, but three more
had been taken during the period of the
sales.

There was still another revelation to come:
on November 25 the Attorney General an-
nounced that proceeds from the Iran arms
sales had been "diverted" to the Nicaraguan
resistance at a time when U.S. military aid to
the Contras was prohibited.

Iran and Nicaragua — twin thorns of U.S.
foreign policy in the 1980s — were thus linked
in a credibility crisis that raised serious ques-
tions about the adherence of the Administra-
tion to the Constitutional processes of Gov-
ernment.

The public and Members of Congress ex-
pressed deep concern over the propriety and
legality of actions by the staff of the Nation-
al Security Council (NSC) and other officers

of the Government regarding both the arms
sales and the secret assistance to the Contras.

The issue of U.S. support for the Contras
was not new. The President and Congress
had engaged in vigorous debate over the
proper course of U.S. policy, and Congress
had barred U.S. support of Contra military
operations for almost 2 years. Subsequently,
senior Administration officials had assured
Committees of Congress repeatedly that the
Administration was abiding by the law.

The Iran-Contra Affair, as it came to be
known, carried such serious implications for
U.S. foreign policy, and for the rule of law
in a democracy, that the 100th Congress de-
termined to undertake its own investigation
of the Affair.

The inquiry formally began on January 6,
1987, when the Senate, by S. Res. 23, estab-
lished the Select Committee on Secret Mili-
tary Assistance to Iran and the Nicaraguan
Opposition. The next day, the House, by H.
Res. 12, established the Select Committee to
Investigate Covert Arms Transactions with
Iran. The two Chambers charged their re-
spective Committees with investigating four
major areas: arms sales to Iran, the possible
diversion of funds to aid the Contras, viola-
tions of Federal law, and the involvement of
the NSC staff in the conduct of foreign
policy.

The two Committees took the unprece-
dented step of merging their investigations
and hearings and sharing all the information
they obtained. The staffs of the two Commit-
tees worked together in reviewing more than
300,000 documents and interviewing or ex-
amining more than 500 witnesses. The Com-
mittees held 40 days of joint public hearings

XV

Preface

and several executive sessions. The two
Committees then decided to combine their
findings in a joint Report.

The conclusions in this Report are based
on a record marred by inconsistent testimony
and failure on the part of several witnesses
to recall key matters and events. Moreover,
a key witness — Director of Central Intelli-
gence William J. Casey — died, and members
of the NSC staff shredded relevant contem-
poraneous documents in the fall of 1986.
Consequently, objective evidence that could
have resolved the inconsistencies and over-
come the failures of memory was denied to
the Committees — and to history.

Under the American system. Government
is accountable to the people. A public bipar-
tisan investigation such as this one helps to
ensure that the principle of accountability is
enforced for all officials and policies. It
strengthens the national commitment to the
democratic values that have guided the
United States for two centuries.

The President cooperated with the investi-
gation. He did not assert executive privilege;
he instructed all relevant agencies to
produce their documents and witnesses; and

he made extracts available from his personal
diaries, although he rejected the Committees'
request to refer to those entries in this Report
on the ground that he did not wish to estab-
lish a precedent for future Presidents.

The Committees also received unprece-
dented cooperation from a sovereign nation,
the State of Israel. Although not willing to
allow its officials to be examined, the Gov-
ernment of Israel assembled and furnished
the Committees with extensive materials and
information, including information affecting
its national security.

The Committees' investigation of the Iran-
Contra Affair is not the first, following as it
does the findings of the Senate Select Com-
mittee on Intelligence and the President's
Special Review Board (known as the Tower
Board); nor will it be the last, for the investi-
gation of the Independent Counsel assigned
to this matter continues.

But the Committees hope this Report will
make a contribution by helping to explain
what happened in the Iran-Contra Affair,
and by helping to restore the public's confi-
dence in this Nation's Constitutional system
of Government.

XVI

Section
The Report

Part I
Executive Summary

The full story of the Iran-Contra Affair is
complicated, and, for this Nation, profoundly
sad. In the narrative portion of this Report,
the Committees present a comprehensive ac-
count of the facts, based on 10 months of
investigation, including 1 1 weeks of hearings.
But the facts alone do not explain how or
why the events occurred. In this Executive
Summary, the Committees focus on the key
issues and offer their conclusions. Minority,
supplemental, and additional views are print-
ed in Section II and Section III.

Summary of the Facts

The Iran-Contra Affair had its origin in two
unrelated revolutions in Iran and Nicaragua.

In Nicaragua, the long-time President,
General Anastasio Somoza Debayle, was
overthrown in 1979 and replaced by a Gov-
ernment controlled by Sandinista leftists.

In Iran, the pro-Western Government of
the Shah Mohammed Riza Pahlavi was over-
thrown in 1979 by Islamic fundamentalists
led by the Ayatollah Khomeini. The Kho-
meini Government, stridently anti-American,
became a supporter of terrorism against
American citizens.

Nicaragua

United States policy following the revolu-
tion in Nicaragua was to encourage the San-
dinista Government to keep its pledges of
pluralism and democracy. However, the San-
dinista regime became increasingly anti-
American and autocratic; began to aid a left-
ist insurgency in El Salvador; and turned
toward Cuba and the Soviet Union for politi-
cal, military, and economic assistance. By
December 1981, the United States had begun

supporting the Nicaraguan Contras, armed
opponents of the Sandinista regime.

The Central Intelligence Agency (CIA)
was the U.S. Government agency that assist-
ed the Contras. In accordance with Presiden-
tial decisions, known as Findings, and with
funds appropriated by Congress, the CIA
armed, clothed, fed, and supervised the Con-
tras. Despite this assistance, the Contras
failed to win widespread popular support or
military victories within Nicaragua.

Although the President continued to favor
support of the Contras, opinion polls indicat-
ed that a majority of the public was not
supportive. Opponents of the Administra-
tion's policy feared that U.S. involvement
with the Contras would embroil the United
States in another Vietnam. Supporters of the
policy feared that, without U.S. support for
the Contras, the Soviets would gain a dan-
gerous toehold in Central America.

Congress prohibited Contra aid for the
purpose of overthrowing the Sandinista
Government in fiscal year 1983, and limited
all aid to the Contras in fiscal year 1984 to
$24 million. Following disclosure in March
and April 1984 that the CIA had a role in
connection with the mining of the Nicara-
guan harbors without adequate notification
to Congress, public criticism mounted and
the Administration's Contra policy lost much
of its support within Congress. After further
vigorous debate. Congress exercised its Con-
stitutional power over appropriations and cut
off all funds for the Contras' military and
paramilitary operations. The statutory provi-
sion cutting off funds, known as the Boland
Amendment, was part of a fiscal year 1985
omnibus appropriations bill, and was signed

Executive Summary

into law by the President on October 12,
1984.

Still, the President felt strongly about the
Contras, and he ordered his staff, in the
words of his National Security Adviser, to
find a way to keep the Contras "body and
soul together." Thus began the story of how
the staff of a White House advisory body,
the NSC, became an operational entity that
secretly ran the Contra assistance effort, and
later the Iran initiative. The action officer
placed in charge of both operations was Lt.
Col. Oliver L. North.

Denied funding by Congress, the President
turned to third countries and private sources.
Between June 1984 and the beginning of
1986, the President, his National Security
Adviser, and the NSC staff secretly raised
$34 million for the Contras from other coun-
tries. An additional $2.7 million was provid-
ed for the Contras during 1985 and 1986
from private contributors, who were ad-
dressed by North and occasionally granted
photo opportunities with the President. In
the middle of this period. Assistant Secretary
of State A. Langhorne Motley — from whom
these contributions were concealed — gave
his assurance to Congress that the Adminis-
tration was not "soliciting and/or encourag-
ing third countries" to give funds to the
Contras because, as he conceded, the Boland
Amendment prohibited such solicitation.

The first contributions were sent by the
donors to bank accounts controlled and used
by the Contras. However, in July 1985,
North took control of the funds and — with
the support of two National Security Advis-
ers (Robert McFarlane and John Poindexter)
and, according to North, Director Casey —
used those funds to run the covert operation
to support the Contras.

At the suggestion of Director Casey,
North recruited Richard V. Secord, a retired
Air Force Major General with experience in
special operations. Secord set up Swiss bank
accounts, and North steered future donations
into these accounts. Using these funds, and
funds later generated by the Iran arms sales,
Secord and his associate, Albert Hakim, cre-

ated what they called "the Enterprise," a
private organization designed to engage in
covert activities on behalf of the United
States.

The Enterprise, functioning largely at
North's direction, had its own airplanes,
pilots, airfield, operatives, ship, secure com-
munications devices, and secret Swiss bank
accounts. For 16 months, it served as the
secret arm of the NSC staff, carrying out
with private and non-appropriated money,
and without the accountability or restrictions
imposed by law on the CIA, a covert Contra
aid program that Congress thought it had
prohibited.

Although the CIA and other agencies in-
volved in intelligence activities knew that
the Boland Amendment barred their involve-
ment in covert support for the Contras,
North's Contra support operation received
logistical and tactical support from various
personnel in the CIA and other agencies.
Certain CIA personnel in Central America
gave their assistance. The U.S. Ambassador
in Costa Rica, Lewis Tambs, provided his
active assistance. North also enlisted the aid
of Defense Department personnel in Central
America, and obtained secure communica-
tions equipment from the National Security
Agency. The Assistant Secretary of State
with responsibility for the region, Elliott
Abrams, professed ignorance of this support.
He later stated that he had been "careful not
to ask North lots of questions."

By Executive Order and National Security
Decision Directive issued by President
Reagan, all covert operations must be ap-
proved by the President personally and in
writing. By statute. Congress must be noti-
fied about each covert action. The funds
used for such actions, like all government
funds, must be strictly accounted for.

The covert action directed by North,
however, was not approved by the President
in writing. Congress was not notified about
it. And the funds to support it were never
accounted for. In short, the operation func-
tioned without any of the accountability re-
quired of Government activities. It was an

Executive Summary

evasion of the Constitution's most basic
check on Executive action — the power of
the Congress to grant or deny funding for
Government programs.

Moreover, the covert action to support the
Contras was concealed from Congress and
the pubHc. When the press reported in the
summer of 1985 that the NSC staff was en-
gaged in raising money and furnishing mili-
tary support to the Contras, the President
assured the public that the law was being
followed. His National Security Adviser,
Robert C. McFarlane, assured Committees of
Congress, both in person and in writing, that
the NSC staff was obeying both the spirit
and the letter of the law, and was neither
soliciting money nor coordinating military
support for the Contras.

A year later, McFarlane's successor. Vice
Admiral John M. Poindexter, repeated these
assurances to Congressional Committees.
Then, with Poindexter's blessing. North told
the House Intelligence Committee he was
involved neither in fundraising for, nor in
providing military advice to, the Contras.

When one of Secord's planes was shot
down over Nicaragua on October 5, 1986,
the President and several administration
spokesmen assured the public that the U.S.
Government had no connection with the
flight or the captured American crew
member, Eugene Hasenfus. Several senior
Government officials, including Elliott
Abrams, gave similar assurances to Congress.

Two months later, McFarlane told Con-
gressional Committees that he had no knowl-
edge of contributions made by a foreign
country. Country 2, to the Contras, when in
fact McFarlane and the President had dis-
cussed and welcomed $32 million in contri-
butions from that country. In addition,
Abrams initially concealed from Congress —
in testimony given to several Committees —
that he had successfully solicited a contribu-
tion of $10 million from Brunei.

North conceded at the Committees' public
hearings that he had participated in making
statements to Congress that were "false,"
"misleading," "evasive and wrong."

During the period when the Administra-
tion was denying to Congress that it was
involved in supporting the Contras' war
effort, it was engaged in a campaign to alter
public opinion and change the vote in Con-
gress on Contra aid. Public funds were used
to conduct public relations activities; and
certain NSC staff members, using the pres-
tige of the White House and the promise of
meetings with the President, helped raise pri-
vate donations both for media campaigns and
for weapons to be used by the Contras.

Pursuant to a Presidential directive in 1983
the Administration adopted a "public diplo-
macy" program to promote the President's
Central American policy. The program was
conducted by an office in the State Depart-
ment known as the Office for Public Diplo-
macy for Latin America and the Caribbean,
(S/LPD). S/LPD's activities were coordi-
nated not within the State Department, but
by an interagency working group established
by the NSC. The principal NSC staff officer
was a former senior CIA official, with expe-
rience in covert operations, who had been
detailed to the NSC staff for a year with
Casey's approval, and who upon retirement
from the CIA became a Special Assistant to
the President with responsibility for public
diplomacy matters.

S/LPD produced and widely disseminated
a variety of pro-Contra publications and ar-
ranged speeches and press conferences. It
also disseminated what one official termed
"white propaganda": pro-Contra newspaper
articles by paid consultants who did not dis-
close their connection to the Administration.
Moreover, under a series of sole source con-
tracts in 1985 and 1986, S/LPD paid more
than $400,000 for pro Contra public relations
work to International Business Communica-
tions (IBC), a company owned by Richard
Miller, whose organization was described by
one White House representative as a "White
House outside the White House."

The Administration, like Members of Con-
gress, may appeal directly to the people for
support of its positions; and government
agencies may legitimately disseminate infor-

Executive Summary

mation and educational materials to the
public. However, by law appropriated funds
may not be used to generate propaganda
"designed to influence a Member of Con-
gress;" and by law, as interpreted by the
Office of the Comptroller General, appropri-
ated funds may not be used by the State
Department for "covert" propaganda activi-
ties. A GAO report concluded that S/LPD's
white propaganda activities violated the ban
on arranging "covert propaganda."

Private funds were also used. North and
Miller helped Carl R. "Spitz" Channell raise
$10 million, most of which went to Chan-
nell's tax-exempt organization, the National
Endowment for the Preservation of Liberty
("NEPL"). They arranged numerous "brief-
ings" at the White House complex on Cen-
tral America by Administration officials for
groups of potential contributors. Following
these briefings, Channell reconvened the
groups at the Hay-Adams Hotel, and made a
pitch for tax-deductible contributions to
NEPL's Central America "public education"
program or, in some individual cases, for
weapons. Channell's major contributors were
given private briefings by North, and were
afforded private visits and photo sessions
with the President. On one occasion, Presi-
dent Reagan participated in a briefing.

Using the donated money, Channell ran a
series of television advertisements in 1985
and 1986, some of which were directed at
television markets covering the home dis-
tricts of Congressmen considered to be
"swing" votes on Contra aid. One series of
advertisements was used to attack Congress-
man Mike Barnes, a principal opponent of
Contra aid, and one of the Congressmen to
whom Administration officials had denied
violating the Boland Amendment in Septem-
ber of 1985. Channell later boasted to North
that he had "participated in a campaign to
ensure Congressman Barnes' defeat."

Of the $10 million raised by North, Chan-
nell and Miller, more than $1 million was
used for pro-Contra publicity. Approximate-
ly $2.7 million was sent through IBC and
off-shore accounts of another Miller-con-

trolled company to Secord's Swiss accounts,
or to Calero's account in Miami. Most of the
remainder was spent on salaries and expenses
for Channell, Miller and their business asso-
ciates.

NEPL's charter did not contemplate rais-
ing funds for a covert war in Nicaragua, and
the Internal Revenue Service never ap-
proved such activity when NEPL was grant-
ed exempt status. As a consequence, Chan-
nell and Miller have each pleaded guilty to
the crime of conspiring to defraud the
United States Treasury of revenues "by sub-
verting and corrupting the lawful purposes
of NEPL." Channell named North as a co-
conspirator.

In private fundraising, as in the "white
propaganda" campaign, the goal of support-
ing the Contras was allowed to override sen-
sitivity to law and to accepted norms of be-
havior.

Iran

The NSC staff was already engaged in
covert operations through Secord when, in
the summer of 1985, the Government of
Israel proposed that missiles be sold to Iran
in return for the release of seven American
hostages held in Lebanon and the prospect
of improved relations with Iran. The Secre-
taries of State and Defense repeatedly op-
posed such sales to a government designated
by the United States as a supporter of inter-
national terrorism. They called it a straight
arms-for-hostages deal that was contrary to
U.S. public policy. They also argued that
these sales would violate the Arms Export
Control Act, as well as the U.S. arms embar-
go against Iran. The embargo had been im-
posed after the taking of hostages at the U.S.
Embassy in Tehran on November 4, 1979,
and was continued because of the Iran-Iraq
war.

Nevertheless, in the summer of 1985 the
President authorized Israel to proceed with
the sales. The NSC staff conducting the
Contra covert action also took operational
control of implementing the President's deci-
sion on arms sales to Iran. The President did

Executive Summary

not sign a Finding for this covert operation,
nor did he notify the Congress.

Israel shipped 504 TOW anti-tank missiles
to Iran in August and September 1985. Al-
though the Iranians had promised to release
most of the American hostages in return,
only one, Reverend Benjamin Weir, was
freed. The President persisted. In November,
he authorized Israel to ship 80 HAWK anti-
aircraft missiles in return for all the hostages,
with a promise of prompt replenishment by
the United States, and 40 more HAWKs to
be sent directly by the United States to Iran.
Eighteen HAWK missiles were actually
shipped from Israel in November 1985, but
no hostages were released.

In early December 1985, the President
signed a retroactive Finding purporting to
authorize the November HAWK transaction.
That Finding contained no reference to im-
proved relations with Iran. It was a straight
arms-for-hostages Finding. National Security
Adviser Poindexter destroyed this Finding a
year later because, he testified, its disclosure
would have been politically embarrassing to
the President.

The November HAWK transaction had
additional significance. The Enterprise re-
ceived a $1 million advance from the Israe-
lis. North and Secord testified this was for
transportation expenses in connection with
the 120 HAWK missiles. Since only 18 mis-
siles were shipped, the Enterprise was left
with more than $800,000 in spare cash.
North directed the Enterprise to retain the
money and spend it for the Contras. The
"diversion" had begun.

North realized that the sale of missiles to
Iran could be used to support the Contras.
He told Israeli Defense Ministry officials on
December 6, 1985, one day after the Presi-
dent signed the Finding, that he planned to
generate profits on future arms sales for ac-
tivities in Nicaragua.

On December 7, 1985, the President and
his top advisers met again to discuss the
arms sales. Secretaries Shultz and Weinberg-
er objected vigorously once more, and Wein-
berger argued that the sales would be illegal.

After a meeting in London with an Iranian
interlocutor and the Israelis, McFarlane rec-
ommended that the sales be halted. Admiral
John Poindexter (the new National Security
Adviser), and Director Casey were of the
opposite opinion.

The President decided to go forward with
the arms sales to get the hostages back. He
signed a Finding on January 6, 1986, author-
izing more shipments of missiles for the hos-
tages. When the CIA's General Counsel
pointed out that authorizing Israel to sell its
U.S. -manufactured weapons to Iran might
violate the Arms Export Control Act, the
President, on the legal advice of the Attor-
ney General, decided to authorize direct
shipments of the missiles to Iran by the
United States and signed a new Finding on
January 17, 1986. To carry out the sales, the
NSC staff turned once again to the Enter-
prise.

Although North had become skeptical that
the sales would lead to the release of all the
hostages or a new relationship with Iran, he
believed that the prospect of generating
funds for the Contras was "an attractive in-
centive" for continuing the arms sales. No
matter how many promises the Iranians
failed to keep throughout this secret initia-
tive, the arms sales continued to generate
funds for the Enterprise, and North and his
superior, Poindexter, were consistent advo-
cates for their continuation. What North and
Poindexter asserted in their testimony that
they did not know, however, was that most
of these arms sales profits would remain with
the Enterprise and never reach the Contras.

In February 1986, the United States,
acting through the Enterprise, sold 1,000
TOWs to the Iranians. The U.S. also provid-
ed the Iranians with military intelligence
about Iraq. All of the remaining American
hostages were supposed to be released upon
Iran's receipt of the first 500 TOWs. None
was. But the transaction was productive in
one respect. The difference between what
the Enterprise paid the United States for the
missiles and what it received from Iran was
more than $6 million. North directed part of

Executive Summary

this profit for the Contras and for other
covert operations. Poindexter testified that
he authorized this "diversion."

The diversion, for the Contras and other
covert activities, was not an isolated act by
the NSC staff Poindexter saw it as "imple-
menting" the President's secret policy that
had been in effect since 1984 of using non-
appropriated funds following passage of the
Boland Amendment.

According to North, CIA Director Casey
saw the "diversion" as part of a more gran-
diose plan to use the Enterprise as a "stand-
alone," "off-the-shelf," covert capacity that
would act throughout the world while evad-
ing Congressional review. To Casey, Poin-
dexter, and North, the diversion was an inte-
gral part of selling arms to Iran and just one
of the intended uses of the proceeds.

In May 1986, the President again tried to
sell weapons to get the hostages back. This
time, the President agreed to ship parts for
HAWK missiles but only on condition that
all the American hostages in Lebanon be re-
leased first. A mission headed by Robert
McFarlane, the former National Security
Adviser, traveled to Tehran with the first
installment of the HAWK parts. When the
mission arrived, McFarlane learned that the
Iranians claimed they had never promised to
do anything more than try to obtain the hos-
tages' release. The trip ended amid misunder-
standing and failure, although the first in-
stallment of HAWK parts was delivered.

The Enterprise was paid, however, for all
of the HAWK parts, and realized more than
an $8 million profit, part of which was ap-
plied, at North's direction, to the Contras.
Another portion of the profit was used by
North for other covert operations, including
the operation of a ship for a secret mission.
The idea of an off-the-shelf stand-alone
covert capacity had become operational.

On July 26, 1986, another American hos-
tage. Father Lawrence Jenco, was released.
Despite all the arms sales, he was only the
second hostage freed, and the first since Sep-
tember 1985. Even though McFarlane had
vowed at the Tehran meeting not to deliver

the remainder of the HAWK parts until all
the hostages were released, the Administra-
tion capitulated again. The balance of the
HAWK parts was shipped when Father
Jenco was released.

In September and October 1986, the NSC
staff began negotiating with a new group of
Iranians, the "Second Channel," that Albert
Hakim had opened, in part, through prom-
ises of bribes. Although these Iranians alleg-
edly had better contacts with Iranian offi-
cials, they, in fact, represented the same prin-
cipals as did the First Channel and had the
same arrangement in mind: missiles for hos-
tages. Once again, the Administration insist-
ed on release of all the hostages but settled
for less.

In October, after a meeting in London,
North left Hakim to negotiate with the Irani-
ans. Hakim made no secret of his desire to
make large profits for himself and General
Secord in the $15 billion-a-year Iranian
market if relations with the United States
could be restored. Thus, he had every incen-
tive to make an agreement, whatever conces-
sions might be required.

As an unofficial "ambassador" selected by
North and Secord, Hakim produced a re-
markable nine-point plan, subsequently ap-
proved by North and Poindexter, under
which the United States would receive "one
and one half hostages (later reduced to
one). Under the plan, the United States
agreed not only to sell the Iranians 500 more
TOWs, but Secord and Hakim promised to
develop a plan to induce the Kuwaiti Gov-
ernment to release the Da'wa prisoners.
(Seventeen Kuwaiti prisoners, connected to
"al-Dawa," an Iranian revolutionary group,
had been convicted and imprisoned for their
part in the December 12, 1983, attacks in
Kuwait on the U.S. Embassy, a U.S. civilian
compound, the French Embassy, and several
Kuwaiti Goverment facilities.) The plan to
obtain the release of the Da'wa prisoners did
not succeed, but the TOW missiles were sold
for use by the Iranian Revolutionary Guard.
Following the transfer of these TOWs, a
third hostage, David Jacobsen, was released

Executive Summary

on November 2, 1986, and more profit was
generated for the Enterprise.

Poindexter testified that the President ap-
proved the nine-point plan. But other testi-
mony raises questions about this assertion.
Regardless of what Poindexter may have
told the President, Secretary Shultz testified
that when he informed the President on De-
cember 14, 1986, that the nine-point plan in-
cluded a promise about the release of the
Da'wa prisoners in Kuwait, the President re-
acted with shock, "like he had been kicked
in the belly."

During the negotiations with the Second
Channel, North and Secord told the Iranians
that the President agreed with their position
that Iraq's President, Saddam Hussein, had
to be removed and further agreed that the
United States would defend Iran against
Soviet aggression. They did not clear this
with the President and their representations
were flatly contrary to U.S. policy.

The decision to designate private parties —
Secord and Hakim — to carry out the arms
transactions had other ramifications. First,
there was virtually no accounting for the
profits from the arms deals. Even North
claimed that he did not know how Secord
and Hakim actually spent the money com-
mitted to their custody. The Committees' in-
vestigation revealed that of the $16.1 million
profit from the sales of arms to Iran only
about $3.8 million went to support the Con-
tras (the amount representing "the diver-
sion"). All told, the Enterprise received
nearly $48 million from the sale of arms to
the Contras and Iran, and in contributions
directed to it by North. A total of $16.5
million was used to support the Contras or
to purchase the arms sold to (and paid for
by) the Contras; $15.2 million was spent on
Iran; Hakim, Secord, and their associate,
Thomas Clines, took $6.6 million in commis-
sions and other profit distributions; almost $1
million went for other covert operations
sponsored by North; $4.2 million was held in
"reserves" for use in future operations; $1.2
million remained in Swiss bank accounts of
the Enterprise; and several thousand dollars

were used to pay for a security system at
North's residence.

Second, by permitting private parties to
conduct the arms sales, the Administration
risked losing control of an important foreign
policy initiative. Private citizens — whose mo-
tivations of personal gain could conflict with
the interests of this country — handled sensi-
tive diplomatic negotiations, and purported
to commit the United States to positions that
were anathema to the President's public
policy and wholly unknown to the Secretary
of State.

The Coverup

The sale of arms to Iran was a "significant
anticipated intelligence activity." By law,
such an activity must be reported to Con-
gress "in a timely fashion" pursuant to Sec-
tion 501 of the National Security Act. If the
proposal to sell arms to Iran had been re-
ported, the Senate and House Intelligence
Committees would likely have joined Secre-
taries Shultz and Weinberger in objecting to
this initiative. But Poindexter recommend-
ed— and the President decided — not to
report the Iran initiative to Congress.

Indeed, the Administration went to consid-
erable lengths to avoid notifying Congress.
The CIA General Counsel wrote on January
15, 1986, "the key issue in this entire matter
revolves around whether or not there will be
reports made to Congress." Shortly thereaf-
ter, the transaction was restructured to avoid
the pre-shipment reporting requirements of
the Arms Export Control Act, and place it
within the more limited reporting require-
ments of the National Security Act. But
even these reporting requirements were ig-
nored. The President failed to notify the
group of eight (the leaders of each party in
the House and Senate, and the Chairmen and
Ranking Minority Members of the Intelli-
gence Committees) specified by law for un-
usually sensitive operations.

After the disclosure of the Iran arms sales
on November 3, 1986, the American public
was still not told the facts. The President
sought to avoid any comment on the ground

Executive Summary

that it might jeopardize the chance of secur-
ing the remaining hostages' release. But it
was impossible to remain silent, and inaccu-
rate statements followed.

In his first public statement on the subject
on November 6, the President said that the
reports concerning the arms sales had "no
foundation." A week later, on November 13,
the President conceded that the United
States had sold arms, but branded as "utterly
false" allegations that the sales were in
return for the release of the hostages. The
President also maintained that there had been
no violations of Federal law.

At his news conference on November 19,
1986, he denied that the United States was
involved in the Israeli sales that occurred
prior to the January 17, 1986 Finding. The
President was asked:

Mr. President . . . are you telling us
tonight that the only shipments with
which we were involved were the
one or two that followed your Janu-
ary 17 Finding and that . . . there
were no other shipments which the
U.S. condoned?

The President replied:

That's right. I'm saying nothing, but
the missiles we sold.

And, on November 25, 1986, the Attorney
General — with the President at his side — an-
nounced at a press conference that the Presi-
dent did not know of the Israeli shipments
until after they had occurred. He stated that
the President learned of the November 1985
HAWK shipment in February 1986.

In fact, however, the Israeli sales, includ-
ing the HAWK shipment, were implemented
with the knowledge and approval of the
President and his top advisers; and the Presi-
dent himself told Shultz on the day of his
press conference that he had known of the
November 1985 shipment when it occurred.
McFarlane, Poindexter, and North were inti-
mately involved in the Israeli shipments; and
the CIA had actually transported one deliv-
ery from Israel to Iran.

While the President was denying any ille-
gality, his subordinates were engaging in a
coverup. Several of his advisers had ex-
pressed concern that the 1985 sales violated
the Arms Export Control Act, and a "cover
story" had been agreed on if these arms sales
were ever exposed. After North had three
conversations on November 18, 1986, about
the legal problems with the 1985 Israeli ship-
ments, he, Poindexter, Casey, and McFarlane
all told conforming false stories about U.S.
involvement in these shipments.

With McFarlane's help, North rewrote
NSC staff chronologies on November 19 and

20, 1986, in such a way that they denied
contemporaneous knowledge by the Admin-
istration of Israel's shipments to Iran in 1985.
They asserted at one point that the U.S.
Government believed the November 1985
shipment consisted of oil-drilling equipment,
not arms.

Poindexter told Congressional Committees
on November 21, 1986, that the United
States had disapproved of the Israeli ship-
ments and that, until the day before his brief-
ing, he believed that Administration officials
did not know about any of them until after
they had occurred. He then destroyed the
only Finding signed by the President that
showed the opposite.

Casey told Congressional Committees on
November 21, 1986, that although a CIA
proprietary airline had actually carried mis-
siles to Iran from Israel in 1985, the proprie-
tary had been told the cargo was "oil-drill-
ing equipment."

McFarlane told the Attorney General on
November 21, 1986, that the Israelis said
they were shipping oil-drilling equipment in
November 1985 and that McFarlane did not
learn otherwise until May 1986.

On learning that the President had author-
ized the Attorney General to gather the rele-
vant facts. North and Poindexter shredded
and altered official documents on November

21, 1986, and later that weekend. On No-
vember 25, 1986, North's secretary con-
cealed classified documents in her clothing

10

Executive Summary

and, with North's knowledge, removed them
from the White House.

According to North, a "fall guy" plan was
proposed by Casey in which North and, if
necessary, Poindexter, would take the re-
sponsibility for the covert Contra support
operation and the diversion. On Saturday
November 22, 1986, in the midst of these
efforts to conceal what had happened, Poin-
dexter had a two and one half hour lunch
with Casey. Yet Poindexter could not recall
anything that was discussed.

North testified that he assured Poindexter
that he had destroyed all documents relating
to the diversion. The diversion nevertheless
was discovered on November 22, 1986,
when a Justice Department official, assisting
the Attorney General's fact-finding inquiry,
found a "diversion memorandum" that had
escaped the shredder.

Prior to the discovery of the diversion
memorandum, each interview by the Attor-
ney General's fact finding team had been
conducted in the presence of two witnesses,
and careful notes were taken in accordance
with standard professional practices. After
discovery of the diversion memorandum —
which itself gave rise to an inference of seri-
ous wrongdoing — the Attorney General de-
parted from these standard practices. A
series of important interviews — Poindexter,
McFarlane, Casey, Regan, and Bush — was
conducted by the Attorney General alone,
and no notes were made.

The Attorney General then announced at
his November 25 press conference that the
diversion had occurred and that the Presi-
dent did not know of it. But he made several
incorrect statements about his own investiga-
tion. He stated that the President had not
known of the Israeli pre-Finding shipments,
and he stated that the proceeds of the arms
sales had been sent directly from the Israelis
to the Contras. These statements were both
mistaken and inconsistent with information
that had been received during the Attorney
General's fact-finding inquiry.

Poindexter testified to these Committees
that the President did not know of the diver-

sion. North testified that while he assumed
the President had authorized each diversion,
Poindexter told him on November 21, 1986,
that the President had never been told of the
diversion.

In light of the destruction of material evi-
dence by Poindexter and North and the
death of Casey, all of the facts may never be
known. The Committees cannot even be sure
whether they heard the whole truth or
whether Casey's "fall guy" plan was carried
out at the public hearings. But enough is
clear to demonstrate beyond doubt that fun-
damental processes of governance were dis-
regarded and the rule of law was subverted.

Findings and Conclusions

The common ingredients of the Iran and
Contra policies were secrecy, deception, and
disdain for the law. A small group of senior
officials believed that they alone knew what
was right. They viewed knowledge of their
actions by others in the Government as a
threat to their objectives. They told neither
the Secretary of State, the Congress nor the
American people of their actions. When ex-
posure was threatened, they destroyed offi-
cial documents and lied to Cabinet officials,
to the public, and to elected representatives
in Congress. They testified that they even
withheld key facts from the President.

The United States Constitution specifies
the process by which laws and policy are to
be made and executed. Constitutional process
is the essence of our democracy and our
democratic form of Government is the basis
of our strength. Time and again we have
learned that a flawed process leads to bad
results, and that a lawless process leads to
worse.

Policy Contradictions and Failures

The Administration's departure from
democratic processes created the conditions
for policy failure, and led to contradictions
which undermined the credibility of the
United States.

11

Executive Summary

The United States simultaneously pursued
two contradictory foreign policies — a public
one and a secret one:

— The public policy was not to make any
concessions for the release of hostages lest
such concessions encourage more hostage-
taking. At the same time, the United States
was secretly trading weapons to get the hos-
tages back.

— The public policy was to ban arms ship-
ments to Iran and to exhort other Govern-
ments to observe this embargo. At the same
time, the United States was secretly selling
sophisticated missiles to Iran and promising
more.

— The public policy was to improve rela-
tions with Iraq. At the same time, the United
States secretly shared military intelligence on
Iraq with Iran and North told the Iranians in
contradiction to United States policy that the
United States would help promote the over-
throw of the Iraqi head of government.

— The public policy was to urge all Gov-
ernments to punish terrorism and to support,
indeed encourage, the refusal of Kuwait to
free the Da'wa prisoners who were convict-
ed of terrorist acts. At the same time, senior
officials secretly endorsed a Secord-Hakim
plan to permit Iran to obtain the release of
the Da'wa prisoners.

— The public policy was to observe the
"letter and spirit" of the Boland Amend-
ment's proscriptions against military or para-
military assistance to the Contras. At the
same time, the NSC staff was secretly assum-
ing direction and funding of the Contras'
military effort.

— The pubhc policy, embodied in agree-
ments signed by Director Casey, was for the
Administration to consult with the Congres-
sional oversight committees about covert ac-
tivities in a "new spirit of frankness and co-
operation." At the same time, the CIA and
the White House were secretly withholding
from those Committees all information con-
cerning the Iran initiative and the Contra
support network.

— The public policy, embodied in Execu-
tive Order 12333, was to conduct covert op-
erations solely through the CIA or other

organs of the intelligence community specifi-
cally authorized by the President. At the
same time, although the the NSC was not so
authorized, the NSC staff secretly became
operational and used private, non-accounta-
ble agents to engage in covert activities.

These contradictions in policy inevitably
resulted in policy failure:

— The United States armed Iran, including
its most radical elements, but attained neither
a new relationship with that hostile regime
nor a reduction in the number of American
hostages.

— The arms sales did not lead to a modera-
tion of Iranian policies. Moderates did not
come forward, and Iran to this day sponsors
actions directed against the United States in
the Persian Gulf and elsewhere.

— The United States opened itself to black-
mail by adversaries who might reveal the
secret arms sales and who, according to
North, threatened to kill the hostages if the
sales stopped.

— The United States undermined its credi-
bility with friends and allies, including mod-
erate Arab states, by its public stance of op-
posing arms sales to Iran while undertaking
such arms sales in secret.

— The United States lost a $10 million
contribution to the Contras from the Sultan
of Brunei by directing it to the wrong bank
account — the result of an improper effort to
channel that humanitarian aid contribution
into an account used for lethal assistance.

— The United States sought illicit funding
for the Contras through profits from the
secret arms sales, but a substantial portion of
those profits ended up in the personal bank
accounts of the private individuals executing
the sales — while the exorbitant amounts
charged for the weapons inflamed the Irani-
ans with whom the United States was seek-
ing a new relationship.

Flawed Policy Process

The record of the Iran-Contra Affair also
shows a seriously flawed policymaking proc-
ess.

12

Executive Summary

Confusion

There was confusion and disarray at the
highest levels of Government.

— McFarlane embarked on a dangerous
trip to Tehran under a complete misappre-
hension. He thought the Iranians had prom-
ised to secure the release of all hostages
before he delivered arms, when in fact they
had promised only to seek the hostages' re-
lease, and then only after one planeload of
arms had arrived.

— The President first told the Tower
Board that he had approved the initial Israeli
shipments. Then, he told the Tower Board
that he had not. Finally, he told the Tower
Board that he does not know whether he
approved the initial Israeli arms shipments,
and his top advisers disagree on the question.

— The President claims he does not recall
signing a Finding approving the November
1985 HAWK shipment to Iran. But Poin-
dexter testified that the President did sign a
Finding on December 5, 1985, approving the
shipment retroactively. Poindexter later de-
stroyed the Finding to save the President
from embarassment.

— That Finding was prepared without ade-
quate discussion and stuck in Poindexter's
safe for a year; Poindexter claimed he forgot
about it; the White House asserts the Presi-
dent never signed it; and when events began
to unravel, Poindexter ripped it up.

— The President and the Attorney General
told the public that the President did not
know about the November 1985 Israeli
HAWK shipment until February 1986 — an
error the White House Chief of Staff ex-
plained by saying that the preparation for
the press conference "sort of confused the
Presidential mind."

— Poindexter says the President would
have approved the diversion, if he had been
asked; and the President says he would not
have.

— One National Security Adviser under-
stood that the Boland Amendment applied to
the NSC; another thought it did not. Neither
sought a legal opinion on the question.

— The President incorrectly assured the
American people that the NSC staff was ad-
hering to the law and that the Government
was not connected to the Hasenfus airplane.
His staff was in fact conducting a "full serv-
ice" covert operation to support the Contras
which they believed he had authorized.

— North says he sent five or six completed
memorandums to Poindexter seeking the
President's approval for the diversion. Poin-
dexter does not remember receiving any.
Only one has been found.

Dishonesty and Secrecy

The Iran-Contra Affair was characterized
by pervasive dishonesty and inordinate secre-
cy.

North admitted that he and other officials
lied repeatedly to Congress and to the Amer-
ican people about the Contra covert action
and Iran arms sales, and that he altered and
destroyed official documents. North's testi-
mony demonstrates that he also lied to mem-
bers of the Executive branch, including the
Attorney General, and officials of the State
Department, CIA and NSC.

Secrecy became an obsession. Congress
was never informed of the Iran or the
Contra covert actions, notwithstanding the
requirement in the law that Congress be no-
tified of all covert actions in a "timely fash-
ion."

Poindexter said that Donald Regan, the
President's Chief of Staff, was not told of the
NSC staffs fundraising activities because he
might reveal it to the press. Secretary Shultz
objected to third-country solicitation in 1984
shortly before the Boland Amendment was
adopted; accordingly, he was not told that,
in the same time period, the National Securi-
ty Adviser had accepted an $8 million con-
tribution from Country 2 even though the
State Department had prime responsibility
for dealings with that country. Nor was the
Secretary of State told by the President in
February 1985 that the same country had
pledged another $24 million — even though
the President briefed the Secretary of State
on his meeting with the head of state at

13

Executive Summary

which the pledge was made. Poindexter
asked North to keep secrets from Casey;
Casey, North, and Poindexter agreed to keep
secrets from Shultz.

Poindexter and North cited fear of leaks as
a justification for these practices. But the
need to prevent public disclosure cannot jus-
tify the deception practiced upon Members
of Congress and Executive branch officials
by those who knew of the arms sales to Iran
and of the Contra support network. The
State and Defense Departments deal each
day with the most sensitive matters affecting
millions of lives here and abroad. The Con-
gressional Intelligence Committees receive
the most highly classified information, in-
cluding information on covert activities. Yet,
according to North and Poindexter, even the
senior officials of these bodies could not be
entrusted with the NSC staffs secrets be-
cause they might leak.

While Congress's record in maintaining
the confidentiality of classified information is
not unblemished, it is not nearly as poor or
perforated as some members of the NSC
staff maintained. If the Executive branch has
any basis to suspect that any member of the
Intelligence Committees breached security, it
has the obligation to bring that breach to the
attention of the House and Senate Leaders —
not to make blanket accusations. Congress
has the capability and responsibility of pro-
tecting secrets entrusted to it. Congress
cannot fulfill its legislative responsibilities if
it is denied information because members of
the Executive branch, who place their faith
in a band of international arms merchants
and financiers, unilaterally declare Congress
unworthy of trust.

In the case of the "secret" Iran arms-for-
hostages deal, although the NSC staff did
not inform the Secretary of State, the Chair-
man of the Joint Chiefs of Staff, or the lead-
ership of the United States Congress, it was
content to let the following persons know:

— Manucher Ghorbanifar, who flunked
every polygraph test administered by the
U.S. Government;

— Iranian officials, who daily denounced
the United States but received an inscribed
Bible from the President;

— Officials of Iran's Revolutionary Guard,
who received the U.S. weapons;

— Secord and Hakim, whose personal in-
terests could conflict with the interests of the
United States;

— Israeli officials, international arms mer-
chants, pilots and air crews, whose interests
did not always coincide with ours; and

— An unknown number of shadowy inter-
mediaries and financiers who assisted with
both the First and Second Iranian Channels.

While sharing the secret with this dispar-
ate group, North ordered the intelligence
agencies not to disseminate intelligence on
the Iran initiative to the Secretaries of State
and Defense. Poindexter told the Secretary
of State in May 1986 that the Iran initiative
was over, at the very time the McFarlane
mission to Tehran was being launched. Poin-
dexter also concealed from Cabinet officials
the remarkable nine-point agreement negoti-
ated by Hakim with the Second Channel.
North assured the FBI liaison to the NSC as
late as November 1986 that the United States
was not bargaining for the release of hos-
tages but seizing terrorists to exchange for
hostages — a complete fabrication. The lies,
omissions, shredding, attempts to rewrite his-
tory— all continued, even after the President
authorized the Attorney General to find out
the facts.

It was not operational security that moti-
vated such conduct — not when our own
Government was the victim. Rather, the
NSC staff feared, correctly, that any disclo-
sure to Congress or the Cabinet of the arms-
for-hostages and arms-for-profit activities
would produce a storm of outrage.

As with Iran, Congress was misled about
the NSC staffs support for the Contras
during the period of the Boland Amendment,
although the role of the NSC staff was no
secret to others. North testified that his oper-
ation was well-known to the press in the
Soviet Union, Cuba, and Nicaragua. It was
not a secret from Nicaragua's neighbors,

14

Executive Summary

with whom the NSC staff communicated
throughout the period. It was not a secret
from the third countries — including a totah-
tarian state — from whom the NSC staff
sought arms or funds. It was not a secret
from the private resupply network which
North recruited and supervised. According
to North, even Ghorbanifar knew.

The Administration never sought to hide
its desire to assist the Contras so long as
such aid was authorized by statute. On the
contrary, it wanted the Sandinistas to know
that the United States supported the Contras.
After enactment of the Boland Amendment,
the Administration repeatedly and publicly
called upon Congress to resume U.S. assist-
ance. Only the NSC staffs Contra support
activities were kept under wraps. The Com-
mittees believe these actions were concealed
in order to prevent Congress from learning
that the Boland Amendment was being cir-
cumvented.

It was stated on several occasions that the
confusion, secrecy and deception surround-
ing the aid program for the Nicaraguan free-
dom fighters was produced in part by Con-
gress' shifting positions on Contra aid.

But Congress' inconsistency mirrored the
chameleon-like nature of the rationale of-
fered for granting assistance in the first in-
stance. Initially, Congress was told that our
purpose was simply to interdict the flow of
weapons from Nicaragua into El Salvador.
Then Congress was told that our purpose
was to harrass the Sandinistas to prevent
them from consolidating their power and ex-
porting their revolution. Eventually, Con-
gress was told that our purpose was to elimi-
nate all foreign forces from Nicaragua, to
reduce the size of the Sandinista armed
forces, and to restore the democratic reforms
pledged by the Sandinistas during the over-
throw of the Somoza regime.

Congress had cast a skeptical eye upon
each rationale proffered by the Administra-
tion. It suspected that the Administration's
true purpose was identical to that of the
Contras — the overthrow of the Sandinista
regime itself Ultimately Congress yielded to

domestic political pressure to discontinue as-
sistance to the Contras, but Congress was
unwilling to bear responsibility for the loss
of Central America to communist military
and political forces. So Congress compro-
mised, providing in 1985 humanitarian aid to
the Contras; and the NSC staff provided
what Congress prohibited: lethal support for
the Contras.

Compromise is no excuse for violation of
law and deceiving Congress. A law is no less
a law because it is passed by a slender major-
ity, or because Congress is open-minded
about its reconsideration in the future.

Privatization

The NSC staff turned to private parties
and third countries to do the Government's
business. Funds denied by Congress were ob-
tained by the Administration from third
countries and private citizens. Activities nor-
mally conducted by the professional intelli-
gence services — which are accountable to
Congress — were turned over to Secord and
Hakim.

The solicitation of foreign funds by an Ad-
ministration to pursue foreign policy goals
rejected by Congress is dangerous and im-
proper. Such solicitations, when done secret-
ly and without Congressional authorization,
create a risk that the foreign country will
expect and demand something in return.
McFarlane testified that "any responsible of-
ficial has an obligation to acknowledge that
every country in the world will see benefit
to itself by ingratiating itself to the United
States." North, in fact, proposed rewarding a
Central American country with foreign as-
sistance funds for facilitating arms shipments
to the Contras. And Secord, who had once
been in charge of the U.S. Air Force's for-
eign military sales, said "where there is a
quid, there is a quo."

Moreover, under the Constitution only
Congress can provide funds for the Execu-
tive branch. The Framers intended Con-
gress's "power of the purse" to be one of the
principal checks on Executive action. It was
designed, among other things, to prevent the

15

Executive Summary

Executive from involving this country unilat-
erally in a foreign conflict. The Constitution-
al plan does not prohibit a President from
asking a foreign state, or anyone else, to
contribute funds to a third party. But it does
prohibit such solicitation where the United
States exercises control over their receipt
and expenditure. By circumventing Con-
gress' power of the purse through third-
country and private contributions to the
Contras, the Administration undermined a
cardinal principle of the Constitution.

Further, by turning to private citizens, the
NSC staff jeopardized its own objectives.
Sensitive negotiations were conducted by
parties with little experience in diplomacy,
and financial interests of their own. The dip-
lomatic aspect of the mission failed — the
United States today has no long-term rela-
tionship with Iran and no fewer hostages in
captivity. But the private financial aspect
succeeded — Secord and Hakim took $4.4
million in commissions and used $2.2 million
more for their personal benefit; in addition,
they set aside reserves of over $4 million in
Swiss bank accounts of the Enterprise.

Covert operations of this Government
should only be directed and conducted by
the trained professional services that are ac-
countable to the President and Congress.
Such operations should never be delegated,
as they were here, to private citizens in
order to evade Governmental restrictions.

Lack of Accountability

The confusion, deception, and privatiza-
tion which marked the Iran-Contra Affair
were the inevitable products of an attempt to
avoid accountability. Congress, the Cabinet,
and the Joint Chiefs of Staff were denied
information and excluded from the decision-
making process. Democratic procedures
were disregarded.

Officials who make public policy must be
accountable to the public. But the public
cannot hold officials accountable for policies
of which the public is unaware. Policies that
are known can be subjected to the test of
reason, and mistakes can be corrected after

consultation with the Congress and delibera-
tion within the Executive branch itself. Poli-
cies that are secret become the private pre-
serve of the few, mistakes are inevitably per-
petuated, and the public loses control over
Government. That is what happened in the
Iran-Contra Affair:

— The President's NSC staff carried out a
covert action in furtherance of his policy to
sustain the Contras, but the President said he
did not know about it.

— The President's NSC staff secretly di-
verted millions of dollars in profits from the
Iran arms sales to the Contras, but the Presi-
dent said he did not know about it and Poin-
dexter claimed he did not tell him.

— The Chairman of the Joint Chiefs of
Staff was not informed of the Iran arms
sales, nor was he ever consulted regarding
the impact of such sales on the Iran-Iraq war
or on U.S. military readiness.

— The Secretary of State was not in-
formed of the millions of dollars in Contra
contributions solicited by the NSC staff from
foreign governments with which the State
Department deals each day.

— Congress was told almost nothing — and
what it was told was false.

Deniability replaced accountability. Thus,
Poindexter justified his decision not to
inform the President of the diversion on the
ground that he wanted to give the President
"deniability." Poindexter said he wanted to
shield the President from political embarrass-
ment if the diversion became public.

This kind of thinking is inconsistent with
democratic governance. "Plausible denial,"
an accepted concept in intelligence activities,
means structuring an authorized covert oper-
ation so that, if discovered by the party
against whom it is directed. United States
involvement may plausibly be denied. That is
a legitimate feature of authorized covert op-
erations. In no circumstance, however, does
"plausible denial" mean structuring an oper-
ation so that it may be concealed from — or
denied to — the highest elected officials of the
United States Government itself.

16

Executive Summary

The very premise of democracy is that
"we the people" are entitled to make our
own choices on fundamental policies. But
freedom of choice is illusory if policies are
kept, not only from the public, but from its
elected representatives.

Intelligence Abuses

Covert Operations

As former National Security Adviser
Robert McFarlane testified, "it is clearly
unwise to rely on covert action as the core
of our policy." The Government cannot
keep a policy secret and still secure the
public support necessary to sustain it. Yet it
was precisely because the public would not
support the Contra policy, and was unlikely
to favor arms deals with Iran, that the NSC
staff went underground. This was a perver-
sion of the proper concept of covert oper-
ations:

— Covert operations should be conducted
in accordance with strict rules of account-
ability and oversight. In the mid-1970s, in
response to disclosures of abuses within the
intelligence community, the Government en-
acted a series of safeguards. Each covert
action was to be approved personally by the
President, funded by Congressional appro-
priations, and Congress was to be informed.

In the Iran-Contra Affair, these rules were
violated. The President, according to Poin-
dexter, was never informed of the diversion.
The President says he knew nothing of the
covert action to support the Contras, or the
companies funded by non-appropriated
monies set up by North to carry out that
support. Congress was not notified of either
the Iran or the Contra operations.

— Covert actions should be consistent with
publicly defined U.S. foreign policy goals.
Because covert operations are secret by defi-
nition, they are of course not openly debated
or publicly approved. So long as the policies
which they further are known, and so long
as they are conducted in accordance with
law, covert operations are acceptable. Here,
however, the Contra covert operation was
carried out in violation of the country's

public policy as expressed in the Boland
Amendment; and the Iran covert operation
was carried out in violation of the country's
stated policy against selling arms to Iran or
making concessions to terrorists. These were
not covert actions, they were covert policies;
and covert policies are incompatible with de-
mocracy.

— Finally, covert operations are intended
to be kept from foreign powers, not from the
Congress and responsible Executive agencies
within the United States Government itself
As Clair George, CIA Director of Oper-
ations, testified: "to think that because we
deal in lies, and overseas we may lie and we
may do other such things, that therefore that
gives you some permission, some right or
some particular reason to operate that way
with your fellow employees, I would not
only disagree with that I would say it would
be the destruction of a secret service in a
democracy." In the Iran-Contra Affair, se-
crecy was used to justify lies to Congress,
the Attorney General, other Cabinet officers,
and the CIA. It was used not as a shield
against our adversaries, but as a weapon
against our own democratic institutions.

The NSC Staff

The NSC staff was created to give the
President policy advice on major national
security and foreign policy issues. Here,
however, it was used to gather intelligence
and conduct covert operations. This depar-
ture from its proper functions contributed to
policy failure.

During the Iran initiative, the NSC staff
became the principal body both for gather-
ing and coordinating intelligence on Iran and
for recommending policy to the President.
The staff relied on Iranians who were inter-
ested only in buying arms, including Ghor-
banifar, whom CIA officials regarded as a
fabricator. Poindexter, in recommending to
the President the sale of weapons to Iran,
gave as one of his reasons that Iraq was
winning the Gulf war. That assessment was
contrary to the views of intelligence profes-
sionals at the State Department, the Depart-

77-026 0 - b7

17

Executive Summary

ment of Defense, and the CIA, who had
concluded as early as 1983 that Iran was
winning the war. Casey, who collaborated
with North and Poindexter on the Iran and
Contra programs, also tailored intelligence
reports to the positions he advocated. The
record shows that the President believed and
acted on these erroneous reports.

Secretary Shultz pointed out that the intel-
ligence and policy functions do not mix, be-
cause "it is too tempting to have your analy-
sis on the selection of information that is
presented favor the policy that you are ad-
vocating." The Committees agree on the
need to separate the intelligence and policy
functions. Otherwise, there is too great a risk
that the interpretation of intelligence will be
skewed to fit predetermined policy choices.

In the Iran-Contra Affair, the NSC staff
not only combined intelligence and policy
functions, but it became operational and con-
ducted covert operations. As the CIA was
subjected to greater Congressional scrutiny
and regulation, a few Administration offi-
cials— including even Director Casey — came
to believe that the CIA could no longer be
utilized for daring covert operations. So the
NSC staff was enlisted to provide assistance
in covert operations that the CIA could not
or would not furnish.

This was a dangerous misuse of the NSC
staff. When covert operations are conducted
by those on whom the President relies to
present policy options, there is no agency in
government to objectively scrutinize, chal-
lenge and evaluate plans and activities.
Checks and balances are lost. The high
policy decisions confronting a President can
rarely be resolved by the methods and tech-
niques used by experts in the conduct of
covert operations. Problems of public policy
must be dealt with through consultation, not
Poindexter's "compartmentation"; with hon-
esty and confidentiality, not deceit.

The NSC was created to provide candid
and comprehensive advice to the President.
It is the judgment of these Committees that
the NSC staff should never again engage in
covert operations.

Disdain for Law

In the Iran-Contra Affair, officials viewed
the law not as setting boundaries for their
actions, but raising impediments to their
goals. When the goals and the law collided,
the law gave way:

— The covert program of support for the
Contras evaded the Constitution's most sig-
nificant check on Executive power: the
President can spend funds on a program only
if he can convince Congress to appropriate
the money.

When Congress enacted the Boland
Amendment, cutting off funds for the war in
Nicaragua, Administration officials raised
funds for the Contras from other sources —
foreign Governments, the Iran arms sales,
and private individuals; and the NSC staff
controlled the expenditures of these funds
through power over the Enterprise. Con-
ducting the covert program in Nicaragua
with funding from the sale of U.S. Govern-
ment property and contributions raised by
Government officials was a flagrant violation
of the Appropriations Clause of the Constitu-
tion.

— In addition, the covert program of sup-
port for the Contras was an evasion of the
letter and spirit of the Boland Amendment.
The President made it clear that while he
opposed restrictions on military or paramili-
tary assistance to the Contras, he recognized
that compliance with the law was not op-
tional. "[W]hat I might personally wish or
what our Government might wish still
would not justify us violating the law of the
land," he said in 1983.

A year later, members of the NSC staff
were devising ways to continue support and
direction of Contra activities during the
period of the Boland Amendment. What was
previously done by the CIA — and now pro-
hibited by the Boland Amendment — would
be done instead by the NSC staff.

The President set the stage by welcoming
a huge donation for the Contras from a for-
eign Government — a contribution clearly in-
tended to keep the Contras in the field while
U.S. aid was barred. The NSC staff thereaf-

18

Executive Summary

ter solicited other foreign Governments for
military aid, facilitated the efforts of U.S.
fundraisers to provide lethal assistance to the
Contras, and ultimately developed and di-
rected a private network that conducted, in
North's words, a "full service covert oper-
ation" in support of the Contras.

This could not have been more contrary
to the intent of the Boland legislation.

Numerous other laws were disregarded:

— North's full-service covert operation
was a "significant anticipated intelligence ac-
tivity" required to be disclosed to the Intelli-
gence Committees of Congress under Sec-
tion 501 of the National Security Act. No
such disclosure was made.

— By Executive order, a covert operation
requires a personal determination by the
President before it can be conducted by an
agency other than the CIA. It requires a
written Finding before any agency can carry
it out. In the case of North's full-service
covert operation in support of the Contras,
there was no such personal determination
and no such Finding. In fact, the President
disclaims any knowledge of this covert
action.

— False statements to Congress are felonies
if made with knowledge and intent. Several
Administration officials gave statements de-
nying NSC staff activities in support of the
Contras which North later described in his
testimony as "false," and "misleading, eva-
sive, and wrong."

— The application of proceeds from U.S.
arms sales for the benefit of the Contra war
effort violated the Boland Amendment's ban
on U.S. military aid to the Contras, and con-
stituted a misappropriation of Government
funds derived from the transfer of U.S. prop-
erty.

— The U.S. Government's approval of the
pre-Finding 1985 sales by Israel of arms to
the Government of Iran was inconsistent
with the Government's obligations under the
Arms Export Control Act.

— The testimony to Congress in November
1986 that the U.S. Government had no con-
temporaneous knowledge of the Israeli ship-
ments, and the shredding of documents relat-

ing to the shipments while a Congressional
inquiry into those shipments was pending,
obstructed Congressional investigations.

— The Administration did not make, and
clearly intended never to make, disclosure to
the Intelligence Committees of the Finding —
later destroyed — approving the November
1985 HAWK shipment, nor did it disclose
the covert action to which the Finding relat-
ed.

The Committees make no determination as
to whether any particular individual in-
volved in the Iran-Contra Affair acted with
criminal intent or was guilty of any crime.
That is a matter for the Independent Counsel
and the courts. But the Committees reject
any notion that worthy ends justify viola-
tions of law by Government officials; and
the Committees condemn without reserva-
tion the making of false statements to Con-
gress and the withholding, shredding, and
alteration of documents relevant to a pend-
ing inquiry.

Administration officials have, if anything,
an even greater responsibility than private
citizens to comply with the law. There is no
place in Government for law breakers.

Congress and the President

The Constitution of the United States
gives important powers to both the President
and the Congress in the making of foreign
policy. The President is the principal archi-
tect of foreign policy in consultation with
the Congress. The policies of the United
States cannot succeed unless the President
and the Congress work together.

Yet, in the Iran-Contra Affair, Administra-
tion officials holding no elected office re-
peatedly evidenced disrespect for Congress'
efforts to perform its Constitutional over-
sight role in foreign policy:

— Poindexter testified, referring to his ef-
forts to keep the covert action in support of
the Contras from Congress: "I simply did
not want any outside interference."

— North testified: "I didn't want to tell
Congress anything" about this covert action.

19

Executive Summary

— Abrams acknowledged in his testimony
that, unless Members of Congressional Com-
mittees asked "exactly the right question,
using exactly the right words, they weren't
going to get the right answers," regarding
solicitation of third-countries for Contra sup-
port.

— And numerous other officials made false
statements to, and misled, the Congress.

Several witnesses at the hearings stated or
implied that foreign policy should be left
solely to the President to do as he chooses,
arguing that shared powers have no place in
a dangerous world. But the theory of our
Constitution is the opposite: policies formed
through consultation and the democratic
process are better and wiser than those
formed without it. Circumvention of Con-
gress is self-defeating, for no foreign policy
can succeed without the bipartisan support
of Congress.

In a system of shared powers, decision-
making requires mutual respect between the
branches of government.

The Committees were reminded by Secre-
tary Shultz during the hearings that "trust is
the coin of the realm." Democratic govern-
ment is not possible without trust between
the branches of government and between the
government and the people. Sometimes that
trust is misplaced and the system falters. But
for officials to work outside the system be-
cause it does not produce the results they
seek is a prescription for failure.

Who Was Responsible

Who was responsible for the Iran-Contra
Affair? Part of our mandate was to answer
that question, not in a legal sense (which is
the responsibility of the Independent Coun-
sel), but in order to reaffirm that those who
serve the Government are accountable for
their actions. Based on our investigation, we
reach the following conclusions.

At the operational level, the central figure
in the Iran-Contra Affair was Lt. Col.
North, who coordinated all of the activities
and was involved in all aspects of the secret

operations. North, however, did not act
alone.

North's conduct had the express approval
of Admiral John Poindexter, first as Deputy
National Security Adviser, and then as Na-
tional Security Adviser. North also had at
least the tacit support of Robert McFarlane,
who served as National Security Adviser
until December 1985.

In addition, for reasons cited earlier, we
believe that the late Director of Central In-
telligence, William Casey, encouraged
North, gave him direction, and promoted the
concept of an extra-legal covert organiza-
tion. Casey, for the most part, insulated CIA
career employees from knowledge of what
he and the NSC staff were doing. Casey's
passion for covert operations — dating back
to his World War II intelligence days — was
well known. His close relationship with
North was attested to by several witnesses.
Further, it was Casey who brought Richard
Secord into the secret operation, and it was
Secord who, with Albert Hakim, organized
the Enterprise. These facts provide strong
reasons to believe that Casey was involved
both with the diversion and with the plans
for an "off-the-shelf covert capacity.

The Committees are mindful, however, of
the fact that the evidence concerning Casey's
role comes almost solely from North; that
this evidence, albeit under oath, was used by
North to exculpate himself; and that Casey
could not respond. Although North told the
Committees that Casey knew of the diver-
sion from the start, he told a different story
to the Attorney General in November 1986,
as did Casey himself. Only one other wit-
ness, Lt. Col. Robert Earl, testified that he
had been told by North during Casey's life-
time that Casey knew of the diversion.

The Attorney General recognized on No-
vember 21, 1986 the need for an inquiry. His
staff was responsible for finding the diver-
sion memorandum, which the Attorney Gen-
eral promptly made public. But as described
earlier, his fact-finding inquiry departed from
standard investigative techniques. The Attor-
ney General saw Director Casey hours after

20

Executive Summary

the Attorney General learned of the diver-
sion memorandum, yet he testified that he
never asked Casey about the diversion. He
waited two days to speak to Poindexter,
North's superior, and then did not ask him
what the President knew. He waited too
long to seal North's offices. These lapses
placed a cloud over the Attorney General's
investigation.

There is no evidence that the Vice Presi-
dent was aware of the diversion. The Vice
President attended several meetings on the
Iran initiative, but none of the participants
could recall his views.

The Vice President said he did not know
of the Contra resupply operation. His Na-
tional Security Adviser, Donald Gregg, was
told in early August 1986 by a former col-
league that North was running the Contra
resupply operation, and that ex-associates of
Edwin Wilson — a well known ex-CIA offi-
cial convicted of selling arms to Libya and
plotting the murder of his prosecutors — were
involved in the operation. Gregg testified
that he did not consider these facts worthy
of the Vice President's attention and did not
report them to him, even after the Hasenfus
airplane was shot down and the Administra-
tion had denied any connection with it.

The central remaining question is the role
of the President in the Iran-Contra Affair.
On this critical point, the shredding of docu-
ments by Poindexter, North, and others, and
the death of Casey, leave the record incom-
plete.

As it stands, the President has publicly
stated that he did not know of the diversion.
Poindexter testified that he shielded the
President from knowledge of the diversion.
North said that he never told the President,
but assumed that the President knew. Poin-
dexter told North on November 21, 1986
that he had not informed the President of the
diversion. Secord testified that North told
him he had talked with the President about
the diversion, but North testified that he had
fabricated this story to bolster Secord's
morale.

Nevertheless, the ultimate responsibility
for the events in the Iran-Contra Affair must
rest with the President. If the President did
not know what his National Security Advis-
ers were doing, he should have. It is his
responsibility to communicate unambiguous-
ly to his subordinates that they must keep
him advised of important actions they take
for the Administration. The Constitution re-
quires the President to "take care that the
laws be faithfully executed." This charge en-
compasses a responsibility to leave the mem-
bers of his Administration in no doubt that
the rule of law governs.

Members of the NSC staff appeared to
believe that their actions were consistent
with the President's desires. It was the Presi-
dent's policy — not an isolated decision by
North or Poindexter — to sell arms secretly to
Iran and to maintain the Contras "body and
soul," the Boland Amendment notwithstand-
ing. To the NSC staff, implementation of
these policies became the overriding con-
cern.

Several of the President's advisers pursued
a covert action to support the Contras in
disregard of the Boland Amendment and of
several statutes and Executive orders requir-
ing Congressional notification. Several of
these same advisers lied, shredded docu-
ments, and covered up their actions. These
facts have been on the public record for
months. The actions of those individuals do
not comport with the notion of a country
guided by the rule of law. But the President
has yet to condemn their conduct.

The President himself told the public that
the U.S. Government had no connection to
the Hasenfus airplane. He told the public
that early reports of arms sales for hostages
had "no foundation." He told the public that
the United States had not traded arms for
hostages. He told the public that the United
States had not condoned the arms sales by
Israel to Iran, when in fact he had approved
them and signed a Finding, later destroyed
by Poindexter, recording his approval. All of
these statements by the President were
wrong.

21

Executive Summary

Thus, the question whether the President
knew of the diversion is not conclusive on
the issue of his responsibihty. The President
created or at least tolerated an environment
where those who did know of the diversion
believed with certainty that they were carry-
ing out the President's policies.

This same environment enabled a secretary
who shredded, smuggled, and altered docu-
ments to tell the Committees that "some-
times you have to go above the written
law;" and it enabled Admiral Poindexter to
testify that "frankly, we were willing to take
some risks with the law." It was in such an
environment that former officials of the NSC
staff and their private agents could lecture
the Committees that a "rightful cause" justi-
fies any means, that lying to Congress and
other officials in the executive branch itself
is acceptable when the ends are just, and that
Congress is to blame for passing laws that
run counter to Administration policy. What

may aptly be called the "cabal of the zeal-
ots" was in charge.

In a Constitutional democracy, it is not
true, as one official maintained, that "when
you take the King's shilling, you do the
King's bidding." The idea of monarchy was
rejected here 200 years ago and since then,
the law — not any official or ideology — has
been paramount. For not instilling this pre-
cept in his staff, for failing to take care that
the law reigned supreme, the President bears
the responsibility.

Fifty years ago Supreme Court Justice
Louis Brandeis observed: "Our Government
is the potent, the omnipresent teacher. For
good or for ill, it teaches the whole people
by its example. Crime is contagious. If the
Government becomes a law-breaker, it
breeds contempt for law, it invites every
man to become a law unto himself, it invites
anarchy."

The Iran-Contra Affair resulted from a
failure to heed this message.

22

Part II
Central America

Chapter 1

Introduction: Background on U.S.-Nicaragua

Relations

On July 17, 1979, President Anastasio Somoza De-
bayle and his family fled Nicaragua. A civil war that
had devastated the nation's economy and caused more
than 130,000 casualties was at an end, as was the
autocratic and corrupt 43-year rule of the Somoza
family. But the battle for Nicaragua's future was just
beginning.

The United States had long played a role in Nicara-
gua's affairs. Under the Monroe Doctrine of 1823, the
United States had declared the Western hemisphere,
including Central America, off-limits to European
powers. For the rest of the 19th century, U.S. influ-
ence was episodic. An American privateer named
William Walker briefly seized control of Nicaragua in
1855, opened its borders to slavery, and appointed
himself President before he was deposed and execut-
ed. The opening of the Panama Canal, however, in-
creased the strategic importance of Nicaragua to the
United States in the early 20th century.

A treaty signed by the United States and Nicaragua
in 1911 gave the United States an exclusive right of
intervention in return for the reorganization of Nica-
ragua's finances. One year later, President Taft in-
voked this pact as a basis for dispatching 2,700 Ma-
rines to Nicaragua. The Marines initially arrived at
the request of a U.S. -supported Nicaraguan President,
ostensibly to protect American property and citizens.
They stayed, with one brief intermission, until 1933.
During this period, Nicaragua was a virtual depend-
ency of the United States.

From 1927 to 1933, the Marines and the Marine-
trained Nicaraguan National Guard, with General
Anastasio Somoza Garcia at its head, fought a guerril-
la war against the forces of General Augusto Cesar
Sandino, who opposed the U.S. -backed Conservative
Government of Adolfo Diaz. Sandino, whose aim was
to rid Nicaragua of "U.S. imperialists," became a na-
tional hero to many Nicaraguans during those years;
the Sandinistas were named after him. When U.S.
forces withdrew in 1933, Sandino accepted a truce.
He was shot dead a year later. Many authorities be-
lieve Sandino was killed on direct orders from
Somoza, who seized power from the civilian govern-
ment in 1936.

From 1936 to 1979, Anastasio Somoza Garcia and
then his son, Anastasio Somoza Debayle, ruled Nica-

ragua. The rule of Anastasio Somoza Debayle was
characterized by corruption; the Somoza family
owned nearly one-third of all the land and controlled
much of the country's wealth.

In 1961, opponents of Somoza formed the National
Liberation Front (FSLN), popularly known as the
Sandinistas. This fledgling resistance organization
drew much of its early support from students. Fidel
Castro provided some of its initial financial backing.
Through the early 1970s, the FSLN was a marginal
group, unable to succeed in its low-level guerrilla war
or to marshal popular support.

The 1972 earthquake that devastated the capital
city of Managua, however, changed the nature of the
conflict between the rebels and the Government. Fol-
lowing the earthquake, Somoza reaped immense prof-
its from international relief efforts. His show of greed
in the face of so much suffering was an important fact
in his loss of support from the growing Nicaraguan
business and professional classes. Another was his
grooming of his son, known as Tachito, to inherit his
position.

Successive attacks by the FSLN were met by in-
creasingly harsh reprisals by the National Guard.
Strikes, street protests, and guerrilla raids prompted
Somoza to order the wholesale shooting of alleged
peasant collaborators and the clearance of large areas
of the countryside where opposition fighters found
sanctuary. Somoza's human rights abuses led the
Carter Administration in April 1977 to reduce mili-
tary and economic aid to the regime. Six months
later, the aid was restored after Nicaragua promised
to curb the excesses of the National Guard.

Despite Somoza's promises, the situation deteriorat-
ed. In January 1978, Pedro Joaquin Chamorro, the
editor of La Prensa, Nicaragua's foremost opposition
newspaper, was assassinated. His assassins were never
found, but the public reacted against the Government.
A wave of protest swept the country. The ranks of
the FSLN swelled with new recruits. Business, trade,
and church groups joined the rebellion.

The FSLN was the only force trained and capable
of opposing the National Guard. The fact that the
movement had taken on the rhetorical trappings of a
leftist insurgency seemed of little consequence to
Nicaraguans eager to remove Somoza. Following the

25

Chapter 1

26

Chapter 1

killing of Chamorro, non-Marxist resistance groups
began to gather around the FSLN, leading ultimately
to the creation of the Broad Opposition Front seeking
to draw all economic classes, ages, and professions.
By the beginning of 1979, the movement could claim
the full backing of Cuba, the unqualified support of
the democracies of Venezuela and Costa Rica, and
broad sympathy throughout Latin America.

In February 1979, the State Department announced
that, because of Somoza's unwillingness to accept a
negotiated settlement, the United States was recalling
more than half of its officials in Nicaragua and sus-
pending all new economic and military aid. The end
of U.S. backing cut the last props of support for the
Government, and the end of the Somoza dynasty
came on July 17, 1979.

The Sandinistas were enormously popular when
they began their rule. A Provisional Government of
National Reconstruction was formed to lead the coun-
try. At its head was a five-person directorate com-
posed of Violetta Chamorro (widow of the murdered
La Prensa editor), Alfonso Robelo, Sergio Ramirez,
Moises Hassan, and Daniel Ortega. Hassan and
Ortega came from the militant wing of the Sandinista
Party. Members of the 18-member cabinet and the 33-
member council were drawn from a broad spectrum
of Nicaraguan public life. Though Nicaraguans were
generally satisfied that the new Government repre-
sented the Somoza opposition, the United States was
not, pointing to Ortega and Hassan as left-wing radi-
cals.

The Sandinistas Tal<e Over

The Sandinistas set out to court public favor and
international support. They promised free elections, a
free press, free enterprise, an independent judiciary,
and an end to political oppression.

Yet, the Sandinistas took over television and radio
stations and censored the newspaper La Prensa,
which opposed repression whether by the Sandinistas
or by Somoza. The Sandinistas forced the two moder-
ate members of Nicaragua's governing council, Cha-
morro and Robelo, to resign, pressured opposition
parties, continued political detentions, and expropriat-
ed land. The revolutionary party organization as-
sumed the functions of state. On September 19, 1980,
the Government announced that it would not hold
national elections until 1985.

Americans were divided on how to interpret Sandi-
nista intentions. If the Carter Administration did not
openly embrace the Sandinistas, neither did it close all
doors to a possible reconciliation. Immediately fol-
lowing the Sandinista victory, the United States do-
nated $39 million in emergency food aid to Nicara-

gua, and in 1980 Congress appropriated an additional
$75 million in emergency economic assistance (Public
Law 96-257). Similarly, Washington supported the
provision of aid to Nicaragua from international lend-
ing organizations.

The Carter Administration accepted the fact that
the United States was in "competition" with Cuba to
win over the Nicaraguan Government, but it hoped
that friendly relations could be maintained. Yet while
providing overt financial assistance. President Carter
in the fall of 1979 signed a Finding authorizing sup-
port to the democratic elements in Nicaragua because
of the concern about the effect of the Sandinista take-
over on such institutions.

In public statements, Sandinista officials expressed
their desire for better relations with the United States,
and insisted that they had no intention of supporting
insurgencies aimed at subverting their neighbors.
Their actions, however, began to raise doubts. Weap-
ons and equipment sent by Cuba through Nicaragua
were making their way to rebels in El Salvador.

The new regime received aid from several sources,
including United States, Mexico, Venezuela, and
Western Europe. But the United States, the largest
single contributor, became increasingly concerned
about the new regime's growing ties with the Eastern
bloc. Nicaragua increased its number of Cuban advis-
ers, and in 1980 and 1981 signed agreements with the
Soviet Union and East bloc governments, including
Bulgaria and East Germany, for advisers and military
and intelligence assistance.

Candidate Ronald Reagan stated his firm opposition
to any further U.S support for the Sandinistas. In
January 1981, President Carter suspended aid to the
Nicaraguan regime. In April 1981, the Reagan Ad-
ministration continued this policy. It announced that
it would withhold the remaining $15 million in un-
spent U.S. assistance to Nicaragua and not request
further economic aid until the revolution was democ-
ratized and all assistance to the Salvadoran rebels
ceased.

Concerns about Nicaragua's internal repression, its
growing military force, its ties to the Soviet bloc and
its support for the Salvadoran insurgency led the Ad-
ministration to consider ways to assist the regime's
opponents, who came to be known as the Contras.

The Contras

As the Sandinistas consolidated their hold on Nicara-
gua in 1979 to 1981. the concerns of the United States
were matched within Nicaragua itself. In response, a
new Nicaraguan rebel movement — anti-Sandinista
"Contras" — emerged.

27

Chapter 1

Figure 1-2. Map of Nicaragua

ChlnandegaO /

North "<r ITM-aXjTaVl.SanBenlto ..^../^

Pacific Ocean \^ v^-^ aipitapi-, f chontales

Puerto Sandlno^ y C* — ^^1 ( / >,

Caribbean
Sea

Nicaragua

■^-^— International boundary

Departamento boundary

O National capital

© Departamento capital

Depanementos have the same name
Bs their capitals except where noted

0 25 50 Kilometers

I ■— H —

QQ Boundary representation is not necessarily authoritative.

28

Chapter 1

The Contras were not a monolithic group, but a
combination of three distinct elements of Nicaraguan
society; former National Guardsmen and right-wing
figures who had fought for Somoza and against the
revolution; anti-Somocistas who had supported the
revolution but felt betrayed by the Sandinista Govern-
ment; and Nicaraguans who had avoided direct in-
volvement in the revolution but opposed the Sandinis-
tas' increasingly anti-democratic regime.

Many future Contra leaders fled to exile. Some, like
Jose Francisco Cardenal, head of the Superior Coun-
cil of Private Enterprise (COSEP), moved to the
United States, where they began a political campaign
to win support for their cause in Congress and from
among the Cuban and Nicaraguan exile communities.
Other anti-Sandinistas set about organizing a resist-
ance movement in neighboring nations.

The largest and most active of these groups, which
later came to be known as the Nicaraguan Democrat-
ic Force (FDN), was led by Adolfo Calero Portocar-
rero. Calero had been an accountant and businessman,
and had been active in the movement to oust Somoza.
Following the liberation, he served as the political
coordinator of the Conservative Democratic Party
and became an outspoken critic of the Sandinista
Government. Calero joined the resistance movement
after his office and home were attacked and he was
forced into exile.

Although Calero had opposed Somoza, the FDN
had its roots in two insurgent groups made up of
former National Guardsmen who fled Nicaragua after
the fall of Somoza. In 1981, this branch of the resist-
ance consisted of only a few hundred men.

Other elements of the anti-Sandinista resistance
emerged following the failure of members of the Nic-

araguan provisional government to resolve their dif-
ferences over the political direction of the country.
Increasingly, those who opposed the Sandinistas
found themselves isolated within the Government.
The resignation in 1980 of Violetta Chamorro from
the ruling directorate triggered an exodus of moderate
leaders from the Government.

Among those who left were Alfonso Robelo Calle-
jas and Arturo J. Cruz. Robelo had entered politics
during the two national strikes organized against
Somoza. In March 1978, he founded the Nicaraguan
Democratic Movement and was imprisoned by
Somoza. After his release, he was forced into exile.
He participated in the post-revolutionary Government
as the head of his own political party and as an
opponent of the Sandinista regime. Cruz, who would
become a prominent Contra leader, was named Nica-
raguan Ambassador to the United States in 1981. He
resigned 2 years later in protest against Sandinista
policies, and joined the resistance in 1983.

In addition to the main force of FDN fighters cen-
tered primarily in the northern portion of the country,
other resistance forces became active in other parts of
Nicaragua. These include several Indian groups oper-
ating along the Atlantic coast and, after 1981, a group
formed by the charismatic figure and former Sandi-
nista guerrilla leader and hero, Eden Pastora. Forces
under Pastora were based along the southern border
with Costa Rica.

Initial support for the Nicaraguan resistance came
from another country, which organized and supplied
paramilitary forces in early 1981. By the end of 1981,
however, the Contras were looking to the United
States for their support. They were to find a receptive
audience — President Reagan.

29

Chapter 2

The NSC Staff Takes Contra Policy

Underground

In December 1981, the President authorized a Central
Intelligence Agency (CIA) covert action program to
support the Contras. The CIA's activity, however,
did not remain covert for long: within months, it was
the topic of news reports and the subject of Congres-
sional debate questioning the Administration's policy
in support of the Contras. The Administration re-
sponded that it did not intend to overthrow the San-
dinista Government in Nicaragua, but sought to check
the spread of communism to El Salvador and other
nations in Central America.

In 1982, in the first Boland Amendment, Congress
sought to enforce that claim by barring the Adminis-
tration from using Congressionally appropriated
money for the "purpose" of overthrowing the Sandi-
nista regime. The Administration, although not
pleased with the amendment, nevertheless accepted it,
because the amendment allowed the Administration to
maintain support for the Contras so long as that sup-
port had as its "purpose" stopping the spread of the
Sandinista revolution outside Nicaragua's borders.

With the first Boland Amendment, then, came a
temporary compromise between the Administration
and Congress. But it was an inherently uneasy com-
promise, based more on semantics than substance: The
Contras were not in the field to stop Sandinista arms
flowing to El Salvador; they were in the field to
overthrow the Sandinistas. The Intelligence Commit-
tees of Congress, while rejecting that objective, nev-
ertheless approved CIA use of contingency reserve
funding to support the anti-Sandinistas. And the Ad-
ministration embraced the contradiction inherent in
the new law, by emphasizing that U.S. support was
aimed only at interdicting arms destined for other
Central American Communist insurgencies.

During 1983, press reports of a "secret" CIA war
in Nicaragua led to increased questioning in Congress.
In July, the House voted to end all Contra aid. Mean-
while, in the hopes of forestalling an aid cutoff, the
Administration accepted an invitation by the Senate
Select Committee on Intelligence to clarify its inten-
tions in pursuing a covert program. Despite Adminis-
tration efforts to meet those concerns, by the winter,
the House and Senate had agreed to cap Contra fund-
ing at $24 million, a sum that both the Administration

and the Congress knew would not last through fiscal
1984.

Nonetheless, the Administration decided to escalate
the operations in Nicaragua. When the Nicaraguan
harbor mining was disclosed in April, it created a
storm of protest in Congress and around the country
and, chiefly as a result. Congress declined to appro-
priate more money for the Contras. With the CIA out
of funds for the Contras, the NSC staff took over the
program of supporting the Contras. But this time, the
operation was covert in a new sense — it was con-
cealed from Congress.

Beginning in May 1984, when the CIA-appropri-
ated funds for the Contras ran out, the National Secu-
rity Council (NSC) staff raised money for Contra
military operations from third countries with the
knowledge of the President, supervised the Contras'
purchase of weapons, and provided guidance for the
Contras' military operations. The operational responsi-
bilities fell largely to Lt. Col. Oliver L. North, a
member of the NSC staff who reported to the Nation-
al Security Adviser, Robert C. McFarlane, and his
deputy. Vice Admiral John M. Poindexter.

In October 1984, the Congress passed and the
President signed the second Boland Amendment pro-
hibiting the expenditure of any available funds in sup-
port of Contra military operations by any agency or
entity involved in intelligence activities. Rather than
halting U.S. support for the Contras, the CIA's with-
drawal was treated as a call for the NSC staff to take
over the entire covert operation, raising more money
from a third country, arranging for arms purchases,
and providing military intelligence and advice. The
NSC staff went operational — and underground.

The December 1981 Finding

Within 2 months of President Reagan's inauguration,
the CIA proposed, and the NSC considered, plans for
covert action to deal with the growing Cuban pres-
ence in Nicaragua.' The United States continued to
recognize the Nicaraguan Government, but diplomat-
ic relations became increasingly adversarial because of
the Administration's concern that the Sandinistas
were continuing to receive significant military support

31

Chapter 2

from Cuba, support targeted, in part, for insurgent
groups beyond Nicaraguan borders.^

In December 1981, President Reagan signed his
first Finding specifically authorizing covert paramili-
tary actions against the Sandinista Government in
Nicaragua.^ Under the law, covert actions may be
initiated only by a personal decision of the President.
A Finding is an official document embodying that
decision. By signing a Finding, a President not only
authorizes action, but accepts responsibility for its
consequences.

Sponsoring the CIA's new covert program in Cen-
tral America was the Director of Central Intelligence,
William J. Casey. Casey was a veteran of covert
operations, having served with the Office of Strategic
Services (OSS), the predecessor to the CIA, during
the Second World War. In 1945, Casey, just 32 years
old and a Navy lieutenant, was chief of the Secret
Intelligence Branch that directed intelligence gather-
ing in German-controlled Europe from OSS head-
quarters in London.

After the war, Casey became a successful corporate
lawyer and a wealthy investor, was appointed Chair-
man of the Securities and Exchange Commission, and
later became head of the President's 1980 election
campaign. Following the 1980 election, Casey was
named Director of Central Intelligence, the first Di-
rector to enjoy Cabinet rank. Casey was a firm believ-
er in the value of covert operations, and took an
activist, aggressive approach to his craft. In the words
of the CIA's Deputy Director of Operations, Clair
George, "Bill Casey was the last great buccaneer
from OSS."4

Pastora Defects

Casey saw the opportunity to make military head-
way against the Sandinistas in early 1982, when rebel
leader Eden Pastora defected from the ruling Sandi-
nista junta. Pastora appeared to be an ideal candidate
for Contra military leadership. Known to his follow-
ers by the nom de guerre, "Comandante Zero," he had
been one of the heroes of the fight against Somoza.
From 1977 to 1978, he served in the Sandinista Na-
tional Liberation Front and later held several high
posts in the new Government until his abrupt resigna-
tion in 1981. In April 1982, Pastora organized the
Sandinista Revolutionary Front (FRS) and declared
war on the Sandinista Government.

Although Pastora was a popular, charismatic leader
with the potential to challenge the Sandinistas, his
geographic base presented a problem for the Adminis-
tration. He insisted on operating in the southern part
of Nicaragua. The Administration, however, claimed
that its only purpose in aiding the Contras was to
interdict arms Hows to El Salvador, which lies to the
north of Nicaragua. Support for Pastora in the South
contradicted that claim.

Casey's deputy. Admiral Bobby R. Inman, an intel-
ligence professional who had headed the National Se-
curity Agency, objected to this broadening of the
covert program. He believed that it was unsound, and
unauthorized by the existing Presidential Finding. Yet
Casey was determined to proceed. Inman retired at
the end of June 1982 and the CIA supported Pastora
without any change in the Presidential Finding.^

A Proposal for a New Finding

Pastora's rebel group "develop[ed] quickly."® By
July 12, 1982, Donald Gregg, then head of the NSC's
Intelligence Directorate and responsible for all covert
action projects, proposed a new draft Finding to keep
pace with Pastora's developing operations. Gregg,
hke Inman, believed that broad support for Pastora
was outside the scope of the December 1981 Find-
ing.' He wrote to William Clark, the National Securi-
ty Adviser, that "additional actions not covered by
previous authority are now being proposed."* Those
"additional actions" included providing "financial and
material support," training, and arms supply to Pas-
tora's forces.^ The problem with providing that assist-
ance under the December 1981 Finding, as Gregg
saw it, was that the "rationale" of the earlier Finding
appeared "to be to have the anti-Sandinista forces
strike against the Cuban presence in Nicaragua rather
than attacking the Sandinista units."'"

Vice Admiral Poindexter, then military adviser to
the National Security Adviser, disagreed. In a hand-
written note, Poindexter stated: "I don't see this really
needs to be approved since the earlier Finding covers
it, but maybe it would be good to get a confirmation
since we now have a better idea as to where we are
going."" As drafted by Gregg, the proposed Finding
provided for CIA paramilitary support to forces
inside Nicaragua for the purpose of "effect[ing]
changes in Nicaraguan government policies."'^ This
draft Finding, with its broadly stated goals, was never
approved by the President.

Boland I

By the fall of 1982, press reports told of a growing
U.S. involvement in Nicaragua.'^ Administration
spokesmen responded by stating that the U.S. Gov-
ernment was seeking not to overthrow the Nicara-
guan Government, but merely to prevent it from ex-
porting revolution to El Salvador. Aid to the Contras
was presented as an act in defense of El Salvador, not
a hostile act against Nicaragua.

Congress soon began to question this explanation.'*
The Contras were in the field for the announced
purpose of overthrowing the Sandinistas, not simply
to interdict supplies destined for El Salvador.'* Con-
gress debated the issue extensively, with some Mem-
bers questioning whether their own Government was

32

Chapter 2

violating the charters of both the United Nations and
the Organization of American States by interfering in
the internal affairs of Nicaragua.'* Members voiced
concern that U.S. support for the Contras was provid-
ing a "convenient pretext" for the Sandinistas to
impose martial law, suppress freedom of the press,
stifle religion, and undermine the rights of assembly
and free elections." Those who supported these
views called for a complete cutoff of aid to the Con-
tras.

There was equally strong support in Congress, par-
ticularly in the Senate, for aiding the Contras. Some
Members believed that the Sandinistas were trying to
spread a Marxist revolution to neighboring states.
They argued that no Communist regime had ever
stepped down or consented to free elections and that
support for the Contras was necessary to bring about
democracy in Nicaragua.'*

Out of this debate emerged an amendment to the
Defense Appropriations bill for fiscal year 1983, later
known as Boland I. Introduced by Representative
Edward P. Boland, the amendment passed the House
by a vote of 411-0, and was adopted, in December
1982, by a Conference Committee of the House and
Senate. This first Boland Amendment prohibited CIA
use of funds "for the purpose of overthrowing the
Government of Nicaragua."'^

The internal contradictions of the Administration's
announced Nicaragua policy ^° were carried forward
in the new law: Congress appropriated funds that
would be used by the CIA for Contra assistance, but
at the same time rejected the Contras' objective to
remove the Sandinista Government. During the floor
debate on his amendment, Representative Boland indi-
cated that while the Administration did not like his
proposed restrictions, it would accept them.^' Con-
gress had not cut Contra funding; it merely had legis-
lated an impermissible purpose. The Administration
still could maintain support for the Contras and did,
by relying upon its original justification for Contra
support— stopping arms flows to El Salvadoran Com-
munist insurgents.

In December 1982, The New York Times reported
intelligence officials as saying that Washington's
"covert activities have . . . become the most ambitious
paramilitary and political action operation mounted
by the C.I. A. in nearly a decade. . . ."^'^ One month
later, in January 1983, Senator Patrick J. Leahy, ac-
companied by staff of the Senate Intelligence Com-
mittee, visited Central America to review U.S. intelli-
gence activities related to Nicaragua. His findings,
supplemented by followup Committee briefings and
inquiries, revealed that the covert action program was
"preceding policy," that it was "growing beyond that
which the Committee had initially understood to be
its parameters," and that "there was uncertainty in the
executive branch about U.S. objectives in Nicara-
gua."^^

Questions about compliance with the Boland
Amendment increased throughout 1983. In March, 37
House Members sent a letter to the President warning
that CIA activities in Central America could be vio-
lating the law.^* In April, news reporters visiting
Contra base camps wrote that "[t]he U.S. -backed
secret war against Nicaragua's leftist Sandinista
regime has spilled out of the shadows."^^

Challenged to defend the Administration's compli-
ance with the law, the President asserted in April that
there had been no violation of the Boland Amend-
ment. There would be none, said the President, be-
cause even a law he disagreed with had to be ob-
served; "We are complying with the law, the Boland
Amendment, which is the law."^* "[W]hat I might
personally wish or what our government might wish
still would not justify us violating the law of the
land."^'' When asked if his Administration was doing
anything to overthrow the Government of Nicaragua,
he replied, "No, because that would be violating the
law."28

According to some in Congress, the Administration
was facing a "crisis of confidence" about the legitima-
cy of CIA support for the Contras. ^^ The President
responded with a major address on Central America
to a joint session of Congress on April 27, 1983.
Rejecting images of a new Vietnam, the President
stated:

But let us be clear as to the American attitude
toward the Government of Nicaragua. We do not
seek its overthrow. Our interest is to ensure that
it does not infect its neighbors through the export
of subversion and violence. Our purpose, in con-
formity with American and international law, is
to prevent the flow of arms to El Salvador, Hon-
duras, Guatemala, and Costa Rica . . . .^°

It soon became clear, however, that the President
had not made the case for the Administration's
Contra support policy with either the Congress or the
American people.^' He was not helped by the Con-
tras' performance on the ground. The Contras had
failed to win either popular support or military victo-
ries in Nicaragua and could not, without both, sustain
public support in the United States. ^^

The Administration Responds to
Congressional Unrest: l\/lay-
September 1983

In May 1983, both the House and Senate Select Com-
mittees on Intelligence challenged the Administra-
tion's Nicaragua policy, but in different ways. The
Senate Intelligence Committee "took the rather un-
usual step of requiring" that "the Administration ar-
ticulate, in a clear and coherent fashion its policy

33

Chapter 2

objectives." Before the Committee would vote for
more aid, it wanted a new Presidential Finding. ^^

The House Permanent Select Committee on Intelli-
gence, on the other hand, favorably reported a new
bill, the "Boland-Zablocki" bill, to the full House for
consideration.^* The bill barred aid for the Nicaragua
covert action program, but it also took the Adminis-
tration at its word about the need to stop arms flows
to El Salvador. The legislation provided $80 million
in assistance to Central American governments to
stop the flow of arms to rebel groups, but no funds
for "support of military or paramilitary activities in
Nicaragua."^* Despite strong Administration opposi-
tion, the House passed the bill on July 28, 1983, by a
vote of 228-195.36

With its implicit threat of an aid cutoff, the Boland-
Zablocki measure challenged the Administration to
articulate a plausible rationale for covert aid. The bill
exposed the loose fit between the Administration's
announced policy of stopping arms flows to El Salva-
dor and its covert support of the Contras. If the
Administration really wanted to stop arms flows to El
Salvador, it could do so directly, said the Congress;
but if its purpose was to aid the Contras in over-
throwing the Nicaraguan Government, there would
be no funding. 3'

The Administration responded to the threat of an
aid cutoff in three different ways. First, the Adminis-
tration established a public relations office in the State
Department attempting to muster the public and Con-
gressional support necessary for the Contras. Second,
anticipating that a cutoff might nevertheless occur,
the Administration developed a secret plan to stock-
pile weapons for the Contras at the CIA. Finally, at
the same time, to satisfy Congressional demands, the
Administration agreed to draft a new Finding.

White Propaganda

In June of 1983, the Administration decided upon a
new method of trying to win public support for the
President's policy in Central America. On July 1,
1983, then National Security Adviser Clark an-
nounced that "the President had decided that the Ad-
ministration must increase our efforts in the public
diplomacy field to deepen the understanding of the
support for our policies in Central America."^*

As a result, an office of Public Diplomacy for Latin
American and the Caribbean (S/LPD) was estab-
lished in the State Department, headed by Otto
Reich, ''^ who eventually was given the rank of Am-
bassador.*" The S/LPD was an interagency office
with personnel contributed by the Department of
State, the Department of Defense (DOD), the
Agency for International Development, and the U.S.
Information Agency. Although created as part of the
State Department, the office was established at the
direction of the National Security Council.'" The S/
LPD's activities were coordinated by an interagency

working group staffed by the NSC. The principal
NSC staff officer was a former senior CIA official.
With the knowledge and approval of Director Casey,
he was detailed to the NSC staff for a year. He later
became Special Assistant to the President with re-
sponsibility for public diplomacy matters.

The mission of the office — public diplomacy — was
a "new, non-traditional activity for the United States
government," according to the State Department. In
fact, "public diplomacy" turned out to mean public
relations-lobbying, all at taxpayers' expense. The
office arranged speaking engagements, published pam-
phlets, and sent materials to editorial writers.*^ In its
campaign to persuade the public and Congress to
support appropriations for the Contras, the office used
Government employees and outside contractors — in-
cluding Richard Miller and Francis Gomez who
would later work with North to provide Contra as-
sistance. ^^

A Deputy Director of S/LPD, Jonathan Miller,
reported the office's success in what he labeled a
"White Propaganda Operation," which sought to
place op-ed pieces in major papers by secret consult-
ants to the office.** By Reich's own description, the
office adopted "a very aggressive posture vis-a-vis a
sometimes hostile press." It "briefed Members of Con-
gress, reached out to audiences previously over-
looked, found new ways of reaching traditional audi-
ences, and generally did not give the critics of the
policy any quarter in the debate."*^ It claimed that
"[a]ttacking the President was no longer cost free."*®

Later, the Comptroller General would find that
some of the office's efforts, in particular Jonathan
Miller's "White Propaganda," were "prohibited,
covert propaganda activities,""' "beyond the range
of acceptable agency public information
activities. . . ."" In a September 30, 1987, letter,
the Comptroller General concluded that S/LPD had
violated "a restriction on the State Department's
annual appropriations prohibiting the use of federal
funds for publicity or propaganda purposes not
authorized by Congress.""^

The CIA Tries to Stoclcpiie

In the summer of 1983, while efforts were under-
way at the State Department to change public opin-
ion, the CIA began secret preparations in the event
Congress decided to cut off aid to the Contras. In that
event, the Agency planned to obtain equipment free
of charge from the DOD.

On July 12, the President directed that the DOD
provide enhanced support for the CIA in its efforts to
assist the Contras.^" One day later, the CIA sent a
"wish list" to the DOD, requesting that $28 million in
equipment be transferred to it, "free-of-charge."*'
The list covered everything from medical supplies to
aircraft, and included a request for personnel.*^ The

34

Chapter 2

Joint Chiefs of StafT proposed that each of the four
services carry a quarter of the cost of these trans-
fers.^' The equipment then could be stockpiled by the
CIA and provided to the Contras if the need arose.
The CIA would not run afoul of any aid ceiling since
it had not paid for the equipment. The equipment
involved had been paid for out of the normal DOD
budget allocation. In short, money appropriated by
Congress for one purpose would be used for another,
bypassing any limits Congress might place on CIA
appropriations, such as the then-pending Boland-
Zablocki bill.^"

By late summer, the DOD's General Counsel con-
cluded that a nonreimbursable transfer would violate
the Economy Act, a law requiring that the DOD be
reimbursed for the cost of interagency transfers. ^^
The CIA would have to pay for all items except
surplus equipment. From the CIA's perspective, this
defeated the purpose of the plan: to avoid the expend-
iture of CIA funds and shift the cost to the DOD.^^
The project was finally terminated on February 12,
1985, after the CIA had obtained, without cost, 3
surplus Cessna aircraft and, at cost, 10 night vision
goggles, 1 night vision sight, and a Bushmaster
cannon.^'

The September 1983 Finding: A New
Rationale for Covert Aid

Trying to forestall a complete cutoff of Congres-
sional aid, the Administration accepted the Senate
Intelligence Committee's proposal that it draft a new
Finding defining and delimiting the purposes of the
covert program. By August, Director Casey had pre-
sented the Committee with a first draft and later, in
September, proceeded to "informally discuss the find-
ing with Senator Goldwater and other key Senators
of the SSCI."^* Within the Administration, the Find-
ing was, as North put it, "thoroughly scrubbed" by
the State Department and NSC staff as well by as the
Justice Department and lawyers from DOD and
CIA.59

On September 16, 1983, at a National Security
Planning Group (NSPG) meeting. Director Casey
briefed the President and his advisers from the State
and Defense Departments on the draft Finding. The
Director explained that the earlier Finding had been
"modified to reflect [a] change of objectives. . . ."^°
No longer was the covert program justified solely by
the need to curb Cuban support for the Sandinistas or
to stop arms flows out of Nicaragua. A new, and
broader, rationale was added: covert aid was intended
to pressure the Sandinistas to negotiate a treaty with
nearby countries.®'

The new Finding also reflected a change of tactics.
Congress would not accept a Finding broad enough
to permit paramilitary operations conducted by U. S.
citizens. The Administration gave its assurances that
aid for paramilitary operations would be limited to

third -country nationals.®^ Casey told the President
that the "new Finding no longer lets us engage in PM
[paramilitary operations]."®'

Three days later, on September 19, 1983, the Find-
ing was signed.®* The next day, the Intelligence
Committees received briefings on it. Shortly thereaf-
ter, the Senate Intelligence Committee voted to pro-
vide aid for a continued covert operation in Nicara-
gua.®^

The new Finding, however, was not without prob-
lems. The Administration's stated objective in sup-
porting the Contras was now to pressure the Sandinis-
tas into accepting a treaty that had to include free
elections. If, as the President believed, the Sandinistas
could not win such an election, they would never
agree to such a treaty.®® Only the prospect of a
military defeat would push them toward a negotiating
posture. Yet, the renunciation of a military victory
was the price set by Congress for a bipartisan com-
promise. The Finding thus contained within it a para-
dox that would haunt the Administration's Nicaragua
policy.

Forcing the Issue: The December
Funding Cap and Intensifying
Covert Operations

One day after the September Finding was briefed to
the Intelligence Committees, an unnamed Administra-
tion official was quoted in The New York Times
explaining the rationale of the new Finding: "Yes, we
are supporting the rebels until the Nicaraguans stop
their subversion," an "approach," the official urged,
that "should end the argument over whether the Ad-
ministration was violating its pledge by doing more
than just stopping the arms flow."®'

But Administration hopes that the September Find-
ing, and its new rationale for covert action, would
end the debate on Contra aid were quickly dashed.
Discussions were held on the House floor over the
advisability of continuing covert aid, and the Presi-
dent took his cause to the public in his radio address-
es. In October, the House voted to halt all aid to
paramilitary groups fighting the Nicaraguan Govern-
ment.®* The Senate, however, wanted to continue
aid. In early December, the House and Senate agreed
to a compromise: A "cap" of $24 million would be
placed on Contra funding, and the CIA would be
barred from using its contingency reserves to make up
any shortfall.®^

Congress and the Administration recognized that
the $24 million appropriation would be insufficient to
sustain a covert operation through the fiscal year.'"
Therefore, the door was left open for a future Admin-
istration funding request to carry the program for the
balance of the year if negotiations for a peace treaty
were thwarted by the Sandinistas. The President was

35

Chapter 2

required to report to Congress by March 15 on the
steps taken to achieve a negotiated settlement in Cen-
tral America.'"

The Decision to Bring the Situation to a
Head

Having survived the threat of a total cutoff of funds
for the Contras, the Administration decided to intensi-
fy the CIA's covert activities while funding still re-
mained.'^ Charged by the new National Security Ad-
viser, Robert McFarlane, to prepare an "in-depth
review" of the Administration's Central America
policy, ''^ a Special Interagency Working Group
(SIG)''' concluded: "Given the distinct possibility
that we may be unable to obtain additional funding in
FY-84 or FY-85, our objective should be to bring the
Nicaragua situation to a head in 1984.""^ At a Janu-
ary 6 NSPG meeting, the President and his advisers
concurred in the SIG recommendation: "Our covert
action program should proceed with stepped up inten-
sity."''^

Even before the decision had been officially ac-
knowledged, plans had been implemented to step-up
paramilitary operations in Central America. In the
fall, speedboats carried out attacks against Sandinista
patrol craft and fuel tanks.'® By November, a more
heavily armed speedboat had been developed for
follow-on operations."

At the end of December, and thereafter, the mining
and other operations increased. In early January, the
CIA proposed attacks against fuel supply depots and
transmission lines along the "entire Pacific coast of
Nicaragua."'* On January 7, three magnetic mines
were placed in Sandino harbor;''^ on February 3, an
air attack destroyed a Sandinista "communications
and naval arms depot"*"; and on February 29, more
mines were placed at Corinto.*' By March 29, plans
had been made to support an attack by Eden Pastora
on San Juan del Norte; it was hoped that the attack
would result in the installation of a provisional gov-
ernment.*^

The Role of Lt. Col. Oliver North

At the NSC, Lt. Col. Oliver North became the
liaison with the CIA in its intensified covert effort. A
graduate of the U. S. Naval Academy, he had distin-
guished himself on the battlefield in Vietnam, winning
a Silver Star, a Bronze Star, and two Purple Hearts.*^
He was assigned to the NSC in October 1981, where
he quickly established a reputation with his superiors
as a staffer who could get a job done.***

North was energetic, articulate, action-oriented, and
had a reputation for bypassing red tape.*^ His superi-
ors could depend on him not only to carry out orders,
but to keep them informed.*® North was a prodigious
writer, often staying in his office until late at night to
complete lengthy papers or other work.*''

As described by a number of his colleagues. North's
relationship to McFarlane was very close.** With
McFarlane's rise to the position of National Security
Adviser, North came to play an increasingly large
role not only in the operational aspects of Contra
policy, but also in forging that policy. North already
had contacts in Central America who were pleased
with his success. On November 7, 1983, John Hull,
Indiana native, ranch owner in Costa Rica, and
Contra supporter, wrote that "B.G.," or "blood and
guts," as North was known, was to have a new boss,
Robert McFarlane. Hull hoped this would make
North "more powerful as we need more like him."*^

North became a strong advocate within the NSC
staff of intensified covert support for the Contras. He
was the point of contact, transferring information
from the CIA to the National Security Adviser for
the President's approval.®" For every significant, and
sometimes insignificant, operation, he provided a
memorandum to the National Security Adviser des-
tined for the President. His reports were detailed and
enthusiastic, his recommendations supportive of fur-
ther operations.®'

In his new assignment, North looked to Casey for
guidance. In his words. Director Casey was a "teach-
er or philosophical mentor" of sorts, to whom he
looked for help and advice on a regular basis. ®^ "Bill
Casey was for me a man of immense proportions,"
North testified, "a man whose advice I valued greatly
and a man whose concern for this country and the
future of this land were, I thought, on the right
track." "History," North stated "will bear that
out."®^

Tension Between the 1983 Finding and
Intensified Operations

In a series of memorandums written between Oc-
tober 1983 and March 1984, North recorded the
CIA's increasing covert presence in the region. Rela-
tively minor operational details were given to the
President, as on November 4, when North advised
McFarlane to suggest an increase in the number of
weapons supplied to the Contras by 3,000. The Presi-
dent approved the recommendation.®'* North not only
sought approval for, but also reported the results of,
various actions proposed to him by Agency person-
nel. On February 3, he reported a successful attack on
a Sandinista communications and naval arms depot.
Admiral Poindexter penned, "Well done." and
checked North's recommendation that the President
would be briefed.®^

North frequently stated in his memorandums that
the actions recommended were within the Septem-
ber 1983 Finding.®^ Yet, progress toward negotiations
and success in arms interdiction were not the focus of
his attention; instead, the destruction of Sandinista
fuel supply lines or the mining of harbors was the

36

Chapter 2

subjects of these memorandums. North kept his
superiors advised of Contra actions that would
weaken the Sandinista regime, explaining that the
purpose of the mining and attacks was to enhance
the Contras' military strength, while "reduc[ing]
the mobility of Sandinista military units. "^'

North could contend that such military activities
were within the scope of the Finding because of the
Finding's essential ambiguity. Paramilitary action,
once authorized, may be used to promote a diplomat-
ic end while at the same time furthering the cause of
military victory. But by March of 1984, it had
become clear that the diplomatic end the Finding
described was not what North anticipated or encour-
aged. In memoranda to McFarlane, he proposed sig-
nificant military actions against the Sandinistas, the
details of which cannot be disclosed for national secu-
rity reasons, but which give substance to the testimo-
ny of Clair George, CIA Deputy Director for Oper-
ations, that North's ideas were often extreme,
"crazy," or "hairbrained."** The memos reveal the
same enthusiasm for covert paramilitary operations
that North would later bring to his work as the
"switching point" for Contra support during the next
2 years. ^8

The Money Begins to Run Out

By February 1984, the $24 million earmarked by
Congress for the Contras was being quickly depleted.
On February 13, North wrote to McFarlane, empha-
sizing the importance of obtaining "relief from the
$24M ceiling,"""' but recognizing that "[c]ongres-
sional resistance on this issue is formidable":

[P]rospects for success are bleak even with a
concerted effort. At some point, we may have to
reassess our prospects and decide whether pru-
dence requires that we somehow stretch our FY-
84 effort to avoid running out of funds.'*"

In a memorandum drafted by North for the President,
McFarlane concluded that "[u]nless an additional
$14M [million] is made available, the [Contra aid]
program will have to be drastically curtailed by May
or June of this year.""'^

the September 1983 Finding.'"^ Senator Barry
Goldwater, Senate Intelligence Committee Chairman,
charged that his Committee Members had been de-
ceived at the very moment they were being asked to
vote to support Contra aid. "[I]t is indefensible on the
part of the Administration to ask us to back its for-
eign policy when we don't even know what is going
on," he declared.'"^

After initial assertions by Director Casey and the
National Security Adviser"" that full and detailed
disclosure had been provided to Congress, the Ad-
ministration decided to end the escalating battle and
offered a truce. On April 26, Director Casey
"apologize[d] profoundly," conceding inadequate dis-
closure.'"* But the "apology" could not heal the
"fracture" between Congress and the Administration
that the mining had created. '°^ The Administration's
policy to bring the situation "to a head" had back-
fired: the plan, rather than attracting support, lost it.

Keeping the Contras Together:
Spring-Summer 1984

The Administration's proposal for $21 million in
supplemental assistance for the Contras now lay in
doubt as Congress debated the course of U. S. policy
in Central America. The uproar over the mining inci-
dent made any further appropriation unlikely. Indeed,
House Speaker Thomas P. (Tip) O'Neill, Jr. declared
that, in his view, the President's funding request was
"dead."''"

With or without appropriated funds, the Adminis-
tration planned to continue supporting the Contras. In
McFarlane's words, the President directed the NSC
staff to keep the Contras together "body and
soul."''"^ In Poindexter's words, the President
"wanted to be sure that the contras were support-
ed."'^

McFarlane assigned this responsibility to North,
who testified:

I was given the job of holding them together in
body and in soul. ' ' ^

The Harbor Mining Disclosures

In early April, the country learned that the U.S.
Government was involved in the mining of Nicara-
guan harbors. U.S. Government presence in Nicara-
gua had become "embarrassingly overt." '"^ As
McFarlane testified: "The disclosure that harbors had
been mined in Nicaragua was received very
badly. . . ."""■

Some in Congress believed that the Administration
had misrepresented the activities it conducted under

To keep them together as a viable political oppo-
sition, to keep them alive in the field, to bridge
the time between the time when we would have
no money and the time when the Congress
would vote again, to keep the effort alive, be-
cause the President committed publicly to go
back, in his words, again and again and again to
support the Nicaraguan resistance. ' ' *

37

Chapter 2

Tapping Foreign Sources — The First
Efforts

With the appropriated funds projected to run out in
May or June, the Contras could be kept together only
if an alternative source of funding could be found.
The Administration began to look beyond the U.S.
Treasury to foreign countries for monetary support.
As early as February, North drafted a National Secu-
rity Decision Directive recommending "immediate ef-
forts to obtain additional funding of $10-$ 15 million
from foreign or domestic sources to make up for the
fact that the current $24 million appropriation will
sustain operations only through June 1984."*''* While
McFarlane struck this language from an official pol-
icymaking document,"^ he quietly pursued the same
idea.

Looking to Country 1 for Contra Support

McFarlane testified that perhaps as early as Febru-
ary 1984, he considered "the possibility of in effect
farming out the whole contra support operation to
another country, which would not only provide the
funding, but give it some direction."**^ In February
or March, McFarlane pursued the idea with an offi-
cial from Country 1."'' He inquired whether Country
1 would have any interest in instructing "the contras
in basic tactics, maneuver[s], and so forth."''* Coun-
try 1 officials eventually declined the invitation. "^

But McFarlane was not dissuaded from attempting
a less ambitious plan for third-country support. On
March 27, McFarlane met with Director Casey and
proposed a plan to approach third countries, including
Country 1, for Contra assistance. In a memorandum
of that date, Casey recounted McFarlane's plan:

In view of possible difficulties in obtaining sup-
plemental appropriations to carry out the Nicara-
guan covert action project through the remainder
of this year, I am in full agreement that you
should explore funding alternatives with [Coun-
try 1] and perhaps others.'^"

Others were not in "full agreement," however,
about an approach to Country 1. Secretary of State
George P. Shultz testified that during other discus-
sions within the Administration about third-country
funding, he questioned the legality and wisdom of any
third-country approach. Shultz testified that by April
18, McFarlane knew he (Shultz) felt it was a mistake
to approach Country 1 for Contra support. '2'

Nevertheless, McFarlane followed through with the
plan recounted in Director Casey's March 27 memo.
He directed Howard J. Teicher, the Director of Near
East Affairs at the NSC, to speak to an official in
Country Ts Ministry of Foreign Affairs about obtain-
ing monetary support. Teicher made the approach,
but Country 1 declined to be a part of the plan.'^^
McFarlane, in a memorandum of April 20, told

Teicher that he was "disappointed in the outcome but
we will not raise it further . . . [w]e will not press
them on the question of assistance to the contras." '^^
In May, Secretary Shultz learned of Teicher's ap-
proach from the U. S. Ambassador to Country 1, and
he confronted McFarlane at the White House. '^'' Ac-
cording to Shultz, McFarlane told him that Teicher's
approach to Country 1 was without authorization and
that Teicher was operating "on his own hook."'^*
But Shultz later learned, to the contrary, from his
Ambassador, that Teicher had made a point of telling
the Ambassador he was in Country 1 at McFarlane's
instructions. '2^ Later, McFarlane told the Commit-
tees that he had directed Teicher to seek a contribu-
tion from Country 1.'^'

Looking to Country 6 for Contra Support

Another third-country funding option considered
by the CIA during the spring of 1984 was an ap-
proach to Country 6. In his March 27 memorandum,
Casey indicated that Country 6 officials already had
been approached and that the initial reaction had been
favorable. '2* Between April 10 and 13, 1984, Duane
(Dewey) Clarridge, Chief of the Latin American Di-
vision of the CIA Directorate of Operations traveled
to Country 6.'-^ While there, CIA Deputy Director
John N. McMahon, told Clarridge to "hold off on
his discussions because of the recent harbor mining
disclosures.'^" Upon his return to the United States,
Clarridge wrote:

Current furor here over the Nicaraguan project
urges that we postpone taking [Country 6] up on
their offer of assistance. Please express to [Coun-
try 6 official] my deep regret that we must do
this, at least for the time being, and I fully realize
that he cannot crank up assistance on a moment's
notice, should we decide to go forward in the
future. ' ^ '

Clarridge testified that neither Casey's March 27
memorandum nor the cable traffic (in some cases cap-
tioned, "[Country 6] Assistance to the Nicaraguan
Project" '^^), represented CIA efforts to solicit
Contra assistance from Country 6.'^^ He conceded
that the documents showed that, prior to his arrival.
Country 6 had offered to aid the Contras, and that an
offer may have been made as early as January 1984 in
a meeting between Director Casey and a Country 6
official.'^'' But before he arrived in Country 6,
Clarridge testified, "a decision had been taken . . .
that we would neither ask for any assistance nor
would we accept any . . . ."'^s clarridge did not
explain why, if the Country 6 offer of assistance was
dead before his visit, he urged on his return "we
postpone taking [Country 6] up on their offer of as-
sistance."'^*

38

Chapter 2

Country 2 Contributes Funds

By May 1984, the Contras had exhausted the last
portion of the $24 million Congressional appropriation
for fiscal 1984. McFarlane testified that possibly as
early as May,'^' he met with the Ambassador from
Country 2 and explained that it was almost "inevita-
ble that the Administration would fail" to win Con-
gressional support for the Contras.*'* According to
McFarlane, the Ambassador offered to "provide a
contribution of $1 million per month, ostensibly from
private funds that would be devoted to — as a humani-
tarian gesture — to sustenance of the Contras through
the end of the year."''^ In his testimony, McFarlane
denied that any solicitation of Country 2 had oc-
curred, and insisted the Country 2 contribution was
merely a gift.'*"

After receiving the contribution and informing his
deputy, Admiral Poindexter, McFarlane charged
North with the responsibility for arranging the trans-
fer of funds: "[I] asked him to be in touch with the
contra leaders and to find out where the bank account
was kept. . . . Lieutenant Colonel North came back
and provided the name of the bank, its address and
the contras' account number for the bank in
Miami. . . ."*'" McFarlane communicated this to
the Ambassador by handing him an index card with
the account number on it."^ North testified that it
was McFarlane who asked him "to establish the
initial resistance account offshore to which money
was sent by a foreign government."'"'^

According to McFarlane, the President was in-
formed of the Country 2 contribution shortly after it
took place. McFarlane placed a note card into the
President's morning briefing book. He chose this
method of informing the President of the contribution
to reduce any chance that others at the President's
daily briefing might become aware of the funding
scheme. After the meeting, McFarlane was called in
to "pick up the note card which," he recalled, "ex-
pressed the President's satisfaction and pleasure that
this had occurred."''*'*

McFarlane also testified he informed selected mem-
bers of the executive branch of the funding. "Within a
day or so," he told Vice President George Bush, and
at a weekly breakfast with the Secretaries of State
and Defense, he "drew them aside" and informed
them that the Contras would be "provided for" until
the end of the year. Neither Secretary, according to
McFarlane's testimony, asked the source of the
funds.'''* McFarlane testified that it was "likely" he
told then-Chief of Staff, James A. Baker III "[i]n the
spring of '84," and that it was "possible" he told then-
Counselor to the President Edwin Meese III of the
Country 2 contribution.'*® McFarlane claimed he did
not inform Director Casey of the Country 2 fund-
ing.'*'

But McFarlane's account was disputed by other
witnesses. Secretary of Defense Caspar W. Weinberg-

er had no recollection of being so advised by McFar-
lane;'•** and Secretary Shultz testified that he was
told of the contribution for the first time in June 1986
after Admiral Poindexter became concerned that the
Secretary of State had not been told of the Country 2
contribution.'*^ Baker denied any knowledge of the
contribution. '*°

The June National Security Planning
Group Meeting

On June 25, the National Security Planning Group
met to consider options for funding the Contras. In
attendance were the President, Vice President Bush,
Secretary Shultz, Secretary Weinberger, Director
Casey, Meese, and McFarlane. Director Casey urged
the President to seek third-country aid. Secretary
Shultz responded that Chief of Staff James Baker had
told him that if the U.S. Government acted as a
conduit for third-country funding to the Contras, that
would be an "impeachable offense."'*' Casey re-
sponded that it was permissible if the plan called for
direct contributions from third countries to the Con-
tras. Meese recalled that there was an opinion by
Attorney General William French Smith that provid-
ed authority for such a plan, but also noted that if an
opinion were sought. Justice Department lawyers
should be given guidance on what the opinion should
say. The meeting ended without any firm conclusion.
McFarlane advised that no one was to do anything
without the necessary Justice Department opinion.
Although McFarlane had already secured the contri-
bution from Country 2, neither he nor anyone else
mentioned it. '*^

And although McFarlane had urged those at the
National Security Planning Group meeting not to do
anything, that very day North arranged for the trans-
fer of Country 2 funds to Contra leader Adolfo
Calero. North's notes reveal that on June 25, 1984, he
told Calero that funds would be transferred "w/in 24
hrs.," through an offshore account. North issued a
series of instructions to Calero: "Never let agency
know of amt, source, or even availability" of the
funds; "No one in our govt, can be aware"; and
"Your organization must not be aware."'*'

North made these plans to send the Country 2
funds to Calero despite his apparent knowledge of the
legal difficulties expressed earlier that day at the Na-
tional Security Planning Group meeting. His notes
reflect that he was advised of those discussions by
Clarridge of the CIA. North recorded phrases such as
"impeachable offense" (presumably referring to Sec-
retary Shultz's remark), and "going to French Smith
— reading on US seeking alternative funding." The
note continues: "Seek 3d party funding."'**

The next day, Director Casey met with Attorney
General Smith along with members of the Justice
Department and the CIA legal staff. In a memoran-

39

Chapter 2

dum recording the meeting, the CIA's General Coun-
sel, Stanley Sporkin, reported that in response to Di-
rector Casey's question about the "legal limits" of
funding options, the Attorney General stated:

that he saw no legal concern if the United States
Government discussed this matter with other na-
tions so long as it was made clear that they
would be using their own funds to support the
Contras and no U.S. appropriated funds would be
used for this purpose. The Attorney General also
said that any nation agreeing to supply aid could
not look to the United States to repay that com-
mitment in the future. The DCI [Director of
Central Intelligence] made it clear that if there is
a possibility this option might be used, he would
advise the CIA oversight committees. '^^

The Intelligence Committees were not advised of the
Country 2 contribution until 1987.

Providing Support— The Private Networl(

With funds available from Country 2, North turned
to creating a mechanism for providing materiel sup-
port for the Contras. "When we ran out of money,"
North testified, "when people started to look in Nica-
ragua and Honduras and Guatemala and El Salvador
and Costa Rica for some sign of what the Americans
were really going to do," a decision was made to
create an infrastructure, what North termed a "covert
operation" to provide the operational support denied
by Congress. '^^

North testified that, at Casey's suggestion, he
turned to Retired U.S. Air Force Maj. General Rich-
ard V. Secord: '^''

[I]n 1984, we were approaching the proscriptions
under Boland, Director Casey and I had had a
number of discussions. I had made a number of
trips, and obviously by then I had become much
more engaged in the support for the resistance.

Director Casey is the one who had suggested
General Secord to me as a person who had a
background in covert operations . . . and was a
man who, by Director Casey's definition, got
things done, and who had been poorly treated.
Those were his words.

I approached General Secord in 1984 and asked
that he become engaged in these activities. . . .

I went back to him again and at some point in
'84, he agreed to become actively engaged. He
agreed to establish, and did, private commercial
entities outside the United States that could help
carry out these activities. '•''*' It was always
viewed by myself, by Mr. McFarlane, by Direc-
tor Casey, that these were private commercial
ventures, private commercial activities . . . .'^^

It was clearly indicated that Mr. McFarlane and
Admiral Poindexter and in fact almost drawn up
by Director Casey, how these would be outside
the U.S. Government, and that I told them right
from the very beginning that those things that he
did deserved fair and just compensation.'^"

[I]t was always the intention to make this a self-
sustaining operation and that there always be
something there which you could reach out and
grab when you needed it. Director Casey said he
wanted something you could pull off the shelf
and use at a moment's notice.'®'

The network, albeit privately run, was created for the
purpose of pursuing "foreign policy goals." Accord-
ing to North: "It was never envisioned in my mind
that this would be hidden from the President." '^^
The President has publicly stated that he was kept
informed of some of the efforts by private citizens to
aid the Contras.'®^ Poindexter testified the President
"knew the contras were being supported ... by
third-country funds and by private support
activity. . . ." "''' There is no evidence, however, to
suggest that the President was ever informed about an
"off-the-shelf covert operation.

Secord's Initial Role

General Secord had served in the Air Force until
1983, when he retired and entered private business.
During his service in the Air Force, he was involved
in special operations with the CIA in Laos. From
1978 to 1981, Secord headed the U.S. Air Force
International Programs office.'®^

In summer 1984, Secord's first assignment from
North was to assist the Contras in buying weapons
with the funds sent to Calero by Country 2. In July,
Secord, accompanied by his associate and former CIA
operative, Rafael Quintero, met with Calero to dis-
cuss the Contras' need for low-priced weapons. He
left the meeting with a weapons list.'^® Although
Secord was not an arms dealer, he agreed to act as a
broker to procure the weapons with his business part-
ner, Albert A. Hakim, a naturalized American of Ira-
nian descent.'^' In his testimony. Secord referred to
the operation that he and Hakim used for Contra
support as "the Enterprise." '**

Owen's Role

North also obtained the assistance of Robert W.
Owen to act on his behalf with Contra leaders. Owen
was a private citizen who was a teacher before he
joined the staff of Senator Dan Quayle in 1982. After
leaving Senator Quayle's staff in 1983, Owen joined
Gray & Co., a public relations firm in Washington,
D.C.'«»

In the spring of 1984, while Owen was at Gray &
Co., a Contra representative approached the firm

40

Chapter 2

seeking representation. Owen was asked to contact
the Nicaraguan Democratic Forces (FDN). He turned
to North, whom he had met the year before while
working for Senator Quayle. Owen learned from
North that the Contras needed money, and they dis-
cussed a plan to set up a group of European proprie-
tary companies to purchase weapons overseas. During
the discussions, North asked Owen to travel to Cen-
tral America to determine the Contras' requirements
over the next several months. Owen agreed.''"'

Taking a leave of absence from his firm, Owen
traveled to Central America in late May or early June
1984 and met with Contra leaders. He was told, and
subsequently repeated to North, that the Contras
"would need $1 million a month, and if they wanted
to increase in size they would need about a million
and a half dollars a month." "' Between October
1984 and March 1986, Owen made more than seven
trips to Central America collecting information and
delivering intelligence and money to the Contras on
North's behalf.'''^ He was given the code name
"T.C." (The Courier), and in his own words, he
served as North's "eyes and ears" in Central Amer-
ica. •''^

Boland II

In the summer of 1984, CIA covert assistance to the
Contras began to wane as funds were depleted. Mean-
while, legislation — the second Boland Amendment —
that would bar the Agency from future support for
the Contras had been passed by the House in early
August. According to McFarlane, as the CIA stepped
out of the picture, the task of supporting the Contras
fell to the NSC: "[t]he President had made clear that
he wanted a job done. The net result was that the job
fell to the National Security Council staff." '''*

In late August, North traveled to Central America
to meet with Calero to resolve "immediate operation-
al/logistic problems." McFarlane advised North: "Ex-
ercise absolute 'stealth.' No visible meeting. No press
awareness of your presence in the area." '''^ On Sep-
tember 1, North proposed to McFarlane that he
obtain a "private donor" for a new helicopter to re-
place one shot down the day before. The National
Security Adviser penned a note: "I don't think this is
legal." "^ One month later, on October 9, North
proposed a National Security Decision Directive call-
ing "for the CIA to provide assistance to the Nicara-
guan Resistance Forces in interdicting Soviet arms
bound for the FSLN in Managua." Once again,
McFarlane wrote on the cover sheet: "Ollie/Ken [de-
Graffenreid]. '''■' pis check w/ CIA legal counsel
promptly to confirm this is legal ... ." •'*

By early October, Congress had adopted the
Boland Amendment to an omnibus appropriations bill.
Signed into law by the President on October 12, 1984,

the bill would later be referred to as Boland II. It
provided in relevant part:

During fiscal year 1985, no funds available to the
Central Intelligence Agency, the Department of
Defense, or any other agency or entity involved
in intelligence activities may be obligated or ex-
pended for the purpose or which would have the
effect of supporting, directly or indirectly, mili-
tary or paramilitary operations in Nicaragua by
any nation, group, organization, movement or
individual.

Similar provisions were adopted as parts of the De-
fense and Intelligence Authorization bills.

While Boland II cut off all funding for the Contras,
it held out some hope for renewing Contra aid in the
future by providing that the Administration could
seek a $14 million appropriation on an expedited basis
after February 28, 1985. But, even as the bill held out
a future hope, its sponsors made clear that the law
was intended to achieve an immediate cutoff of aid.
As Representative Boland put it, the law "clearly
ends U.S. support for the war in Nicaragua. Such
support can only be renewed if the President can
convince the Congress that this very strict prohibition
should be overturned." '"

Poindexter and North, who admitted assisting the
Contras in their military activities, had a different
view. Both testified that they did not believe that
Boland II was applicable to the NSC staff and that
while the CIA could no longer provide any assistance
to the Contras, the NSC staff was free to do so.**"
Poindexter put it succinctly: "I never believed, and
I don't believe today, that the Boland Amendment
ever applied to the National Security Council
staff. . . ." '»'

Their former superior, Robert McFarlane, was sur-
prised by that view.'^^ McFarlane, who denied au-
thorizing the NSC staff to provide military assistance
to the Contras, maintained that the "Amendment gov-
erned our actions." '*^ In "cutting off money for the
Contras," he understood Congress to say "we don't
want any money raised for the Contras." McFarlane
testified that he repeatedly addressed the NSC staff
with "a kind of litany of mine, . . . [not to] 'solicit,
encourage, coerce, or broker' " financial contributions
for the Contras. 1^* According to McFarlane, he spe-
cifically told North to "stay within the law and to be
particularly careful not to be associated with or take
part in any fundraising activities." '*^ He dismissed
his instruction to North to keep the Contras "together
body and soul" as meaning nothing more than "smoke
and mirrors." '^^ What he intended North to provide
was only moral and political, not military, support.'*''

North and Poindexter both denied hearing
McFarlane's warnings against solicitation and en-
treaties to observe the law.'** Both claimed that they
were acting within their legal rights in aiding the

41

Chapter 2

Contras. North stated that all of his acts were author-
ized by his superiors, '^^ and Poindexter, speaking as
one of those superiors, confirmed that he had given
North a "broad charter" to support the Contras and
had "authorized in general" North's actions in carry-
ing out that charter. **° McFarlane testified he was
unaware of the breadth of North's activities. '* '

In any case, Poindexter and North were not de-
terred by Boland II in assisting the Contras. Thus,
after the Boland Amendment passed, Poindexter ex-
plained to McFarlane his Nicaraguan strategy for the
future: "continue active negotiations but agree on no
treaty and agree to work out some way to support the
Contras either directly or indirectly. Withhold true
objectives from staffs." '^^

Indeed, Boland II was a spur to action. The CIA
had to withdraw from supporting the Contras and,
according to North, this meant he "was the only
person left talking to them." '^^ As North put it:
"The U.S. contact with the Nicaraguan resistance was
me, and I turned to others to help carry out that
activity." '^^ Poindexter saw it the same way:

Very frankly, we were willing to take some risks
in order to keep the Contras alive, as I said, until
we could eventually win the legislative battle.

So for all intents and purposes. Colonel North
largely took over the — much of the activity that
[the] CIA had been doing prior to their being
prohibited from carrying [on] activity because of
the Boland Amendment."^

As Poindexter summed up North's role, "[0]nce the
CIA was restricted," North was the "switching point
that made the whole system work . . . the kingpin to
the Central American opposition . . . ." >^^

Boland II did not deter North — it simply reinforced
the need to keep what he was doing secret from
Congress, the public, and others in the Government.
The CIA support of the Contras had not been kept
from Congress — it was openly debated on the floor
and was funded by appropriations. With Boland II,
the assistance— now handled by the NSC staff— went
underground.

Contra Aid— Fall 1984 to Winter
1985

Boland II did not cause any immediate crisis for the
Contras. Steps taken months before ensured their sur-
vival. As McFarlane testified, "[T]here wasn't any
need" for funds at the time.'^' The $1 million-a-
month pledged by Country 2 in June 1984 would
"bridge the gap" at least until December. And as
North testified, by the time the Boland Amendment
was passed, "General Secord had been engaged and
money had started to flow to the Nicaraguan Resist-
ance from outside sources." '^*

Arms Shipments Begin and Blowpipes
Are Sought

While Secord undertook to procure weapons,
North remained heavily involved. Calero testified that
he consulted with North regarding weapons needs
and purchases '^^ and North's notebooks confirm
this.^oo

In the fall, the Contras' most pressing need was
ground-to-air missiles. The Sandinistas had just ob-
tained Soviet-designed HIND-D helicopters, sophisti-
cated assault helicopters. North devoted his efforts to
finding a missile capable of shooting them down.

North learned in December 1984 that Blowpipe
missiles were available in a Latin American country
and, on his advice, Calero visited the country to ne-
gotiate for their purchase.^"' On December 17,
Calero reported back to North that the Latin Ameri-
can country was willing to donate Blowpipes provid-
ed that Calero bought eight launchers for
$200,000.^°^ Permission was required and North tried
to get that permission, recommending to McFarlane
that the President take it up directly with the perti-
nent head of state. ^°^ McFarlane denied he ever
asked "the President to intercede with any person for
the obtaining of Blowpipes for the Contras." ^°'* In
any event, permission was not secured and on January
3, 1985, Calero reported to North that the "Blow
Pipe deal is off" ^"^ North would try the following
year to revive it.

In the meantime, Secord had located ground-to-air
missiles in Country 4. But in December, North
learned that Secord was having difficulty in arranging
their shipment to the Contras. North asked Gaston
Sigur, an NSC consultant and expert in Far Eastern
Affairs, to set up a meeting in Washington between a
representative of the originating country. Country 4,
and North. ^°^ At the meeting, North told the Coun-
try 4 official that the missiles were going to the
Contras, not to the Central American country identi-
fied in the official documents.^"'' North said that
while he was "actually seeking to facilitate the trans-
portation" of the missiles, he hoped that he could
persuade Country 4 to donate them.^"^ Ultimately,
Country 4 agreed to sell the missiles to the Contras.

North sent McFarlane and Poindexter a memoran-
dum reporting on the meeting. Although McFarlane
could not recall the memorandum, he testified that it
would likely have prompted him to ask "Admiral
Poindexter to find out what was going on . . . and
how his [North's] actions squared with the law."
McFarlane did not recall how his questions were re-
solved.^°^ North testified that McFarlane and Poin-
dexter approved the meeting with the Country 4 rep-
resentative described in his memo.^'°

Meanwhile, the Contras were also running out of
basic weapons. According to Secord, in November,
Secord, using money provided by Calero, made a

42

Chapter 2

downpayment on a shipment of arms which was to
come by sea from the Far East. But the shipment was
delayed and, in fact, it would not arrive until the
spring of 1985. 2"

To make the first arms shipment, the Enterprise
needed an end-user certificate (EUC) — a document
certifying that the arms were for the exclusive use of
the country to which the arms were being sent. The
Contras could not issue end-user certificates because
they were not a recognized government. Thus, false
certificates had to be procured for the Enterprise, and
again it fell to North to arrange their procurement.
By the end of January, he was engaged in the task.
He wrote in his notebooks: "Mtg. w/ Adolfo
[Calero]-. . . . [Central American Leader] re: EUC for
M-79 Rounds. [Leader of Central American country]
turned down." ^" "Private mtg. w/ [U.S. Ambassador
to a Central American country], offline items — EUC-
$5000 M-79 Rds." ^'^ By early February, there was
urgency in the request: Second met with North and
told him that he "need[ed] to get a bunch of EUC's
from [Country 14] NOW for next shipment." ^"' By
February 14, 1985, North had the end-user certificates,
and Secord was able to ship more than 90,000 pounds
of East European munitions by chartered aircraft from
Defex, a European arms dealer, to a Central American
country for the Contras. ^'^

Providing Intelligence and Military
Advice

North's role was not limited to assisting arms pur-
chases. On direction from McFarlane, he gave politi-
cal advice to the Contras on unifying the different
factions and adopting a platform recognizing human
rights and pledging a pluralistic society.^ '^ Even
more critical for the Contras, North provided military
intelligence and advice.

The CIA and the DOD could not provide military
intelligence directly to the Contras, so North provid-
ed it himself North would obtain maps and other
intelligence on the Sandinista positions from the CIA
and DOD, ostensibly for his own use.^''' North
would then pass the intelligence to the Contras using
Owen as a courier.^'* North explained the reasons
for this system:

Q: Did you believe that you were complying
with Boland when you took intelligence from the
CIA and passed it to the Contras through Robert
Owen?

A: Yes. And the intelligence that I passed myself
personally, and it wasn't all from the CIA, much
of it came from the Department of Defense.

Q: And did you understand at the time that the
CIA and the Department of Defense couldn't
pass that intelligence directly?

A: Exactly.

Q: And you believed that it was compliance with
Boland, that it was fulfilling the purposes of
Boland for you to take the intelligence from the
CIA or the Department of Defense and pass it to
the Contras? That is what you are saying?

A: I am not saying that it was fulfilling the pur-
poses of Boland. I am saying it was working
around the problem that Boland would have cre-
ated in trying to comply with Boland that al-
lowed me to do that.^'^

Director Casey was eager to keep the CIA bu-
reaucracy insulated from North's activities in support-
ing the Contras. Indeed, in November, Casey com-
plained to Poindexter that North was conducting his
support activities "indiscreetly," '^^° and had disclosed
to CIA officials that he was raising funds for, and
providing intelligence to, the Contras.^ ^'

Learning of the complaint. North wrote McFarlane
on November 7, 1984, to defend his behavior. North
insisted he had not implicated the Chief of the CIA's
Central American Task Force in his Contra support
activities. "Clarifying who said what to whom,"
North acknowledged that he had passed intelligence
to Calero to assist him in destroying the Sandinistas'
newly acquired HIND-D helicopters. North stated
that he had gone to both the CIA and to the DOD
for information on the helicopters' location and
passed this on to Calero.^^^

North denied, however, that he had disclosed his
purpose to the Chief of the Central American Task
Force, or advised him about the "financial arrange-
ments of the FDN." ^^^ In fact, the memo recounts a
conversation showing that North misled the Task
Force Chief, telling him that the intelligence request
had been "a fall out of the CPPG [the Crisis Pre-
planning Group]," and that he (North) had no idea
where the Contras were obtaining their funding. In
the memorandum. North reported that he encouraged
the Task Force Chiefs impression that the funding
had been obtained from "outside" sources. ^^^

McFarlane testified that he did not authorize North
to pass intelligence to the Contras and if, as the memo
indicated. North had passed that information to
Calero, Boland II would had been violated.^^^ North
admitted that he had provided the intelligence but
maintained that Boland II did not "prevent the trans-
fer of basic intelligence information to the Con-
tras." 226

In early February 1985, North became concerned
about a shipment of weapons bound for the Sandinis-
tas aboard the ship, the Monimbo. In a memorandum
to McFarlane and Poindexter, North recommended
the vessel be seized or sunk:

If asked, Calero would be willing to finance the
operation. He does not, however, have sufficient
numbers of trained maritime special operations

43

Chapter 2

personnel or a method of delivery for seizing the
ship on the high seas. ... If time does not permit
a special operation [on the high seas] . . . Calero
can quickly be provided with the maritime assets
required to sink the vessel before it can reach
port at Corinto. He is in contact with maritime
operations experts and purveyors of materiel nec-
essary to conduct such an operation. ^^''

North asked McFarlane for authorization to provide
Calero "with the information on Monimbo" and for
permission to approach him "on the matter of seizing
or sinking the ship." ^^^

This time, Admiral Poindexter raised a legal ques-
tion, but only to advise McFarlane about how North's
recommendation should be handled. On the bottom of
the memorandum, Poindexter agreed with North that,
"We need to take action to make sure ship does not
arrive in Nicaragua. JP."229 But in a cover note to
McFarlane, Admiral Poindexter wrote:

Except for the prohibition of the intelligence
community doing anything to assist the Freedom
Fighters I would readily recommend I bring this
up to CPPG [Crisis Pre-Planning Group] at 2:00
today. Of course we could discuss it from the
standpoint of keeping the arms away from Nica-
ragua without any involvement of Calero and
Freedom Fighters. What do you think?23°

No action was taken on North's recommendation to
seize the Monimbo.

In addition to providing intelligence. North also
secured the logistical assistance of a paramilitary op-
erations expert. He described those efforts in the same
December 4 memorandum to McFarlane in which he
had outlined his intervention with Country 4 to
secure surface-to-air missiles. According to the memo.
Secretary of the Navy John Lehman had suggested to
North that he meet with David Walker, a former
British SAS officer, to discuss the services Walker's
company could provide. North met with Walker, and
proposed to McFarlane that Walker:

establish[ ] an arrangement with the FDN for
certain special operations expertise aimed particu-
larly at destroying HIND helicopters. . . . Unless
otherwise directed. Walker will be introduced to
Calero and efforts will be made to defray the
cost of operations from other than Calero's limit-
ed assets.^^'

In his testimony. North confirmed that he had ar-
ranged for Walker to "provide operational support
for certain activities in the region," and that Walker
was paid either by the Contras or Secord. This step,
according to North, was approved by Poindexter or
McFarlane.232 McFarlane testified that he referred
North's memo on the subject to Poindexter,^^^ and

Poindexter said that, if asked, he would have ap-
proved North's actions. ^3''

Three months later. Walker provided two techni-
cians to help carry out a military operation in Nicara-
gua. North testified that he was involved in the oper-
ation. ^^^ A subsequent PROF note confirms Walker's

role 2 36

Singlaub Efforts with Countries 3 and 5

Country 2 had pledged funds only through the end
of 1984. Therefore, by the end of the year, an urgent
need existed to find money for the Contras to contin-
ue into 1985.

In late November 1984, North approved the efforts
of Retired U.S. Army Maj. Gen. John K. Singlaub to
obtain funds from third countries to support the Con-
tras. ^^'^ Singlaub met in Washington with officials of
Country 3 and Country 5 to request aid. Singlaub was
blunt about the Contras' needs: bullets, guns, and anti-
aircraft missiles. The foreign country officials, howev-
er, expressed concern about running afoul of "Con-
gress by openly defying the Boland Amendment." At
the same time they were willing to help "if this could
be done in a way that did not attract attention." They
agreed to send Singlaub's request to their respective
governments.^^*

On November 28, Singlaub reported to North the
reaction of the officials of Countries 3 and 5, inform-
ing him he "was prepared to go and meet with senior
officials in those governments." According to Sing-
laub, North concurred and gave the plan "his bless-
ing. . . . [I]t was a good idea, he saw no objec-
tion . . ." 239

Whether North was authorized to "bless" Sing-
laub's efforts is a matter of confiicting testimony. Ac-
cording to McFarlane, to solicit or facilitate aid from
a third country was barred by the Boland Amend-
ment and he did not authorize North to pursue fund-
ing from third countries.^'"' But according to North,
he believed McFarlane had approved: "he was aware
of each and every one of [my] actions to obtain
money from foreign countries and approved of it.''^*'
North defended his actions, testifying that Country 3
had offered to make a contribution;^''^ he had never
made any "solicitation" because that would be an
improper act for a Government official. ^^^

Singlaub followed up on his request, travelling to
Countries 3 and 5 in January. He met with highly
placed officials and reiterated his earlier request for
military donations to the Contras. ^'''^ Singlaub provid-
ed the officials with an index card bearing the name
of the bank and account number, under Calero's con-
trol, where the funds could be deposited directly. ^""^
Singlaub told the officials he was a private citizen, but
wanted to make it clear he was not an "unguided
missile ricocheting around to that part of
the world." ^""^ He expressed the belief that "it
would be possible ... to have someone in the Admin-

44

Chapter 2

istration send a signal to them ... to indicate that [he]
. . . was not operating entirely on [his] . . . own,
without the knowledge of the Administration."^'"

On February 1, 1985, North's notes reflect that
Singlaub called North and told him that Country 3
needed a signal that the Administration would be
"greatly pleased" by a donation before Country 3
would be willing to contribute.^** On February 6,
North wrote McFarlane and reported that: "Singlaub
will be here to see me tomorrow. With your permis-
sion, I will ask him to approach [the Country 3 and 5]
Embass[ies] urging that they proceed with their offer.
Singlaub would then put Calero in direct contact with
each of these officers. No White House/NSC solicita-
tion would be made."^''^ McFarlane made no re-
sponse on the memo to North's recommendations.^^"

Singlaub testified that he returned to Washington
on February 7, met with North to report his results,
and recounted his "entire presentation. "^^^ He rec-
ommended that now was the time for a U.S. Govern-
ment representative to send a signal to Countries 3
and 5. According to Singlaub's testimony, North re-
sponded that he would "brief his superiors," and
eventually told him (Singlaub) that he had informed
his superior, whom Singlaub assumed to be McFar-
lane. ^^^

Countries 3 and 5 did not contribute any money as
a result of Singlaub's efforts. Not until late 1985, after
a signal was in fact given by an NSC official, did
Country 3 make a contribution.^^*

Country 2 Makes an Additional
Contribution

With the Contras running out of funds, McFarlane
turned once more to Country 2. McFarlane made the
initial approach to its Ambassador for more funds. He
testified that he did not "solicit" funds because the
Boland Amendment prohibited such solicitation. He
merely told the Ambassador of the plight of the Con-
tras and hoped for a contribution.^^* According to
Secord, North asked him to follow up on McFarlane's
initial meeting.^^^

Secord testified that he did in fact follow up with
the Ambassador, with whom he "had dealt ... in the
past with respect to possible contributions to the Con-
tras." When Secord raised the subject, the Ambassa-
dor responded curtly, "You can stop twisting my arm
.... I have decided to take it up with the head of
state. "^^® McFarlane did not recall Secord's involve-
ment.^*''

In early February 1985, Country 2 agreed to con-
tribute an additional $24 million.^** McFarlane in-
formed the President of the contribution by placing a
note card in the President's daily briefing book. The
President again reacted with "gratitude and satisfac-
tion," expressing no surprise. ^^^ Unknown to McFar-
lane, the Country 2 head of state had already in-
formed the President directly of the new contribution.

But the President did not mention this when he
briefed the Secretary of State and McFarlane on his
meeting with the government leader.^®"

Nor did McFarlane tell the Secretary of De-
fense.^®' Both Secretary Weinberger and General
John W. Vessey, Jr., the Chairman of the Joint Chiefs
of Staff, learned of the contribution from other
sources.^®^ Secretary Shultz, who dealt regularly
with Country 2, was not told of the contribution until
June 1986.2^3 This was an omission "not of conscious
choice," according to McFarlane. ^^^

The new donation from Country 2, like its prede-
cessor, was sent to Calero's accounts. Between June
1984 and March 1985, Country 2's contributions, to-
taling $32 million, were virtually the only funds the
Contras had.^®^

Contra Aid: Winter-Spring 1985
Tlie Administration Returns to Congress

When the President signed the Boland Amendment,
he made it clear he would return to Congress for
additional Contra support:

I sincerely regret the inability of the Congress to
resolve the issue of continuing certain activities in
Nicaragua .... I am signing this act with every
expectation that shortly after the next Congress
convenes it will provide adequate support for
programs to assist the development of democracy
in Central America.^® ^

In the winter of 1985, the Administration pinned its
hopes on obtaining the $14 million in aid held out by
the Boland legislation. The law provided for expedit-
ed consideration of such a request after February 28,
1985, if the President certified to Congress that Nica-
ragua was supporting other Central American com-
munist insurgencies. McFarlane conveyed to his staff,
in particular to North and Donald R. Fortier, then
Senior Director for Policy Development, the Presi-
dent's "strong wish that we not break faith with the
Contras. . . . [We need] to do everything possible to
reverse the course of the Congress, and get the fund-
ing renewed," he said. "[T]he mission was to win the
vote the next time . . . ."^st

The chances for success were dim from the start.
The new Chairman of the Senate Intelligence Com-
mittee, David Durenberger, had warned publicly that
he would oppose both the release of the $14 million
and any future Contra aid.^** But the President had
not given up. He told a group of reporters, "We're
going to do our best."^®^

Defense Secretary Weinberger called for an updat-
ed legislative strategy and new funding alternatives to
win the battle in Congress. ^^^ White House officials
considered a number of legislative proposals including
third-country assistance and/or the supply of non-

45

Chapter 2

lethal aid coupled with third-country lethal assist-
ance.^" Legislative strategy groups met to consider
the proposals. McFarlane, accompanied by North,
traveled to Central America to gauge the reaction of
leaders in the region. Donald Fortier was dispatched
to Capitol Hill to assess Congressional sentiment. ^''^
While North assisted in drafting various legislative
proposals, his preferred option was to seek Congres-
sional approval for sufficient sums to fund an in-
creased covert action program "adequate to achieve
victory. "^■'^ North understood that foreign contribu-
tions would ensure Contra survival, but success could
only be achieved with increased funding:

[RJesources available to the resistance from sym-
pathetic government(s) and/or individuals will
permit current small-scale operations to continue
for at least another 6 to 8 months. A resumption
of USG funding or additional alternative re-
sources would be essential in order to bring the
scale of activity to that which existed in the
spring of 1984 and, over time, to prevent an
erosion of the will and determination of the FDN
combatants.^''*

North was optimistic that "[w]ith adequate support
the resistance could be in Managua by the end of

1985." 275

Any legislative proposal for increased aid depended
upon the Contras' survival in the field. McFarlane
testified he told North that "unless the Contras
become a credible military force, they would never
gain political support in Congress and among the
American people. "^'s North was counting on the En-
terprise to provide the support necessary to maintain
the Contras as a viable force.

The Weapons Shipments from the
Enterprise Continue

In the spring of 1985, two weapons shipments ar-
ranged by Secord in consultation with North and
Calero would finally reach the Contras: first, in Feb-
ruary, a planeload of 90,000 pounds of munitions from
Europe and, second, in the spring, a sealift. Both
shipments were arranged through Transworld Arma-
ment, and both apparently required end-user certifi-
cates. ^^ 7

North needed the cooperation of Central American
countries to provide documentation and to receive the
shipments for the Contras. On March 5, 1985, he
proposed that one country be rewarded for its assis-
tance. In a memorandum to McFarlane, North sug-
gested that the Secretaries of State and Defense and
Chairman Vessey of the Joint Chiefs of Staff be asked
to grant the Central American country additional se-
curity assistance.27 8

The "real purpose" of this memo, North explained,
was to:

find a way by which we can compensate [Coun-
try 14] for the extraordinary assistance they are
providing to the Nicaraguan freedom fighters. At
Tab II are end-user certificates which [Country
14] provided for the purchase of nearly $8M
worth of munitions to be delivered to the
FDN.279

In the attached memorandum to Weinberger, Shultz,
and Vessey, drafted by North, the real purpose
behind the request was not stated. The memorandum
contained no reference to the end-user certificates, "to
the arrangements which have been made for support-
ing the resistance through [Country 14],"2«o or to the
Country 14 munitions "wish list" North attached for
McFarlane's information. ^^^ Instead, the request for
aid was predicated on its merits.

McFarlane testified that he recommended that the
Cabinet approve increased assistance based solely on
his assessment of Country 14's need, without taking
into account its support of the Contras. ^^2 North
testified that he had not promised a "quid pro quo."
There was no "need" to make such a promise to a

country threatened by the Sandinista presence, he
said. 283

Disbursements to Other Contra Leaders

During the winter and spring of 1985, North decid-
ed to use the money sent directly to Calero from
Country 2 to support other Contra leaders. To do
this, funds were withdrawn from Calero's account
using traveler's checks, and hand-carried to North.
North stored the checks in his safe. Additional cash
was secured from Secord. ^^^

North testified that the idea for maintaining this
fund came from Director Casey:^^^

My recollection is that the very first traveler's
checks came either very late '84 or certainly
early 1985 and that the sum total of traveler's
checks was probably in excess of $100,000 or
thereabouts.

I also had cash which I estimated to be some-
where in the neighborhood of 50 to 75 thousand
dollars in cash, so we are talking about an oper-
ational account that went from somewhere
around 150 to 175 thousand dollars. At various
points in time there would be considerable sums
in it and at various points in time there would be
none in it.

My recollection is that I got the traveler's checks
in packages of less than $10,000. I understand
that others have remembered elsewise, but that is
how I remember it.

Those funds were used to support the operations
that we were conducting. They were used to

46

Chapter 2

support the covert operation in Nicaragua, and
then eventually were used to support other ac-
tivities as well.

The fact that I had those funds available was
known to Mr. McFarlane, to Admiral Poin-
dexter, to Director Casey, and eventually to Ad-
miral Art Moreau over at the Pentagon. It also
came to be known to others, some of whom you
have had testimony here.^*^

What is important that you realize is that meticu-
lous records were kept on all of this. I kept a
detailed account of every single penny that came
into that account and that left that account. All
of the transactions were recorded on a ledger
that Director Casey gave me for that purpose.
Every time I got a group of traveler's checks in,
I would report them, and I would report them
when they went out, even going so far as to
record the traveler's check numbers themselves.

The ledger for this operational account was
given to me by Director Casey, and when he
told me to do so, I destroyed it because it had
within it the details of every single person who
had been supported by this fund, the addresses,
their names, and placed them at extraordinary
risk.287

Poindexter testified that he knew of the account
almost from the start, in 1984:

[I]t was associated with the first contribution of
Country 2, I think it came to my attention, by
Colonel North reporting to me, that Mr. Calero
had provided some funds to him, and it was my
understanding it was cash, at least that's my
recollection of my understanding.^®*

Poindexter "didn't see anything illegal about it," but,
as he testified, "any time you handle cash there are
perception problems that can certainly develop ....
And so I told Colonel North he should get rid of the
money by returning it or whatever, that I didn't think
that was a good idea."^*' In fact, the money was
instead funneled to various Contra leaders throughout
1985 and 1986.

One of the principal beneficiaries of North's fund
was a Resistance leader. With McFarlane's approval.
North decided to assume support for the Resistance
leader, using funds drawn from the Calero ac-
count.^*" North assured McFarlane that Casey had
been told that North would maintain contact with the
Contra leader.^" Later, though. North reported that
"the CIA will not be told of the new source for
[Resistance leader's] funds. "^^^

By February 27, 1985, "Adolfo [Calero] ha[d]
agreed to provide [the] requisite funds in the blind

without [the] [Resistance leader] becoming aware of
the source. "^*^ Eventually, Calero was to "deposit
$6,250 per month in [Resistance leader's] checking
account without [his] knowledge [of the source]. "^^^
But before the direct deposit mechanism could be put
into operation. North enlisted Robert Owen and Jona-
than Miller, then-Deputy Coordinator for Public Di-
plomacy at the State Department, to pass the money
to the Resistance leader. Sometime in early March,
North handed Owen and Miller traveler's checks
from his office safe, and requested that the checks be
cashed. Miller and Owen did so, and returned to
North's office. Later that day, at his apartment, Owen
passed $6,000 to $7,000 in cash to the Resistance
leader.28^

Owen handled a number of transfers to Contra
leaders. He testified that he paid "[s]omewhere be-
tween six and ten" Contra leaders, and the total
amount paid was "[s]omewhere around $30,000."^*®
On March 22, 1985, for example, Owen traveled to
Central America carrying several thousand dollars in
cash or traveler's checks for delivery to a Contra
leader.^®'' In some cases, Owen's efforts did not take
him far from the White House itself In April, for
example, he waited outside the Old Executive Office
Building in the rain. A car drove up, and Owen
passed cash to a Nicaraguan Indian leader sitting
inside.^®* These payments had a number of purposes:
One payment was made to an Indian leader as a "quid
pro quo" for ceasing negotiations with the Sandinistas
and joining instead with other Indian leaders to
"work together in a united front."^*^

Keeping the Operation Secret

North provided the logistical and funding assistance
the Contras needed to keep going in Central America
at the same time that he worked to keep their cause
alive in Washington. To persuade Congress to vote
for renewed aid, it was critical that the NSC staffs
Contra assistance remain secret. As North warned
Calero: "Too much is becoming known by too many
people. We need to make sure that this new financing
does not become known. The Congress must believe
that there continues to be an urgent need for fund-
ing"3oo

North actively cultivated an image of Contra self-
sufficiency within the Administration. For example,
he urged the CIA's Chief of the Central American
Task Force to reject the State Department's opinion
that the Resistance had become largely ineffective
since U.S. funding ran out in May 1984. "I told [the
Chief of the Central American Task Force]," wrote
North, "that it was important that the SNIE [Special
National Intelligence Estimate] reflect the fact that
there was substantial outside support which had con-
tinued for some months and showed no signs of abat-

47

Chapter 2

But even without such active encouragement, the
secrecy shrouding North's efforts contributed to the
appearance of Contra self-sufficiency. As funds ar-
rived and weapons were shipped, CIA intelHgence
reports confirmed that the Contras remained not only
a viable force, but were surviving on their own, with-
out apparent U.S. Government assistance. By March,
close to a year after U.S. Government aid had ceased.
Director Casey's subordinates provided Casey with
briefing materials, reporting surprise at the Contras'
survival, but noting there was little intelligence on
how the Contras had managed to flourish:

Since the cutoff of official funds to the anti-San-
dinistas in May 1984 they have been able to field
a viable guerrilla fighting force, have increased
their numbers, and improved their tactical effi-
ciency. It is estimated that to maintain the level
of activity that they have it would cost an esti-
mated one and one half to two million dollars per
month. There is, however, no intelligence on the
source of this income, except that it comes from
private groups, and possibly some U.S. business
corporations.^"^

The secret of North's involvement, however, was
not to last. North's name had begun to appear periodi-
cally in the press along with that of Singlaub. By
March, Singlaub already had become something of a
"lightning rod" in the press, attracting attention as a
private fundraiser for the Contras. ^os According to
Singlaub, North told him that his frequent visits to
the NSC were a source of concern.^"* But North
"understood and agreed" that Singlaub had to keep a
"high profile" in order to raise funds, and he support-
ed the effort. If Singlaub "had high visibility, [he]
might be the lightning rod and take the attention
away from [North] and others who were involved in
the covert side of support. "^°^

Covert Operation and Legislative
Strategy Intertwine

While maintaining the secrecy of his Contra support
activities, North worked to promote a legislative
strategy that would change both the Congressional
and the public perception of the Nicaraguan
threat. ^°^ In March, he and Donald Fortier spon-
sored an elaborate plan calling for lobbying, a media
blitz, and culminating in almost daily Presidential
speeches and phone calls in support of the initiative.
At its most ambitious stage, the plan included a 10-
page, day-by-day chronology to describe each of the
players' appointed tasks. ^"^

At the same time. North proposed a "Fallback
Plan," should Congress refuse to provide aid or lift
the Boland Amendment restrictions.^"* In a memo-
randum to McFarlane, North noted that the Contras
had sufficient funding for munitions to carry them

through October 1, 1985, but they needed money for
the following year.^"^ The fallback plan, sent to
McFarlane on March 16, called for Country 2, de-
scribed as the "current donor," to contribute an addi-
tional $25 million to $30 million to the Resistance for
the purchase of arms and munitions; for the President
to appeal to the public for contributions instead of
seeking a Congressional appropriation; and for a tax-
exempt foundation to be established to receive the
contributions. McFarlane rejected the idea of the
Presidential appeal, expressed doubt about seeking
more money from Country 2, and approved the estab-
hshment of a tax-exempt foundation.^'"

With McFarlane ruling out a return to Country 2, a
return to Congress was the Administration's only
hope for renewed Contra funding. During March
1985, North focused his attention on the elaborate
legislative strategy plan he had been working on since
late February. The plan was developed in conjunction
with a peace initiative drafted by North in a Miami
hotel room with FDN head Adolfo Calero and other
Contra leaders, which became known as the San Jose
Declaration. North arranged the deadline for a Sandi-
nista response to the peace plan to coincide with the
vote by Congress. If the Sandinistas rejected the over-
ture, as North anticipated, then "special operations
against highly visible military targets in Nicaragua,"
were timed to follow in the hopes that successful and
"visible" Contra military activities might favorably
influence Congress's decision on Contra aid.^''

At the last minute, however, the Administration
considered delaying the submission of the Administra-
tion's new aid request to Congress.^'^ North recog-
nized that if the vote were delayed, the Contras'
planned military operations would not serve as an
effective tool in influencing Congress's decision on
the aid proposal. He strongly recommended to
McFarlane that the vote take place as originally
scheduled. He wrote:

The deadline for substantive negotiations . . . was
carefully chosen to ensure that the internal oppo-
sition would have a specific date for their own
planning purposes. Military operations were
planned based on the expiration of the offer on
April 20. . . . [A]n attack is scheduled for April
25. Based on my request Calero has agreed to
postpone the attack for five days. The force
which is being inserted to conduct this operation
cannot be logistically supported in this area after
May 5. The resupply situation will require that
they be withdrawn after that date.

It is my belief that urging the resistance leaders
(particularly Calero) to accept a major delay . . .
will result in a breakdown of the unity we have
achieved. [Calero] has only cooperated to date in

48

Chapter 2

the unity effort because he trusts the only persons
in the U.S. Government who have supported the
movement since October 1984 — North and
McFarlane.^'^

The Administration Responds to
Congressional Defeat

In early April, the Administration submitted a Contra
aid proposal to the Congress, along with its own
peace plan modeled on the San Jose Declaration. The
President pledged that lethal aid would only be pro-
vided if the Sandinistas rejected the proposal. The
plan provoked controversy, and on April 23, the
House rejected the Administration's proposal.

When the House rejected the bill, the President's
first step was to reassure Central American leaders
that he had not given up on Contra aid. As to one
country, the President had special cause for concern:
A military leader had seized ammunition intended for
the Contras. The President telephoned the head of
state and received an assurance that the ammunition
would be delivered to the Contras.^''*

Publicly, the President expressed his determination
"to return to the Congress again and again." ^'^ Soon
after the House defeat, the Administration was back
on Capitol Hill hoping to mold a compromise in sup-
port of nonlethal aid.

Meanwhile, Nicaraguan President Daniel Ortega
traveled to the Soviet Union and throughout Europe,
seeking renewed assistance for the Sandinista forces.
President Ortega's visit to Moscow prompted the
President to issue a warning to Congress:

And whatever way they may want to frame it,
the opponents in the Congress of ours, who have
opposed our trying to continue helping those
people, they really are voting to have a totalitar-
ian Marxist-Leninist government here in the
Americas, and there's no way for them to dis-
guise it. So, we're not going to give up.'*®

President Ortega's Moscow trip also prompted a
renewed sense in Congress that something had to be
done to support the Contras. With strong support
from Congressional leaders, President Reagan an-
nounced the imposition of economic sanctions against
Nicaragua on May 1, 1985. ''''

Maintaining the Covert Operation

Before the Congress rejected the Administration's aid
proposal. North was optimistic about the Contras'
prospects. In an early April 1985 memo to McFar-
lane. North explained what the operation had
achieved up to that point, and the plans he had for its
future.' '* Based on information provided by Calero,
North outlined what the Contras had spent "since
USG funding expired in May 1984."3>9 Of the "grand
total" of $24.5 million received by Calero,
"$17,145,594 has been expended for arms,'^° muni-

tions, combat operations, and support activities."'^'
Extolling the FDN's nearly twofold increase in size,
and its newly acquired expertise in guerrilla warfare.
North emphasized that the money had been spent
wisely: "In short, the FDN has well used the funds
provided and has become an effective guerrilla army
in less than a year."'^^

The image of Contra military capability cultivated
by North was arguably at odds with reality. U.S.
Army General Paul F. Gorman, Commander of the
Southern Command from May 1983 through Febru-
ary 1985, told the Committees that "the prospects of
the Nicaraguan resistance succeeding [were] dim at
best." Specifically referring to Congressional testimo-
ny he gave in June and December 1985, Gorman
testified:

what I was saying in those days was that I did
not see in the Nicaraguan resistance a combina-
tion of forces that could lead to the overthrow of
the government or the unseating of the Sandinis-
tas. . . . The training of the Contras was, when I
last saw them in 1985, abysmal. ... I didn't
regard them as a very effective military organiza-
tion, based on what I could see in refiections of
battles, in communications on both sides. The
Sandinistas could wipe them out.

Regarding North's reaction to his views, Gorman
added:

Oliver was terribly concerned about my attitude,
and he knew that I was travelling up here on the
Hill and in other circles where I was being asked
to comment on the prospects of these people.

Q: I take it Colonel North, who had been your
friend . . . was not pleased with the position you
were taking?

A: No. ... I made a speech over at the National
Defense University which was reported in the
Washington Post . . . and Oliver . . . got very
exercised because in it I said ... I can't see any
amount of money or any amount of time, given
the present set of conditions, that would be effi-
cacious. . . . Oliver got very exercised about that
and called me and said would you try to put to-
gether an op ed piece . . . which he allegedly was
going to get placed in the Washington Post. It
never was, and I gather it's because what I wrote
displeased him.

Gorman concluded by telling the Committees, "it was
also very clear to me, he [North] saw me as a prob-
lem in terms of what I was saying, and I think he was
just doing his damndest to get me to shut up — old
General, put a cork in it."'^'

In the spring. North had made ambitious plans for
the Contras' future, according to his April 11 memo.
The force would be increased in size. Two special

49

77-026 0 - o7 - 3

Chapter 2

operations were planned: an "attack against Sandino
airport with the purpose of destroying" Sandinista
HIND-D hehcopters; and a "ground operation against
the mines complex" in Nicaragua securing the princi-
pal lines of communication in and out of Puerto Cabe-
zas. Finally, North told McFarlane the Contras
would open a Southern front. ^^^

These plans were soon stalled, though, when in late
April, Congress rejected the Administration's funding
request. The defeat precipitated a crisis atmosphere
among Contra leaders, who had planned on renewed
Congressional funding. There were daily contacts be-
tween Contra leaders and North, and between North
and the CIA Chief of the Central American Task
Force. The problems of the Resistance were further
complicated when one Central American country, re-
sponding to Sandinista encroachment, ordered the
Contras to move to less exposed locations.^^^

Meanwhile, in Congress, a consensus was building
in favor of humanitarian aid. By May 15, 1985, Con-
gressional leaders were seeking counsel from the NSC
on the Administration's position about a Contra sup-
port bill that was limited to nonlethal aid. North,
along with other NSC staff members, drafted talking
points for a meeting between McFarlane and Minority
Leader Robert H. Michel, emphasizing that the "pri-
mary goal" was to lift the Boland Amendment restric-
tions, "which severely limit our ability to support/
advise the now unified Nicaraguan resistance. "^^^

By the end of May, North was optimistic that the
Boland Amendment restrictions would be lifted, at
least with respect to the CIA's provision of intelli-
gence and political support. But even if they were
lifted, and Congress appropriated humanitarian aid,
North did not contemplate that his covert operation
would end. He told McFarlane in a May 31 memo:

Plans are underway to transition from current
arrangements to a consultative capacity by the
CIA for all political matters and intelligence,
once Congressional approval is granted on lifting
Section 8066 [Boland Amendment] restrictions.
The only portion of current activity which will
be sustained as it has since last June, will be the
delivery of lethal supplies. ^^''

The Secord Group and Its
Competition

As humanitarian aid measures were debated in Con-
gress, Secord's Enterprise was continuing to procure
weapons for the Contras. By May, Secord was using
Thomas G. Clines, rather than the original broker.
Clines' source was a European arms dealer. ^^*
Secord was also using Rafael Quintero to handle the
logistics of the arms deliveries in Central America. As
North put it, Quintero was the "Secord man on [the]
scene."^28 j^e coordinated the arms reception in Cen-
tral America, and "all of the liaison with the Contras
and with the local authorities."^^" From Quintero,
Secord would obtain the information necessary to

provide North with what North termed "views from
on [the] scene" in Central America. ^^' Clines, Quin-
tero, and Secord were to play an increasingly large
role in the Contra support structure as the summer
progressed.

During May, Secord arranged through Clines for
the third in a series of arms transfers to the Contras.
This time, the shipment was to arrive by sea.^^^ Peri-
odically, Secord would call North with the latest
update, as on May 8: "Came out of mtg/ in . . . now
in Paris; -Tested every item; -ship arrived 4-5 hours
ago; -40,000 M-79 . . . ."^^'^ Later, on May 24, North
recorded: "Call from Dick; -Vessel needs shipping
agent for receiving; -Need to do long lead plan for
Aug-Sep delivery; -need to make deposit for M-79
buy."'^* As Secord testified. North "was in the infor-
mation collection business" and "[h]e wanted to know
if I would provide him with details of any deliveries
or deals that were made, and I did so gladly. "^^*

General Secord was not the only weapons dealer
seeking the Contra account during the summer of
1985. For example, Ronald Martin, a Miami arms
dealer, was by May "setting up [a] munitions 'super-
market'" in Central America. ^^^ As North testified:
"You had a very competitive environment down
there. Once the U.S. Government withdrew in '84
from directly supporting the resistance, you ended up
with a lot of folks out there running a very cutthroat
business."^ ^'

North discouraged Calero from dealing with some
of Secord's competitors. He testified that CIA Direc-
tor Casey had suspicions that the arms warehouse
operation run by Martin was supported by U.S. fund-
ing that had been diverted to Martin by a Central
American country. According to North, Casey told
him "that there shouldn't be any further transactions
with that broker until such time as he resolved or
they were able to resolve where" the money to stock-
pile "several millions of dollars worth of ordnance"
had come from.^^^

Secord's other competitor for procuring arms for
the Contras during the spring of 1985 was General
Singlaub. As early as April, Singlaub had begun to
arrange for a major weapons purchase, after meeting
at FDN base camps in March with the FDN military
commander, Enrique Bermudez.^^^ The list of weap-
ons Singlaub drew up with Bermudez included AK-47
rifles, RPG-7 rocket launchers, light machine guns,
and SA-7 surface-to-air missiles. Singlaub took the
weapons list to North, who made "some additions and
subtractions." North and Singlaub "reach[ed] a clear-
cut statement of what we were going to buy."^'"'

Sometime later that month, Singlaub introduced
Calero to a European arms dealer.^'" Calero was
astonished at the low prices he had been quoted; "at
least in the case of the AK-47s that price was about
half of what we had previously had to pay."^*^ (In
part, this can be attributed to the fact that Singlaub
did not take a commission.)

50

Chapter 2

According to Singlaub, North later confirmed that
the prices quoted by the European arms dealer were
lower than anything he had ever seen before. Con-
fronted with the price list, North "expressed some
surprise, doubt, that they could be purchased for that
price." But, he "made it quite clear that that was a
very, very good price and a bargain. We were getting
twice as many weapons for the same amount of
money. "^■'^ In his testimony. North maintained that
he checked Secord's prices against the prices of other
dealers: "[s]ome were higher, some were lower. "^''''

Part of the explanation for the difference between
Secord's prices and those of Singlaub's dealer was
Secord's profit margin — a margin of which Calero
was unaware. Secord testified that his markup on all
Contra shipments "averaged out almost exactly 20
percent."^** In fact, the actual commission charged
on the cost of arms averaged 38 percent.^*®

In Secord's own words:

By the way, this was a strict commercial kind of
transaction. There was nothing spooky about it.
It was just a normal brokering deal. The prices
were marked up in the process, different markups
for different line items depending upon the size,
but between 20 and 30 percent was the markup
which is quite low in the arms business.^*''

Secord candidly admitted that he was to make a
profit:^*^

Q: I take it from what you are saying that you
were to make a profit on these arms transactions?

A: Yes .... It was intended that the profits
generated would be shared by Hakim, myself,
and, of course, the arms dealer. ^*^

Calero testified he was unaware that Secord was
earning money off the arms sales. He believed that
Secord was supplying the weapons at cost.^*° "My
understanding, right from the beginning, was that he
was not making a profit," Calero recalled.^^' North,
on the other hand, testified that it was his understand-
ing from his conversations with Casey in 1984 that
those running the off-the-shelf covert entities were
entitled to fair compensation:'*^ "The arrangement
that I made with General Secord starting in 1984
recognized that those who were supporting our effort
were certainly deserving of just and fair and reasona-
ble compensation."'*'

Calero Tries Singlaub

In early May, Calero and Singlaub met with Secord
in North's office to discuss procuring SA-7 mis-

siles.'** Although Singlaub's price was lower than
Secord's, North and Calero decided that Secord
should supply the missiles because Secord was pre-
pared to provide training and Singlaub was not.'**

Sometime in mid-May, Calero placed an order for
weapons — other than SA-7s — through Singlaub's
dealer. Calero "preferred" dealing with Singlaub,
rather than Secord, because not only was Singlaub a
closer personal friend, but also his prices were lower.
Singlaub told Calero that he believed Secord was
making a profit. Secord, on the other hand, told
Calero that Singlaub would be unable to deliver:
"The price was so, you know, so low that he thought
he [Singlaub] couldn't make, he couldn't do it. Yes, he
[Secord] told me that, yes."'*®

North's notes reflect an unsuccessful attempt to per-
suade Calero not to deal with Singlaub via the Euro-
pean arms dealer.'*' On May 17, Secord met with
North and discussed pending weapons transactions,
including Martin's munitions supermarket and the
"Singlaub deal w/ A.C; -[European arms
dealer] ....;- lOK AK47s; -procuring items from
USSR . . ." '*' An hour and 20 minutes later. North
spoke to Calero and noted, "will stop move w/ [Europe-
an arms dealer]." ^^^ But despite Calero's apparent
decision to stop the Singlaub deal, Secord informed
North on May 20 that it "[s]ounded like Calero was
going to have to go through with [the European arms
dealer] purchase." ^^°

North appears to attribute to Director Casey his
reluctance to procure arms through the European
dealer. According to North, Casey warned him of "a
transaction of some five to six million dollars from a
broker who he was concerned had also been involved
in reverse technology transfer to the Eastern Bloc,
and he told me to do everything possible to discour-
age further purchases."'®' Although North did not
name the dealer, his reference to a "transaction of
some five to six million dollars" points to the Europe-
an arms dealer. The arms dealer denied to the Com-
mittees any involvement in reverse technology trans-
fers.'®^

The purchase that Singlaub arranged did in fact go
forward after Owen, at North's request, confirmed
the list with Calero. The arms arrived in Central
America on July 8, 1985.'®'

This was the last shipment Calero was to order
from Singlaub or any arms dealer other than Secord.
The Singlaub shipment had nearly exhausted the
funds in Calero's own accounts. Calero told North in
May, "[I] have enough to cover this [shipment] but
[it] will leave nothing."'®*' Thereafter, money raised
by North and Secord was given directly to Secord,
who then provided the Contras with arms. Calero
testified he was "never given a reason" why his "au-
thority to have cash directly sent to [him] to make
those purchases in the future was taken away."'®*

51

Chapter 2

Chapter 2

1. See R. McFarlane Memo, 2/27/81, to Secretary Haig,
N33323-47 (forwarding Director Casey's proposal).

2. See "Review of Foreign Policy," House Foreign Af-
fairs Committee, 97th Cong., 1st Sess., 16-17 (Nov. 12,
1981) (stale-ment of the Hon. Alexander M. Haig, Jr., Sec'y
of State).

3. Earlier, in March 1981, the President had authorized a
CIA covert program for Central America in general.

4. George Test., Hearings. 100-11, 8/6/87, at 269.

5. Inman Int., 3/16/87.

6. Gregg Memo, 7/12/82, to Clark, "Proposed Covert
Action Finding on Nicaragua," N44654.

7. Gregg Memo, 7/12/82, to Clark, "Proposed Covert
Action Finding on Nicaragua," N44654.

i.Id.

9. Id.

10. Id

11. Poindexter handwritten note, attached to Gregg
Memo to Clark, 7/12/82, "Proposed Covert Action Finding
on Nicaragua," N44652.

12. Gregg Memo, 7/12/82, to Clark, "Proposed Covert
Action Finding on Nicaragua," N44656.

13. See e.g., Newsweek, Nov. 8, 1982, at 43.

14. See, e.g., Cong. Rec. H9148-49 (Dec. 8, 1982) (state-
ment of Rep. Harkin).

15. See The Washington Post, April 3, 1983 at A13 (quot-
ing Contra leaders rejecting the Administration's explana-
tion for Contra aid: "The people who are fighting, they are
not fighting to stop the weapons. . . . We are fighting to
liberate Nicaragua. As Suicide [a Contra leader] put it . . .
We're not going to stop the transport of arms and supplies
to the Salvadoran guerrillas until we cut the head off the
Sandinistas.)

16. See Cong. Rec. H9149 (Dec. 8, 1982) (statement of
Rep. Leach); id. at H9151 (statement of Rep. Mikulski); id.
at H9153 (statement of Rep. Studds).

17. See Cong. Rec. H9149 (Dec. 8, 1982) (statement of
Rep. Leach); id. at H9158 (statement of Rep. Matsui).

18. See Cong. Rec. SI 5363-64 (Dec. 18, 1982) (statement
of Sen. Helms).

19. Pub. L. 97-377, Defense Appropriations Act for FY
1983, Sec. 793. In enacting the Boland Amendment, the
Congress re-jected a bill that would have barred all covert
action funding, as well as an amendment that would have
barred Administration support of any insurgent group
having the purpose to overthrow the Nicaraguan Govern-
ment. See "The Boland Amendment," Chapter 26.

20. Since 1982, the Administration has taken the position
that, under the Boland Amendment, it was the agency's
purpose that was controlling, not the Contras' purpose. See
Opinion of the Intelligence Oversight Board, Apr. 6, 1983,
J4825; "The Boland Amendment," Chapter 26.

21. Cong. Rec. H9156 (Dec. 8, 1982) (statement of Rep.
Boland); "The Boland Amendment," Chapter 26.

22. The New York Times, Dec. 9, 1982, at A9.

23. Select Committee on Intelligence, S. Rep. No. 665,
98th Cong., 2d Sess., at 5 (1984) (hereinafter "S. Rep. 98-
665").

24. Letter, from 37 Congressmen, 3/24/83, to the Presi-
dent, HF1367; see Turner Memo, 4/6/83, to the President's
Intelligence Oversight Board, at 17, J4824.

25. Newsweek. April 11, 1983, at 46.

26. 1983 Public Papers of the President of the United
States, Ronald Reagan, Vol. 1, at 539 (April 14, 1983)
[hereinafter "Presidential Papers"].

27. Id at 541.

28. Id

29. See The Washington Post, April 3, 1983 at A3 (state-
ment of Sen. Daniel Moynihan).

30. 1983 Presidential Papers, Vol. 1, at 603-04 (April 27,
1983).

31. In June 1983 a CBS/New York Times poll showed
that the public opposed helping the Contras try to over-
throw the Nicaraguan Government by 53 percent to 23
percent. New York Times, July 1, 1983, at A2. In Septem-
ber, a Harris survey showed 60 percent opposed, and 24
percent favored, U.S. Government support for the Contras.
The Harris Survey, 9/29/83, at 3.

32. See Gorman Dep., 7/22/87, at 25-32; McFarlane
Test., Hearings. 100-2, 5/11/87, 9-10, 21.

33. S. Rep. 98-665 at 5-6.

34. H.R. 2760 was sponsored by Representative Edward
P. Boland, then Chairman of the House Intelligence Com-
mittee and Representative Zablocki, then chairman of the
Committee on Foreign Affairs. See H. Rep. 122, 98th
Cong., 1st Sess., Part 1 at 1; Part 2 at 2 (May 13, 1983).

35. See H. Rep. No. 122, 98th Cong., 1st Sess., at 4.

36. Cong. Rec. H5880-81 (July 28, 1983).

37. See Cong. Rec. H5721-62 (July 27, 1983); id at
H58 19-82 (debate on Boland-Zablocki). Ultimately, the
Boland-Zablocki legislation was never considered by the
Senate, and did not be come law. See "The Boland Amend-
ment," Chapter 26.

38. Clark Memo, 7/1/83, to SPG Principals, S9243.

39. Id

40. Report to the Senate Committee on Foreign Rela-
tions: Subj: "Conferral of Personal Rank of Ambassador,"
S9516.

41. S9468.

42. In its first year, S/LPD claimed credit for 1,5CX)
speaking engagements and for sending material to 239 edito-
rial writers in 150 cities. Comptroller General's Report, 2/
8/85, S9391. It published pamphlets, such as "Broken Prom-
ises: Sandinista Repression of Human Rights in Nicaragua,
"The Sandinista Military Build-up, "Misconceptions About
U.S. Policy Toward Nicaragua." all for the purpose of
"Spreading the President's Message to the Public, the
Media and the Congress." Gardner Memo, 6/25/85, to
Twohie: Subj: "Current Program of S/LPD," S9441.

43. See Chapter 4.

44. J. Miller Memo. 3/13/85, to P. Buchanan: Subj:
" "White Propaganda' Operation," S9418.

45. Reich Memo, 3/1/86, to W. Raymond, S9460.

46. Id

52

Chapter 2

47. Comptroller General Letter, 9/30/87, to Hon. Jack
Brooks, Hon. Dante Fascell, at S11655.

48. Id. at S11652.

49. Id. at S 11 656. The State Department's Inspector Gen-
eral concluded in Audit Report No. 7PP-008 (July 1987)
that "there is no evidence that S/LPD staff participated
directly or indirectly in any unlawful lobbying or that IBC
spent S/LPD contract funds for lobbying activities."

50. Vessey Memo, 9/6/83, to Chief of Staff, U.S. Army et
ai. Subj: "DoD Support for the DCL" at D 15331.

51. See DOD "Background Paper." D 15321 (July 13,
1983 "wish list"); see Information Paper, 4/14/87, D137I8
(referring to the CIA's original request as a "Christmas
List").

52. Memo, Subj: "Supplies Needed to Support Nicara-
guan Resistance Effort," D 15249; Memo for the Record, 7/
15/83. Subj: "CIA Request for DoD Support," D15356-364.

53. See DoD Memo, 7/28/83, to Chief of Staff, U.S.
Army, Chief of Naval Operations, Chief of Staff, U.S. Air
Force, Commandant of the Marine Corps: Subj: "DOD
Support for the DCI," D 15344.

54. This effort has been addressed generally in the press.
See, e.g., U.S. News and World Report. Dec. 15, 1986, at 27-
28.

55. DOD Memorandum for the Director, J-3, The Joint
Staff, 8/19/83, Subj: "DoD support for the DCI," D15338-
40; DOD Memo. 12/9/83, "Background Paper for the Di-
rector." D 13760 (chronology of project developments).

56. W. Taft IV Memo, 9/2/83, to Weinberger: Subj:
"CIA Request for DoD Support of Covert Activities in
Nicaragua," D25051 ("The CIA has been disappointed with
our pointing out this difficulty; it has suggested that it has
insufficient funds to support such activities on its own").

57. CIA paid the preparation and transfer cost of $28,000,
but not the equipment cost of the aircraft. See DOD
Memo, 12/9/86, "Background Paper for the Director," at
D13762-63.

58. Clark Memo, "Meeting with National Security Plan-
ning Group," N49258; see also S. Rep. 98-665 at 6.

59. North/deGraffenreid Memo, 9/15/83, to Clark: Subj:
"NSPG Meeting on Covert Action in Nicaragua," N49255.

60. NSC Handwritten Notes, 9/16/83, N54822.

61. Presidential Finding Scope Paper, 9/19/83, N6783.

62. Presidential Finding Scope Paper. 9/19/84, N6783.

63. NSC Handwritten Notes, 9/16/83, N54823 (emphasis
in original).

64. Presidential Finding. 9/19/83. N6780-82.

65. S. Rep. 98-665 at 6.

66. See Minutes of 5/16/86 NSPG Meeting, 6/4/86,
N10288.

67. S. Rep. 98-665 at 6 (quoting The New York Times);
see Casey Memo, 9/27/83, to Clark. N6787-89.

68. See Cong. Rec. H8389-432 (Oct. 20, 1983).

69. See H.R. Rep. 98-569.

70. See Cong. Rec. H 10543-45 (Nov. 18, 1983); id at
SI 6859-60.

71. Intelligence Authorization Act. FY 1984, sec. 109.

72. SIG Paper, 12/20/83: Subj: "Where Next in Central
America," at N32314.

73. C. Hill Memo. 12/20/83, to McFarlane: Subj: "Next
Steps in Central America," N32308.

74. The Special Interagency Working Group consisted of
representatives from the State Department, CIA, DOD,
NSC, Joint Chiefs of Staff and the White House. See

Memo, 9/23/83, Subj: "Legislation on Nicaragua," N6883.
Later, an interagency policymaking group on Central
America would be called a Restricted Interagency Group
or 'RIG."

74a. SIG Paper, 12/20/83: Subj: "Where Next in Central
America," at N32314; see McFarlane Memo, 1/6/85, Subj:
"Meeting with the National Security Planning Group," at
N46540 (summarizing SIG strategy paper).

75. McFarlane Memo, 1/6/85: Subj: "Meeting with the
National Security Planning Group," N46450; NSDD 124
(approving measures outlined in the SIG paper. "Where
Next in Central America," N32308-359).

76. North/Menges Memo, 10/19/83, to McFarlane: Subj:
"Special Operations: Nicaragua." N44721.

77. North/Menges Memo, 10/19/83. to McFarlane: Subj:
"Special Operations: Nicaragua," N44721.

78. Attachment to North/Menges Memo, 12/22/83, to
McFarlane: Subj: "Anti-Sandinista Actions." at N30844.

79. McFarlane Memo. 2/17/84, Subj: "Meeting with the
National Security Planning Group." at N40040.

80. North Memo to McFariane. 2/3/84, Subj: "Attack on
Guerrilla Command and Control Centers in Nicaragua," at
N44831.

81. North/Menges Memo, 3/2/84, to McFarlane: Subj:
"Special Activities in Nicaragua," at N44842.

82. North Memo, 3/30/84, to McFarlane: Subj: "Nicara-
gua Special Activities Program," at N34514.

83. See North Personnel File, D6087, D6089.

84. Poindexter Test., Hearings. 100-8. 7/15/87. at 41-42;
McFarlane Test., Hearings. 100-2, 5/11/87, at 31.

85. Poindexter Test., Hearings, 100-8, 7/15/87 at 41-42
McFarlane Test.. Hearings. 100-2. 5/11/87, at 31-32; Gregg
Int., 4/2/87, at 4, 6; P.X. Kelley Int., 9/30/87, at 7.

86. McFarlane Test., Hearings. 100-7, 7/14/87, at 203,
221.

87. Hall Test., Hearings. 100-5, 6/8/87, at 466; see North
Test., Hearings. 100-7, Part II, 7/13/87. at 55-56.

88. Gregg Int., 4/2/87, at 4; Ledeen Dep., 6/19/87, at 33;
Eari Dep., 5/22/87, at 29.

89. Letter, 11/7/83, J. Hull to R. Owen, N7460.

90. North's notes reveal frequent Contra-related contacts
during this period between North and Dewey Clarridge,
then Chief of the Latin American Division of the CIA's
Directorate of Operations. See North Notebooks, 1/84-
3/29/84, QOOl 1-0165.

91. See, e.g.. North memo, 3/30/84, to McFarlane: Subj:
"Nicaragua Special Activities Program," N34514; North/
Menges Memo, 3/2/84, to McFarlane: Subj: "Special Ac-
tivities in Nicaragua," N44842.

92. North Test., Hearings. 100-7. Part II, 7/13/87, at 40;
North Test, Hearings. 100-7, Part I, 7/9/87, at 244-45.

93. North Test., Hearings. 100-7, Part I, 7/9/87, at 245.

94. North/Menges Memo. 1 1/4/83, to McFarlane: Subj:
"Support for Nicaraguan Democratic Opposition," N40079,
N40081.

95. North Memo, 2/3/84. to R. McFarlane: Subj: "Attack
on Guerilla Command and Control Centers in Nicaragua,"
N44831-32; see North/Menges Memo, 1/23/84, to McFar-
lane: Subj: "Targeting Guerilla Command and Control Cen-
ters in Nicaragua." N44837.

96. See, e.g., North/Menges Memo, 10/19/83, to McFar-
lane: Subj: "Special Operations: Nicaragua," at N44721;
North/Menges Memo, 12/22/83, to R. McFarlane: Subj:
"Anti Sandinista Actions," at N30842; North Memo. 3/30/

53

Chapter 2

84, to McFarlane: Subj: "Nicaragua Special Activities Pro-
gram," at N34515.

97. North/Menges Memo, 12/22/83, to McFarlane: Subj:
"Anti Sandinista Actions," N30841; see North Memo, 3/30/
84, to McFarlane: Subj: "Nicaragua Special Activities Pro-
gram," N34514.

98. George Test., Hearings. 100-11, 8/6/87, at 269.

99. Poindexter Dep., 5/2/87, at 63.

100. North Forwarding Note to McFarlane, 2/13/84,
N 16901.

101. North/Keel Memo, 2/7/84, to McFarlane: Subj:
"Additional Resources for Our Anti-Sandinista Program,"
N16908 (attached to North Forwarding Note, 2/13/84,
N16901).

102. McFarlane Memo, 2/21/84, to the President: Subj:
"Central America Legislative Strategy — Additional Funding
for the Anti-Sandinista Forces," N 16894.

103. Los Angeles Times, Apr. 13, 1984, at 1.

104. McFarlane Test., Hearings. 100-2, 5/11/87, at 13.

105. The National Security Adviser later expressed his
regret about "lapses," such as the "failure to brief the Com-
mittees on the San Juan del Norte operation." McFar-
lane, PROF Note. 5/4/84 at 17:57:43, to Poindexter, N7091;
see also deGraffenreid Memo, 6/13/84, to McFarlane: Subj:
"Prospectus on New Covert Action Procedures," N7094
("with the exception of the special measures on Nicaragua
(mining . . . etc.) our Hill briefings have been timely and
thorough").

106. S. Rep. 98-665 at 8 (quoting Goldwater statement).

107. See, e.g.. Weekly Presidential Documents, Vol. 20,
No. 15, at 517-18 (Apr. 10, 1984 statement); McFarlane
letter, 4/5/84, to Sen. H. Baker, N43406-07 ("Please be
assured that we have not deviated from the strictest inter-
pretation of this Finding.")

108. S. Rep. 98-665 at 8-9.

109. S. Rep. 98-665 at 10.

110. Los Angeles Times, April 13, 1984, at 9.

1 10a. McFarlane Test., Hearings. 100-2, 5/11/87, at 5, 20-
21. McFarlane testified these were his words, expressing the
President's "sentiment." McFarlane Test., Hearings. 5/11/
87, at 21. North testified that, "[a]s they were relayed to
me," the words 'body and soul' "were the words of the
President." North Test., Hearings. 100-7, Part I. 7/9/87, at
265.

111. Poindexter Test., Hearings. 100-8, 7/15/87. at 54.

112. North Test., Hearings. 100-7, Part \. 1/1/il, at 74.

113. North Test., Hearings. 100-7, Part I, 1/9/&1, at 265.
North testified that he received this assignment around the
time of the Kissinger Commission Report, which was re-
leased Jan. 10, 1984. Report of the National Bipartisan
Commission on Central America (H. Kissinger, Chairman);
North Test.. Hearings. 100-7, Part I. 7/13/87. at 79. McFar-
lane dated the instruction "in the days leading to Boland
H," which was enacted in October 1984. McFarlane Test..
Hearings. 100-7, Part H, 7/14/87, at 221.

114. North/Menges Memo. 1/13/84, to McFarlane: Subj:
"Central America— Draft NSDD to Implement NSPG De-
cisions of January 6, 1984," N43397 (emphasis added).

115. Memo. North/Menges, Memo, 1/13/84, to R.
McFarlane: Subj: "Central America — Draft NSDD to Im-
plement NSPG Decisions of January 6, 1984," handwritten
changes, N43397.

116. McFarlane Test., Hearings. 100-2, 5/11/87, at 14.
54

117. The Committees agreed at the request of the White
House that, in the interest of U.S. foreign relations, certain
foreign nations which were approached or enlisted for
Contra aid would not be referred to by name. Accordingly,
those countries were given numerical designations.

118. McFarlane Test., Hearings. 100-2. 5/11/87, at 15.

119. The idea that Country 1 might fund U. S. ventures in
Central America was not a new one for McFarlane. In the
spring of 1983, he learned that Country 1 might be willing
to provide security assistance and agricultural training to
other countries. In a note to Oliver North recounting this
offer, McFarlane mused that since the U. S. appropriation
to Country 1 increased every year, perhaps it would be
willing to sign over the increase for use in Central America.

120. Casey Memo, 3/27/84, to McFarlane, RCM Ex. 29
at 456, C7490. Casey already had devised his own plan for
raising additional funds. In the March 27 memorandum, he
indicated that two initiatives already were underway at the
CIA to provide the Contras with weapons and other materi-
als: one involved an arrangement with Country 1. and the
other involved an approach to Country 6. Neither effort
produced any significant Contra assistance. Id., C7490.

121. Shultz Test., Hearings. 100-9, 7/23/87, at 13.

122. McFarlane Test., Hearings. 100-2, 5/11/87, at 15-16;
Teicher Dep., 4/23/87. at 15.

123. McFarlane Memo, 4/20/84, to Teicher, RCM Ex. 30
at 459, N 10576. Secretary Shultz was unaware of the sub-
stance of this memo. Shultz Test., Hearings. 100-9, 7/23/87,
at 14-15.

124. Shultz Test., Hearings. 100-9, 7/23/87, at 13-14.

125. Shultz Test., Hearings. 100-9, 7/23/87, at 13-14.

126. Shultz Test., Hearings. 100-9, 7/23/87, at 13-14.

127. McFarlane Test., Hearings. 100-2, 5/11/87, at 15-16.

128. Casey Memo. 3/27/84, to McFarlane. C7490. See
also CIA Cable. 3/8/84, DRC Ex. 19, CIA Cable. 3/10/84,
DRC Ex. 19-1.

129. CIA Cable from D. Clarridge, 4/5/84, DRC Ex. 19-
11; id. 4/12/84. DRC Ex. 19-15.

130. CIA Cable. 4/10/84. DRC Ex. 19-14.

131. Clarridge Test.. Hearings. 100-11. 8/4/87. at 31; CIA
Cable, from D. Clarridge, 5/11/84, DRC Ex. 19-18.

132. See, e.g., CIA Cables, 3/23/84. DRC Ex. 19-2; id. 3/
24/84, DRC Ex. 19-3; id. 4/2/84, DRC Ex. 19-5: id. 4/3/
84. DRC Ex. 19-6; id, 4/4/84. DRC Ex. 19-7.

133. Clarridge Test., Hearings. 100-11, 8/4/87 at 29-32.

134. Clarridge Test., Hearings. 100-11, 8/4/87, at 29-30,
32-33.

135. Clarridge Test., Hearings. 100-11, 8/4/87, at 34.
Clarridge also defended the Agency's conduct by emphasiz-
ing that Country 6's early offer was rejected because it
turned out Country 6 wanted reimbursement and that Coun-
try 6 sought a bilateral arrangement with a Central Ameri-
can country, not the Contras specifically. Clarridge Test.,
Hearings. 100-11, 8/4/87, at 28-32.

136. CIA Cable from D. Clarridge. 5/11/84, DRC Ex.
19-18.

137. McFarlane Test.. Hearings. 100-2, 5/12/87. at 84.

138. McFarlane Test., Hearings, 100-2, 5/11/87, at 17.

139. McFarlane Test., Hearings. 100-2, 5/11/87, at 17.

140. McFarlane Test., Hearings. 100-2, 5/11/87, at 17:
I should stress. I described it as it happened, and
while there is no solicitation, cry for solicitation, in
fact it was unmistakable in his own mind that my
concern and my view of this impending loss would
represent a significant setback for the President,

Chapter 2

and if anyone with any gumption could manage
without being led or asked, then a contribu-
tion would have been welcome.

141. McFarlane Test., Hearings. 100-2, 5/11/87, at 17-18.
North's notes show that the arrangements were made by
June 25. On June 24, he noted "call to RCM re arrange-
ments" and on June 25 he noted that he had told Calero the
funds were on their way. North Notebook, 6/24/84,
Q0338; id., 6/25/84, Q0340. Bank records show the pay-
ment was actually received in Calero's account on July 6,
1984. Bank Records, 0318.

142. McFarlane Test., Hearings. 100-2, 5/11/87, at 18.

143. North Test., Hearings. 100-7, Part II, 7/13/87, at 80.

144. McFarlane Test., Hearings. 100-2, 5/11/87, at 18-19.

145. McFarlane Test., Hearings. 100-2, 5/11/87, at 18.

146. McFarlane Test., Hearings. 100-2, 5/11/87, at 53.

147. McFarlane Test., Hearings. 100-2, 5/11/87, at 24.

148. Weinberger Dep., 6/17/87, at 74 (denying any
knowledge of a Country 2 contribution).

149. Shultz Test., Hearings. 100-9, 7/23/87, at 4; Poindex-
ter Test., Hearings, 100-8, 7/15/87, at 78-79.

150. Baker Dep., 6/22/87, at 12. Attorney General Meese
did not testify on this issue.

151. Baker did not recall "using that language or having a
specific opinion such as that, although I do, as I have
stated, recall feeling that we should take a very close look
at the question of legality and feeling that we could not do
indirectly what we couldn't do directly." Baker Dep., 6/22/
87, at 8-9.

152. See Shultz Test., Hearings. 100-9, 7/23/87, at 14-17.

153. North Notebook, 6/25/84, Q0340 (emphasis in origi-
nal).

154. North Notebook, 6/25/84, Q0343.

155. Sporkin Memo for Record, 6/26/84, Subj: "Nicara-
gua," C8322. Secretary Shultz testified that, as far as he
knew, no Justice Department opinion was ever obtained.
Shultz Test., Hearings. 100-9, 7/23/87, at 17-18.

156. North Test., Hearings, 100-7, Part I, 7/7/87, at 74.

157. North Test., Hearings. 100-7, Part I, 7/8/87 at 116.
There is some evidence that Secord may have been in-
volved in another covert operation prior to the Contra
project. In an Apr. 27, 1984, notebook entry. North relates
what appears to be an arms deal with Country 1 ("Team to
[Country 1] $54 million worth of arms"). Later the note
states: "McFarlane talked to [Country 1 official] Can't
produce $; similar to Secord arrangement: 65 lift vans;
$750K." North Notebook, 4/27/84, Q0228 (emphasis
added).

158. North Test., Hearings. 100-7, Part I, 7/8/87, at 116.

159. North Test., Hearings. 100-7, Part I, 7/8/87, at 117.

160. North Test., Hearings, 100-7, Part I, 7/8/87, at 117.

161. North Test., Hearings, 100-7, Part I, 7/8/87, at 122.
As recounted by North, Casey's plan mirrored the sugges-
tions of others. It was about this time that Robert Owen,
who would become North's courier, provided him with a
plan for "setting up proprietary companies ... to purchase
goods overseas and provide assistance to the contras."
Owen Test., Hearings. 100-2, 5/14/87, at 325-26.

162. North Test., Hearings. 100-7, Part II, 7/13/87, at 46.

163. See The New York Times, May 16, 1987, at Al ("As
a matter of fact, I was very definitely involved in the
decisions about support to the freedom fighters. It was my
idea to begin with.")

164. Poindexter Test., Hearings. 100-8, 7/20/87, at 228.

165. See Secord Test., Hearings. 100-1, 5/5/87, at 46.

166. Secord Test., Hearings. 100-1, 5/5/87, at 48-49. On
July 26, North had a conversation with Gen. Secord, and
his notes report the involvement of "Chi Chi" Quintero:

L-lOO Shipping prices

Shipping Agent — Raphael Chi Chi Quintero

Cuban/Miami

knows maritime ops

knows logistic support

would make a logistics advisor

travels in region frequently

Canadian Arms dealer — Century Arms Ltd.
North Notebook, 7/26/84, Q0448.

167. Secord Test., Hearings. 100-1, 5/5/87, at 50-51;
Hakim Test., Hearings, 100-5, 6/3/87, at 200.

168. Secord Test., Hearings. 100-1, 5/7/87, at 172.

169. Owen Test., Hearings. 100-2, 5/14/87, at 325-26.

170. Owen Test., Hearings, 100-2, 5/14/87, at 325-26.

171. Owen Test., Hearings, 100-2, 5/14/87, at 327; see
Owen Letter, 7/2/84, to North, RWO Ex. 1 at 777 ("fire-
cracker costs").

172. Owen Test., Hearings. 100-2, 5/14/87, at 326-42.

173. Owen Test., Hearings. 100-2, 5/14/87, at 334-35;
id, 5/19/87, at 385.

174. McFarlane Test., Hearings. 100-2, 5/11/87, at 5.

175. North Memo, 8/28/84, to McFarlane: Subj: "Official
Travel to Honduras on August 31, 1984," at N46204.

176. North Memo, 9/2/84, to McFarlane: Subj: "FDN
Air Attack of 1 September," RCM Ex. 30-B at 426, N44850.

177. Ken deGraffenreid was, at the time, the head of the
NSC Staffs Intelligence Directorate, the group responsible
for coordinating policy on covert action projects. deGraf-
fenreid Dep., 6/19/87, at 5; id. 1/11/il, at 58.

178. North Memo, 10/9/84, to McFarlane: Subj: "Draft
National Security Decision Directive (NSDD) on Arms
Interdiction in Central America," at N6446-51.

179. Cong. Rec. HI 1974 (Oct. 10, 1984). Representative
Hyde, an opponent of the Boland Amendment, gave it a
similar interpretation in urging members to reject it. He
stated: "[S]ection 107 . . . forbids any assistance to the
freedom fighters in Nicaragua .... Arm them and abandon
them on a party line vote. No food, no medicine, no ammu-
nition, not even moral support. We barely leave them a
prayer." Cong. Rec. H8269 (Aug. 2, 1984). See Chapter 26
for a fuller discussion of the legislative history of the
Boland Amendment.

180. North Test., Hearings. 100-7, Part I, 7/8/87, at 162-
63; see id., at 270-71; McFarlane Test., Hearings. 100-7, Part
II, 7/14/87, at 223-24; Poindexter Test., Hearings. 100-8, 7/
20/87, at 52-53. See Chapter 26 for a fuller discussion of
their views.

181. Poindexter Test., Hearings. 100-8, 7/15/87, at 52-53.

182. See McFarlane Test., Hearings, 100-7, Part II, 7/14/
87, at 203-04.

183. McFarlane Test., Hearings, 100-7, Part II, 7/14/87, at
203; see also McFarlane Test., Hearings, 100-2, 5/12/87, at
129.

184. McFarlane Test., Hearings, 100-2, 5/11/87, at 44-48;
McFarlane Test., Hearings. 100-2, 5/11/87, at 20.

185. McFarlane Test., Hearings. 100-2, 5/11/87, at 21.

186. McFarlane Test., Hearings. 100-2, 5/11/87, at 21.

187. McFarlane Test., Hearings. 100-7, Part II, 7/14/87, at
204, 221-22.

55

Chapter 2

188. Poindexter Test,, Hearings, 100-8, 7/21/87, at 340-41;
North Test., Hearings. 100-7, Part I, 7/9/87, at 177.

189. North Test., Hearings. 100-7, Part I, 7/8/87, at 177;
id., 1/9/&7, at 186; id, 100-7, Part II, 7/13/87, at 78-79.

190. Poindexter Test., Hearings. 100-8, 7/20/87, at 228-
29; id. 7/15/87, at 74.

191. McFarlane Test., Hearings. 100-7, Part II, 7/14/87, at
204; see also id. 7/14/87, at 21 1-22.

192. Poindexter PROF to McFarlane, 11/23/84 at
21:27:14, JMP Ex. 4.

193. North Test., Hearings. 100-7, Part I, 7/7/87, at 74.

194. North Test., Hearings. 100-7, Part I, 7/7/87, at 74.

195. Poindexter Dep., 5/2/87, at 51-52.

196. Poindexter Dep., 5/2/87, at 63.

197. McFarlane Test., Hearings. 100-7, Part II, 7/14/87, at
225.

198. North Test., Hearings. 100-7, Part II, 7/10/87, at 2-3.

199. Calero Test., Hearings, 100-3, 5/20/87, at 11-12.

200. See, e.g.. North Notebook, 1/10/85, Q0957; id, 1/3/
85, Q0934; id, 12/12/84, Q0893.

201. North Notebook, 12/7/84, Q0882; id. 12/17/84,
Q0910; see North Memo, 12/20/84, to McFarlane: Subj:
"Follow-up with [ ] re: Terrorism and Central America,"
N720O-02.

202. North Notebook, 12/17/84, Q0910; cf. North Memo,
12/20/84, to McFarlane: Subj: "Follow-up with [ ] Re:
Terrorism and Central America," N7200 (indicating $15K
price per launcher).

203. North Memo, 12/20/84, to McFarlane: Subj:
"Follow-up with [ ] re: Terrorism and Central America,"
N7200-02.

204. McFarlane Test., Hearings. 100-7, Part II, 7/14/87, at
222.

205. North Notebook, 1/3/85, Q0934.

206. North Memo, 12/4/84, to McFarlane: Subj: "Assist-
ance for the Nicaraguan Resistance," RCM Ex. 32 at 468,
N16887.

207. North Memo, 12/4/84, to McFarlane: Subj: "Assist-
ance for the Nicaraguan Resistance," RCM Ex. 32 at 468,
N16887.

208. North Test., Hearings, 100-7, Part I, 7/7/87, at 83-84.

209. McFarlane Test., Hearings. 100-2, 5/11/87, at 29-30.

210. North Test., Hearings. 100-7, Part I, 7/7/87, at 83-84.

211. Secord Test., Hearings, 100-1, 5/5/87, at 51-52. Bank
records indicate that the downpayment for the first sealift
was not made until February. H9409.

212. North Notebook, 1/29/85, Q1553-54.

213. North Notebook, 1/30/85, Q1555.

214. North Notebook, 2/5/85, Q1580 (emphasis in origi-
nal).

215. See North Memo, 3/5/85, to McFarlane: Subj: "Aid
to the Nicaraguan Resistance," RCM Ex. 35 at N7 189-97
(attaching end user certificates dated Feb. 14, 1985).

216. See McFarlane Test., Hearings, 100-7, Part II, 7/14/
87, at 221; North Notebook, 1/2/85, Q0932.

217. C/CATF Test., Hearings, 100-11, 8/4/87, at 237-38.

218. See Owen Test., Hearings, 100-2, 5/14/87, at 332-33.

219. North Test., Hearings. 100-7, Part I, 7/9/87, at 266-
67.

220. See Poindexter Test., Hearings. 100-8, 7/15/87, at
193.

221. See North Memo, 11/7/84, to McFarlane: Subj:
"Clarifying Who Said What to Whom," RCM Ex. 31 at
463, N6914.

222. Id. RCM Ex. 31, at 463-64, N6914-15.

223. Id. RCM Ex. 31, at 465, N6916.

224. Id. RCM Ex. 31, at 464, N6915.

225. McFarlane Test., Hearings. 100-7, Part II, 7/14/87, at
222; McFarlane Test., Hearings. 100-2, 5/11/87, at 166.

226. North Test., Hearings, 100-7, Part I, 7/9/87, at 204-
05.

227. North Memo, 2/6/85, to McFarlane: Subj: "Nicara-
guan Arms Shipments," RCM Ex. 33 at 472, N6918.

228. Id. RCM Ex. 33, at 472, N6918.

229. Id. RCM Ex. 33, at 472, N6918.

230. Id. RCM Ex. 33, at 475, N6921.

231. North Memo, 12/4/84, to McFarlane: Subj: "Assist-
ance for the Nicaraguan Resistance," RCM Ex. 32, at 470,
N16889.

232. North Test., Hearings, 100-7, Part II, 7/14/87, at 157.

233. McFarlane Test., Hearings, 100-2, 5/11/87, at 29-30.

234. Poindexter Test., Hearings. 100-8, 7/20/87, at 230.

235. North Test., Exec. Session, 7/9/87, at 58.

236. North, PROF Note, 8/23/86 at 15:52:52, to Poin-
dexter, N12151. [North Classified Ex. 336.]

237. Singlaub Test., 5/20/87, at 192; see North Test., 7/7/
87, at 199-202.

238. Singlaub Test., 5/20/87, at 190-93; see also North
Test., 7/7/87, at 199-202.

239. Singlaub Test., 5/20/87, at 192.

240. McFarlane Test., 5/11/87, at 14-15; id. 5/14/87, at
203.

241. North Test., 7/7/87, at 198-99.

242. North Test., 7/7/87, at 202-04.

243. North Test., 7/7/87, at 234 ("[SJomeone had told me
that a U.S. Government official should not, cannot, will
not, whatever solicit.")

244. Singlaub Test., 5/20/87, at 193-94.

245. Singlaub Test., 5/20/87, at 201.

246. Singlaub Test., 5/21/87, at 164.

247. Singlaub Test., 5/20/87, at 198-99.

248. North Notebook, 2/1/85, Q1567; see Singlaub Test.,
5/20/87, at 198-201.

249. North Memo, 2/6/85, to McFarlane, RCM Ex. 34 at
479, N7015. In a handwritten addition. North wrote: "Nor
should Singlaub indicate any U.S. Government endorsement
whatsoever." Id.

250. North Memo, 2/6/85, to McFarlane, RCM Ex. 34, at
479, N7015.

251. Singlaub Test., 5/20/87, at 200. Singlaub informed
North that he presented three options for Country 3 to
contribute to the Contras: (1) a deposit to a foreign bank
account where no subsequent accounting would be provid-
ed; (2) a contribution directly to, and with an accounting
by, Singlaub; and (3) a diversion from the proceeds of an
upcoming arms sale to Country 3 (so that no disbursement
would then be reflected on Country 3"s books). Singlaub
also proposed that Countries 3 and 5 make direct contribu-
tions to the Contras of military supplies. Singlaub Test., 5/
20/87, at 195-97.

252. Singlaub Test., 5/21/87, at 204.

253. See North Test., 7/7/87, at 199-207.

254. McFarlane Test., 5/13/87, at 103-05.

255. Secord Test., 5/5/87, at 154-56.

256. Secord Test., 5/5/87, at 154-56.

257. McFarlane Test., 7/14/87, at 218.

258. McFarlane Test., 5/11/87, at 49-52.

259. McFarlane Test., 5/11/87, at 51-52.

56

Chapter 2

260. McFarlane Test., 5/11/87, at 50-51; see Shultz Test.,
7/23/87, at 8-9; McFarlane Int., 4/5/87, MF1955.

261. Weinberger Test., 7/31/87, at 133, 135.

262. Vessey Dep., 4/17/87, at 6; Weinberger Test., 7/31/
87, at 134; cf. CWW Ex. 39, CIA Memo for the Record by
J. McMahon, "Breakfast with Secretary and Deputy Secre-
tary of Defense," 3/15/85, ("In closing the Secretary stated
that he had heard that [Country 2] had earmarked $25
million for the Contras in $5 million increments"). While
Weinberger did not recall making the statement recorded in
the memo, Weinberger Dep., 6/17/87, at 74-75, McMahon
confirmed, in his deposition, the accuracy of the informa-
tion. McMahon Dep., 7/1/87, at 57 (Q: "Do you remember
that meeting where Secretary Weinberger mentioned that
he had heard that [an official of Country 2] had earmarked
$25 million for the contras?" A: "Yes." Q: "What did he say
in that meeting?" A: "Exactly what you sa/rf. It was like an
offhand remark.")

263. Shultz Test., 7/23/87, at 8-9.

264. McFarlane Test., 5/11/87, at 54.

265. See 04882-83.

266. Weekly Presidential Documents, Vol. 20, No. 45, 11/
9/84, at 1817.

267. McFarlane Test., 5/11/87, at 43.

268. The Washington Post, 11/30/84, at Al (statement of
Sen. David Durenberger).

269. Weekly Presidential Documents, Vol. 20, No. 51, 12/
21/84, at 1909.

270. See Weinberger Memo, 1/3/85, to McFarlane: Subj:
"U.S. Policy Toward Nicaragua," at N6495.

271. See North Memo, 1/15/85, to McFarlane: Subj:
"Nicaragua Options," Tab F, "Options and Legislative
Strategy for Renewing Aid to the Nicaraguan Resistance,"
at N45086-93.

272. See North Memo, 1/15/85, to McFarlane: Subj:
"Nicaragua Options," at N45025, N45029; see also McFar-
lane Test., 5/11/87, at 44.

273. North Memo, 1/15/85, to McFarlane: Subj: "Nicara-
gua Options," Tab I, "Policy Options for Nicaragua," at
N45029.

274. North Memo, 1/15/85, to McFarlane: Subj: "Nicara-
gua Options," Tab E, "The Future of the Nicaraguan Re-
sistance," at N45083.

275. North Memo, 1/28/85, to Poindexter: Subj; "Nicara-
guan SNIE," (referring to "The Future of the Nicaraguan
Resistance," Tab E to "Nicaragua Options" Memo, at
N45029), at N32824.

276. McFarlane Test., Hearings. 100-2, 5/11/87, at 21.

277. Secord Test., Hearings, 100-1, 5/5/87, at 49-52.

278. North Memo, 3/5/85, to McFarlane: Subj: "Aid to
the Nicaraguan Resistance," RCM Ex. 35 at 494, N7184.

279. North Memo, 3/5/85, to McFarlane: Subj: "Aid to
the Nicaraguan Resistance," RCM Ex. 35 at 494, N7184.

280. Id. RCM Ex. 35 at 495, N7185.

281. Id. RCM Ex. 35 at 494, N7184.

282. McFarlane Test., Hearings. 100-2, 5/11/87, at 32-33;
McFarlane Int., 4/5/87, MF1957.

283. North Test., Hearings. 100-7, Part I, 7/8/87, at 147-
48.

284. North Test., Hearings. 100-7, Part I, 7/8/87, at 132,
135.

285. North Test., Hearings. 100-7, Part I, 7/8/87, at 132

286. North Test.. Hearings. 100-7, Part I, 7/8/87, at 132.

287. North Test., Hearings. 100-7, Part I, 7/8/87, at 133.
North made no mention in his testimony about what he
believed to be the "extraordinary risk" involved. In con-
trast, in the case of his notebooks, which also contained the
names and addresses of private donors and recipients. North
felt free to remove them from the protection of his locked
and guarded office. North Test., Hearings, 100-7, Part I, 7/
8/87, at 134. He destroyed the ledgers as the Contra diver-
sion was coming to light in November 1986. North Test.,
Hearings. 100-7, Part I, 7/8/87, Part I, at 134.

288. Poindexter Test., Hearings. 100-8, 7/15/87, at 74.

289. Poindexter Test., Hearings. 100-8, 7/15/87, at 74.

290. North Memo, 3/15/85, to McFarlane, N7127-28.

291. North Memo, 2/27/85, to McFarlane, N6418-19.

292. North Memo, 3/15/85, to McFarlane, at N7128.

293. North Memo, 2/27/85, to McFarlane, N6419.

294. North Memo, 3/15/85, to McFarlane, N7128.

295. Owen Test., Hearings. 100-2, 5/14/87, at 237-39.

296. Owen Test., Hearings. 100-2, 5/19 at 347-48.

297. Owen Test., Hearings. 100-2, 5/14/87, at 340-41.

298. Owen Test., Hearings. 100-2, 5/14/87, at 341-42.

299. Owen Test., Hearings. 100-2, 5/14/87, at 339-40.

300. "Steelhammer" Letter to "My Friend," RWO Ex. 3
at 782 (emphasis in original).

301. North Memo, 11/7/84, to McFarlane: Subj: "Clarify-
ing Who Said What to Whom," RCM Ex. 31, at 464,
N6915.

302. CIA Memo, 3/5/85, "Outside Support to the FDN,"
C2470.

303. See, e.g.. Guardian, 3/13/85, at 3; see also Boston
Globe, 12/30/84, at A21, A24.

304. Singlaub Test., Hearings. 100-3, 5/20/87, at 83-84.

305. Singlaub Test., Hearings. 100-3, 5/20/87, at 83-84.

306. As Owen wrote to North in February, "[a] major
lobbying, educational and public relations effort is needed to
help sway a Congress which appears inclined not to vote
for passage of covert funding." Owen Memo, 2/19/85, to
North: Subj: "Public Relations Campaign for the Freedom
Fighters," RWO Ex. 4 at 783.

307. North/Fortier Memo, 3/22/85, to McFarlane; Subj:
"Timing and the Nicaraguan Resistance Vote," Tab,
"Chronological Event Checklist," N40320-331. The plan ap-
parently evolved from meetings of an ad hoc working
group chaired by Patrick Buchanan. See id. at N40317.

308. North Memo, 3/16/85, to McFarlane: Subj: "Fall-
back Plan for the Nicaraguan Resistance," RCM Ex. 36 at
511, N10618.

309. Id. RCM Ex. 36 at 512, N10619.

310. Id RCM Ex. 36 at 512, N10619.

311. North/Fortier Memo, 3/22/85, to McFarlane: Subj:
"Timing and the Nicaraguan Resistance Vote," at N40317.

312. See Fortier Memo, 4/1/85, to McFarlane; Subj:
"Contra Vote —Delay to May," N 18785-86.

313. North Memo, 4/1/85, to McFarlane: Subj: "Using
the March 1 San Jose Declaration to Support the Vote on
the Funding for the Nicaraguan Resistance," N40317 (em-
phasis added).

314. McFarlane Test., Hearings. 100-2, 5/11/87, at 28.

315. Weekly Presidential Documents, Vol. 21, No. 18, at
537 (Apr. 24, 1985).

316. Weekly Presidential Documents, Vol. 21, No. 18, at
557 (Apr. 29, 1985).

317. Weekly Presidential Documents, Vol. 21, No. 18, at
566 68 (May 1, 1985).

57

Chapter 2

318. North Memo, 4/11/85, to McFarlane: Subj: "FDN
Military Operations," RCM Ex. 37 at 520, N10592.

319. Calero Test., 5/20/87, at 29; North Memo, 4/11/85,
to McFarlane: Subj: "FDN Military Operations," RCM Ex.
37 at 520, N 10592.

320. In all but one case, these arms had been purchased
by Calero from General Secord. Calero Test., 5/20/87, at
30.

321. North Memo, 4/11/85, to McFarlane: Subj: "FDN
Military Operations," RCM Ex. 37 at 520, N 10592. As of
March 25, 1985, Calero had received $32 million. 04881-83.

322. Id., RCM Ex. 37 at 521, N 10593.

323. Gorman Dep., 7/22/87, at 25-32.

324. RCM Ex. 37 at 521, N10593. North's notes suggest
that these plans were at least to some extent pursued. On
June 17, North first met with Secord and "Tom" (perhaps
Clines); that same morning he met with the Chief of the
Central American Task Force, and noted "-need more Intel;
-MAPS - 1:80,000 Northern Area; -Maps of Managua Air-
port Area." The note continues: "-Log/Mil Pining - Miami
-3 small Maule, 1 C-47, 1 Helo, Medevac -Log Support for
3 mines Area -Log Support for Managua Ops -Phaler Boat
Ops -Refinery -Ammo Purchase Program -Training Pro-
gram." North Notebook, 6/17/85, QI953-54.

325. On May 6, North learned from the Chief, Central
American Task Force, the details of a Sandinista attack.
North Notebook, 5/6/85, Q1796. By the next day, the Con-
tras had been ordered to move out, and Calero called North
to tell him that he was "waiting for word on where they
want[ed the] FDN to move to." North Notebook, 5/7/85,
Q1800. North received the same news from the Chief,
CATF: They had to "immed. vacate [location], will have to
vacate." North Notebook, 5/8/85, Q1808. On May 13,
North learned from the U.S. Ambassador that the "disper-
sal" was "complete." North Notebook, 5/13/85, QI818.
North told a Central American Ambassador that it was
"essential that [the] movement not feel abandoned . . ."
"There must be some visible link/continuity in [the] pro-
gram." North Notebook, 5/9/85, Q1810.

326. North/Fortier/Lehman/Burghardt Memo, 5/15/85,
to McFarlane: Subj: "Congressional Strategy for Nicara-
guan Resistance Funding," N40244.

327. North Memo, 5/31/85, to McFarlane: Subj: "The
Nicaraguan Resistance: Near Term Outlook," RCM Ex. 38
at 532, N 10584.

328. Secord Test., Hearings, 100-1, 5/5/87, at 52-53.

329. North Notebook. 5/1/85, Q1790.

330. Secord, Hearings, 100-1, 5/5/87, at 53.

331. See, e.g.. North Notebook, 5/17/85, Q1832: "Mario
[Calero] more & more in picture;-ponchos, Howard, tires
for C-47;-LORAN C w/ Bad cable, boots w/bad soles; -
serious logistics problems; - possible Martin interference w/
[Central American] delivery; -ship arrives 1 June 85 -
Danish vessel; -$148/copy for . . . in lots of 5K or more."

332. See RCM Ex. 37 at 525, "FDN Expenditures and
Outlays."

333. North Notebook, 5/8/85, Q1806.

334. North Notebook, 5/24/85, Q1861.

335. Secord Test, Hearings, 100-1, 5/5/87, at 57.

336. North Notebook, 5/1/85, Q1790.

337. North Test., 7/8/87, at 83.

338. North Test., 7/8/87, at 84.

339. Singlaub Test., 5/20/87, at 202-03.

340. Singlaub Test., 5/20/87, at 204.

341. Singlaub Test., 5/20/87, at 206-08.

342. Singlaub Test., 5/20/87, at 210-11.

343. Singlaub Test., 5/20/87, at 218.

344. North Test., 7/8/87, at 83.

345. Secord Test., Hearings, lOO-I, 5/5/87, at 53.

346. See Chapter 22.

347. Secord, Hearings. 100-1, 5/5/87, at 51.

348. But see Secord Test., 5/5/87, at 152 ("[L]ater in
1985, I foreswore my share of the profits that had accrued
to that time, none of which I had drawn, and discussed this
extensively with Mr. Hakim").

349. Secord Test., 5/5/87, at 142. For details of the finan-
cial workings of the Enterprise, see Chapter 22.

350. Calero Test., 5/20/87, at 32.

351. Calero Test., 5/20/87, at 279-80.

352. North Test., 7/10/87, at 155-56.

353. North Test., 7/8/87, at 62.

354. Singlaub Test., 5/20/87, at 211-13.

355. Singlaub Test., 5/20/87, at 213-14.

356. Calero Test., 5/20/87, at 90.

357. North called Clarridge immediately after he dis-
cussed the purchase with Secord, and asked Clarridge to do
a check on the European arms dealer. North Notebook, 5/
18/85, Q1834. Clarridge, who was by then Chief of the
CIA's European division, reported back on May 23, 1985.
Id., 5/23/85, Q1858.

358. North Notebook, 5/17/85, Q1831.

359. North Notebook, 5/17/85, Q1833.

360. North Notebook, 5/20/85, Q1837.

361. North Test., 7/8/87, at 84.

362. Committee Interview, 6/10/87.

363. Singlaub Test., 5/20/87, at 222-25. The vessel was
met by an associate of Ron Martin, Mario DelAmico, who
held himself out as a representative of a Central American
country, charged with FDN matters. In September, Sing-
laub met with DelAmico, who warned him that he should
never send another ship but, instead, purchase weapons
through Martin. Id. at 227. Singlaub told North of this
"threat," and North responded that "he would take what-
ever action was necessary of this." Id.

364. North Notebook, 5/15/86, Q1825. In fact, Calero's
funds were not completely depleted until October 1985. See
bank records, 04737.

365. Calero Test., 5/20/87, at 152.

58

Chapter 3

The Enterprise Assumes Control of Contra

Support

In the summer of 1985, Congress voted to appropriate
$27 million for the Contras' humanitarian needs, in-
cluding food, medicine and clothing. At the same
time, the covert program, run by the National Securi-
ty Council (NSC) staff, entered a new and bolder
phase. With the Contras' daily living needs taken care
of by Congress, and their requirements for arms
having been met through Country 2's prior donations,
the NSC staff was able to focus on attempting to
improve the Contras' military effectiveness. This in-
volved establishing an air resupply program for the
main Contra fighting force operating in the North of
Nicaragua, the Nicaraguan Democratic Force (FDN),
and promoting the opening of a second Contra front
in the South of Nicaragua by supporting other Contra
fighters, independent of the FDN, who were operat-
ing there. This support for the southern forces includ-
ed the procurement of arms as well as the establish-
ment of an air resupply program.

Disappointed at the failure of Adolfo Calero to
develop a logistics infrastructure, Lt. Col. Oliver
North asked Gen. Richard Secord and his associates
to assume new responsibilities that under the Boland
Amendment the U.S. Government could not under-
take. Secord agreed to continue to handle all future
weapons procurement for the Contras and to acquire
and operate a small fleet of planes to make air drops
of weapons, ammunition, and other supplies to the
Contras in both northern and southern Nicaragua.
North arranged the funding for Secord to carry out
these activities, directing third-country and private
contributions to Secord that previously went to
Calero. These funds were later augmented by the
diversion from the Iranian arms sales that North, with
Admiral John Poindexter's approval, initiated.

Financed by contributions and the diversion, the
Secord group purchased and operated five airplanes,
built an emergency airstrip in Costa Rica, maintained
an air maintenance facility and a warehouse in an-
other Central American country, and hired pilots and
crew to fly the air drop missions. They also pur-
chased weapons and ammunition in Europe and deliv-
ered them to Central America for use by the Contras
in the south and north. North called the organization
"Project Democracy." Secord and his partner, Albert
Hakim, referred to it as the Enterprise.

The Enterprise, though nominally private, func-
tioned as a secret arm of the NSC staff in conducting
the covert program in Nicaragua. While Secord con-
trolled the operational decisions of the Enterprise,
North remained in overall charge of the Contra sup-
port program. He set the priorities and enlisted the
support of an Ambassador, Central Intelligence
Agency (CIA) officials, and military personnel to
carry out the air resupply operation. He dealt with
crises as they arose, sometimes on a daily basis. In
carrying on these tasks. North had the unqualified
support of Admiral Poindexter, who had replaced
Robert McFarlane as National Security Adviser in
December 1985.

The efforts of the NSC staff and the Enterprise to
carry out a government function with a makeshift
covert organization were, however, dogged by prob-
lems from the beginning. The Enterprise's aircraft
were in poor condition and the group had to over-
come numerous tactical problems in carrying out its
mission. While the Enterprise conducted routine air
drops in northern Nicaragua, it was not able to begin
a regular air drop operation in the south until late
summer of 1986 — at a time when both Houses of
Congress had voted to authorize the CIA to resume
its support for the Contras with appropriated funds
and when the Enterprise was trying to sell its assets
to the CIA. The operation ended abruptly in October
1986 when the plane that Eugene Hasenfus was on
was shot down while on a mission to drop supplies to
the Contras in Nicaragua.

Before that and for more than 2 years, the NSC
staff had secretly achieved what Congress had openly
disapproved in the Boland Amendment — an extensive
program of military support for the Contras. The
Boland Amendment operated as a restraint on disclo-
sure, not on action, as the NSC staff placed policy
ends above the law.

The Enterprise's Mission is
Expanded

On June 12, 1985, the House passed a bill approving
$27 million in humanitarian assistance to the Contras,
paving the way for final approval and signature by
the President in August 1985. While that vote virtual-

59

Chapter 3

ly ensured that the Contras would have adequate
food, medical supplies, and other provisions, it also
strictly limited the money to nonmilitary uses.

The provision of covert military assistance re-
mained the secret business of the NSC staff. In the
summer of 1985, articles appeared in the press specu-
lating about the role of the NSC staff in assisting the
Contras and Congress began inquiring of the National
Security Adviser whether this was true. Yet, at this
very time, the NSC staff decided to extend its covert
program to include a system for resupplying Contras
in the field. Some of the Contras fighting within Nica-
ragua were as many as 30 days away by land from
border areas. To keep them supplied and to encour-
age other fighters to move from border sanctuaries to
Nicaragua, a capacity to make aerial drops of ammu-
nition and other supplies was essential.'

As early as February 1985, North had urged Calero
to set aside $10 million from the funds raised from
Country 2 to hire a logistics expert and create a
resupply operation. But the available money was used
to purchase and stockpile weapons. As a result, by
summer 1986, the Contras had a surplus of arms.
Their problem was how to deliver these weapons to
the fighters. For North, the answer lay with Secord
and his group. ^

In early July, North held a meeting in Miami of
Contra leaders and members of Secord's group to
arrange for what Congress had refused to fund — the
air resupply of lethal material for the Contra forces
inside Nicaragua. Present were North, FDN leader
Adolfo Calero, Enrique Bermudez, the FDN military
commander, Secord, and his associates, Thomas
Clines and Rafael Quintero.^

North began the meeting with an expression of a
loss of confidence in the way the FDN was handling
the donated funds he had directed to the FDN.
Secord described North's remarks:

The meeting commenced on a pretty hard note,
with Colonel North being worried about and
critical of the Contras, because he had been re-
ceiving reports that the limited funds they had
might be getting wasted, squandered or even
worse, some people might be lining their pockets.

His concern, as he articulated it, was a very
serious one. He was afraid that if anything like
this was going on that since they were dependent
on contributions that the image of the Resistance
could be badly damaged; it could ruin us, in fact,
and he was very, very hard on this point.'*

North's solution, though not unveiled at the meet-
ing, was to have Secord and his group take over the
procurement function for the Contras. As Robert
Owen, North's courier, testified, "I think he and Gen-
eral Secord felt they probably could do a better job"
of handling the funds than the Contras.*

North had decided to furnish the FDN directly
with arms, air support, and other supplies. He would
no longer leave to the Contras the task of spending
their own money on these goods and services. Almost
immediately after the Miami meeting, Secord's part-
ner, Albert Hakim, established the Lake Resources
account in Geneva, Switzerland, and thereafter virtu-
ally all donated funds were directed by North to the
Lake Resources account in Switzerland, not Calero's
accounts. The Secord group — the Enterprise — would
no longer function simply as an arms broker from
which Calero would purchase the arms. With the
contributions, it would make all the decisions on arms
purchases and supply the Contras with the weapons
and the other support they needed, without receiving
from the Contras payment for the arms.®

The Contras' management of money was only one
of the problems raised at the all-night meeting in
Miami. More important was the need to create an
airlift system to drop supplies to FDN troops inside
Nicaragua and to open a Southern front.

The first priority, all agreed, was the delivery of
the arms already purchased to the soldiers fighting
near and inside Nicaragua. Before the Boland Amend-
ment was passed, the CIA helped to arrange the airlift
of arms and other supplies to the troops. When the
CIA withdrew, the Contras had difficulty maintaining
this important logistical function. The FDN's aircraft
were few and could not effectively and consistently
penetrate Nicaraguan airspace past Sandinista de-
fenses. Moreover, the FDN lacked properly trained
personnel. The continuing resupply of troops and its
attendant logistics, maintenance, and communications
comprised the "sinews of war," the infrastructure nec-
essary for any sustained and effective fighting force.
North turned to Secord to establish and run the air
resupply operation.'

The participants in the Miami meeting also agreed
on the need to open a Southern front. With the FDN,
the principal Contra force, operating in the North, the
Sandinistas could concentrate their military forces on
the Northern front. Forcing the Nicaraguans to fight
a two-front war by building up a Contra force in the
South was elemental military strategy. Calero, howev-
er, continued to concentrate his resources on his own
organization in the North, the FDN.*

The air resupply and Southern front projects went
hand-in-hand. Because neighboring countries were re-
luctant to permit land resupply from inside their bor-
ders, a southern force could not live without air re-
supply. And the FDN could not, or would not, un-
dertake this mission on its own.^

Thus, the air resupply operation that North asked
Secord to undertake was also the key to the Southern
front. In giving this assignment to Secord, North testi-
fied that he acted with McFarlane's authority.'"
McFarlane denied this." Poindexter, however, stated
that he was "aware that Colonel North was con-

60

Chapter 3

cerned about the logistics operation, the way it was
going, and I was aware that he was going to talk to
General Secord about setting up a more professional
logistics support operation as a private operation." '-

The New Humanitarian Aid

As the Enterprise began implementing the plans laid
in Miami, the Contras received a boost from Wash-
ington. On August 8, 1985, President Reagan signed
legislation authorizing $27 million in humanitarian aid
to the Contras." For the first time since May 1984,
the Contras would receive U.S. Government funding
as well as intelligence support from the CIA. Al-
though the Boland Amendment remained in effect,
new legislation specified that the Amendment did not
prohibit exchanging information with the Contras.''*

The legislation prohibited the CIA or the Depart-
ment of Defense (DOD) from administering the new
humanitarian funds and required that the President
ensure that any assistance "is used only for the intend-
ed purpose and is not diverted" for the acquisition of
military hardware. The State Department was chosen
to administer the aid. By executive order signed on
August 29, 1985, the President created the Nicara-
guan Humanitarian Assistance Office (NHAO) in the
State Department.'^

The State Department was reluctant to accept this
responsibility. The Department had no experience and
lacked the organization to feed and provide for the
daily needs of troops. To run NHAO, Secretary
George P. Shultz tapped Ambassador Robert Duem-
ling, a seasoned diplomat, but with no prior experi-
ence in administering an aid program. Secretary
Shultz cautioned Duemling to administer the aid not
only with "enthusiasm" but also with "care." Ambas-
sador Duemling found the program difficult to admin-
ister from the start. '^ Nicaragua's neighbors did not
officially recognize the Contra movement, even
though Contras operated unofficially out of their ter-
ritory. The cargo of the initial NHAO flight on July
10 was impounded when local Central American au-
thorities learned that an NBC film crew was on board
at the invitation of Calero's brother. Thereafter, that
Central American country barred, for a period of
time, the entry of NHAO employees, which prevent-
ed them from conducting any on-site accounting of
supplies or of the Contras' needs.''' Deumling's diffi-
culties were definitional as well as operational.
NHAO had continually to assess whether various
items were "humanitarian" within the meaning of the
statute.'^

Preparations for the Resupply Operation

In the beginning of August, Secord met with North
and others to discuss the steps necessary to establish
the resupply program. First, a logistics organization
consisting of aircraft, spare parts, maintenance, com-

munications, and trained personnel had to be set up.
For that, Secord turned to former Air Force Lt. Col.
Richard Gadd, who since his retirement from the
military in 1982 had been providing, through a private
business, air support to the Pentagon.'^

The second task was to obtain a secure operating
base from which the aircraft could launch their mis-
sions. For this, Quintero, on Secord's instructions,
consulted with the Contra leaders and chose a mili-
tary airbase in a Central American country ("The
Airbase".) Secord and North concurred in this
choice.^"

Finally, Secord concluded that to establish a sus-
tained air resupply operation on the Southern front,
an emergency airstrip was necessary in the South.
North suggested to Secord Santa Elena in the north-
west corner of Costa Rica, which North believed
could also be used as a covert secondary operating
base for resupply to the Southern front. ^'

U.S. Support for the Covert
Operation

The plans made in Miami for a resupply operation
and a Southern front could not have been implement-
ed without the active support of U.S. Government
officials.

In July 1985, almost immediately after the Miami
meeting, North asked Lewis Tambs, the newly ap-
pointed Ambassador to Costa Rica, to help open a
Southern front for the Contras, a request that Poin-
dexter approved. ^^ Tambs agreed without consulting
Secretary Shultz. Later that summer. North specifical-
ly asked for Tambs' help, as well as that of CIA Chief
Tomas Castillo, to facilitate the construction and use
of the airfield. ^^

North testified that he had received authorization
from Director of Central Intelligence William J.
Casey to bring Castillo into the resupply operation.
Moreover, according to North, the airstrip was dis-
cussed in the Restricted Interagency Group on Cen-
tral American Affairs, which consisted of, among
others. North, the Chief of the Central American
Task Force (CATF) at the CIA and the group's
chairman, Elliott Abrams, Assistant Secretary of State
for Inter-American Affairs.^* Abrams acknowledged
the discussions, but testified that he believed "private
benefactors, as we used to call them, were building
the airstrip." ^^

The Airfield Is Planned

On August 10, 1985, North flew to Costa Rica
where he met with Castillo and Tambs. North and
Castillo discussed the establishment of a secret airbase
that would permit moving all Contra military oper-
ations inside Nicaragua for resupply by air. Castillo
and Tambs then worked to achieve the establishment

61

Chapter 3

of the airfield and air resupply depot for the Contra
forces. Castillo reported these developments to the
Chief of the CATF at CIA headquarters. The Chief
replied that he was pleased with these developments
but he "emphasize[d]" to Castillo that neither the
CIA nor DOD could "become involved directly or
indirectly" in the project. ^^

Less than a week later, North sent Robert Owen to
Costa Rica to scout the Santa Elena site. Owen met
with Tambs, who introduced him to Castillo as a
North emissary. The next day, Owen and Castillo
surveyed Santa Elena. Owen took photographs and
returned to Washington with a map, photos, and a
description of various logistical problems presented
by the air strip. North later told Castillo that he
thought Santa Elena was an ideal place for a refueling
and resupply base.^'

Meanwhile, North recruited a former Marine col-
league, William Haskell, to negotiate the purchase of
the land at Santa Elena for the airfield. By the begin-
ning of September, Haskell, under the alias of Olm-
stead, arrived in Costa Rica to meet with Joseph
Hamilton, an American who headed the group that
owned the land at Santa Elena. While Tambs assisted
in bringing the parties together, Castillo alerted North
that local groups had to be involved in the construc-
tion. Eventually, Secord paid more than $190,000 for
local contractors and guards at the airstrip.^* On Oc-
tober 3, Haskell called North with news of Hamilton's
tentative approval for the sale of the land. Shortly
thereafter. North, Haskell, Secord, Gadd, and Hakim
met. At North's request, Gadd agreed to assemble a
team and assume responsibility for constructing the
airstrip. ^^

The Airbase Is Secured

Once the Airbase in the other Central American
country was selected as the most desirable main base
for the air resupply operation. North also took the
necessary steps to obtain host-government approval,
which required the assistance of other U.S. Govern-
ment officials. North's notebooks reflect that on Sep-
tember 10, 1985, he met with Col. James Steele, a
U.S. Military Group Commander stationed in Central
America, and Donald Gregg, Vice President Bush's
National Security Adviser. Among the discussion
topics North listed was a "Calero/Bermudez visit to
[the Airbase] to estab[lish] log[istical] support/
maint[enance]," as well as other possible locations for
the resupply base.^° Gregg, however, testified that he
did not know of the resupply operation prior to the
summer of 1986.^'

On September 16, North's notebooks reflect a call
from Steele, "what about Felix — help for a/c [air-
craft] maint[enance]." ^^ An ex-CIA operative, Felix
Rodriguez had volunteered as a private American cit-
izen to aid a Central American Air Force in counter-
insurgency maneuvers. Rodriguez had a close rela-

tionship with a local Commander stationed at the
Airbase ("The Commander"). In a letter dated Sep-
tember 20, North asked Rodriguez to obtain service
space at the Airbase for one C-7 Caribou aircraft and
for occasional Maule maintenance. The Maule would
be operated by the FDN and the Caribou by a private
contractor for aerial resupply of both the FDN in the
North and eventually in support of a Southern front.
North wrote. North also said Rodriguez could use
North's name with the Commander. Rodriguez
agreed to help and obtained the Commander's ap-
provals^ Poindexter had sanctioned North's efforts to
obtain the Central American country's help in the
logistics of air resupply. S'*

Securing suitable aircraft that the Enterprise could
afford proved difficult. In the summer of 1985, North
met with both Secord and Calero on the most imme-
diate aircraft needs of the FDN and the resupply
operation. They decided that their first need was a C-
7 Caribou, a twin-engine propeller aircraft capable of
carrying a 5,000-pound cargo over a 900-mile
range. 2^ By November 1985, Gadd, whose task it was
to locate and purchase the airplanes, had found three
surplus C-123 airplanes belonging to a Latin Ameri-
can Air Force. Gadd had earlier formed Amalgamat-
ed Commercial Enterprises (ACE), a shelf company
registered in Panama, to hold title to the aircraft.
ACE was owned equally by Gadd and Southern Air
Transport of Miami, which was to provide mainte-
nance and other logistical support. ^^

The logistics director of the Latin American Air
Force was unwilling to sell the airplanes — whose use
was for military transport — to Gadd without a sign of
official U.S. Government approval. So, Gadd turned
to North for assistance, who decided to intercede in
an effort to obtain the airplanes. North told Gadd and
Secord that he requested both Robert McFarlane and
the State Department's assistance. On November 15,
North indicated in his notebook that he called "El-
liott" "re call to [the Latin American country]" for
the purpose of telling [that country] that "ACE is
OK." Abrams, however, denied any knowledge of the
planes belonging to the Latin American country's Air
Force. In addition. North asked Vince Cannistraro, a
colleague at the NSC, to intercede with the Latin
American country. In the PROF note on November
20, North referred to Cannistraro's upcoming call and
provided the following talking points:

A reputable business organization called A.C.E.
Inc. is negotiating with your air force to buy
three excess C-123 aircraft, a number of engines
(48) and some spare parts.

A.C.E. is a legitimate company which will use
the aircraft for a good purpose that is in the
interest of your country and ours — humanitarian
aid deliveries to anti-communist resistance forces
(. . . Nicaragua).

62

Chapter 3

Apparently the logistics director for the air force
. . . was concerned that A.C.E. (Amalgamated
Commercial Enterprises) may not be legitimate
or that the A/C could be used for drug running
or the like. This is not the case.

It would be very helpful if you could contact
someone who can clarify the good reputation of
A.C.E. and encourage [the logistics director] to
consummate the offer which has been made by
A.C.E. The need is great for these planes. They
will help the cause of democracy where it is most
needed.

Nonetheless, the Government of the Latin American
country did not approve, and the Enterprise had to
look elsewhere.^'

From the inception of the air resupply operation in
July 1985, North impressed upon Secord the fact that
they were operating with donated funds that were
strictly limited. Consequently, more preferable air-
planes that were examined by Gadd and discussed by
North and Secord, such as the Casa 212 and the L-
100 turbo jet propeller-driven aircraft, were rejected
because of their high cost, in favor of the less expen-
sive C-7 and C-123.38

Country 3 Comes Through

More third-country money was needed to support
the Contras. McFarlane had barred a return to Coun-
try 2,^^ and John K. Singlaub had since the end of
1984 been trying unsuccessfully to obtain money from
Country 3.

In the summer of 1985, North turned to Gaston
Sigur, a Senior Director for Far Eastern and Asian
Affairs on the NSC staff, to seek his assistance with
Country S.""* According to Sigur, North told him that
it was an "emergency situation," and that he and
McFarlane were aware that Country 3 "might have
an interest in giving some assistance, financial assist-
ance in the humanitarian area to the Contras."*'
North, too, testified that he had gone to Sigur with
the knowledge, and approval, of McFarlane. ''^
McFarlane testified to the contrary, claiming that he
was "firm" with North "in saying to him absolutely
no participation by you or any other staff member in
any kind of approach to this country." *^

Sigur recalled that when North asked him to set up
the meeting, he inquired, "[N]ow everything here is
quite legal?" to which North replied, "[0]h yes, we
have checked all that out and there is no question
about that." •*■*

Sigur met with a Country 3 official and, without
mentioning any specific amount of money, learned
that the representative needed "to go back to his
home government on it." The same day, Sigur went
to McFarlane and told him that any contribution from
Country 3 would have to be made directly through
U.S. Government channels. According to Sigur, "Mr.

McFarlane's response to that was that this is not pos-
sible, that cannot be done, and so I saw that as the
end of that, and I told Colonel North about it." ■**
North was not deterred. He asked Sigur to arrange
a face-to-face meeting with the Country 3 representa-
tive.*^ At the ensuing meeting at the Hay-Adams
Hotel in the fall of 1985, North told the Country 3
representative that "this country [U.S.] would be very
grateful if they were to make the contribution."*''
North's plea was successful. Sometime later, the
Country 3 official responded with a $1 million contri-
bution in "humanitarian" assistance.** North then sent
Owen to give the official an envelope containing the
Swiss bank number of the Enterprise's Lake Re-
sources account. The $1 million was transferred to
Lake Resources and another $1 million followed in
the early months of 1986.*^

The Link With NHAO

Without the knowledge of its supervisors, the Nica-
raguan Humanitarian Assistance Office (NHAO) pro-
gram was used to further the Enterprise's activities.
Robert Owen became the first link between NHAO
and the covert operation. In mid-September 1985,
Owen applied to Ambassador Duemling for a position
in the humanitarian aid office. North recommended
Owen as a "can do" person "who knows the scene,"
but Duemling declined to hire him.^°

Duemling still refused to hire Owen even after the
three directors of the United Nicaraguan Opposition
(UNO) — Calero, Arturo Cruz, and Alfonso Robelo —
wrote Duemling requesting Owen's help. North, how-
ever, continued to press for Owen's employment. At a
Restricted Interagency Group meeting on October 11,
North complained about the October 10 NHAO re-
supply flight impounded by Central American au-
thorities, claiming that it would never have happened
if Owen had been working for NHAO. Only then did
Duemling relent and agree to fund a UNO contract
with Owen's company, the Institute for Democracy,
Education and Assistance, Inc. (IDEA), to assist in
disbursing the humanitarian aid.^'

North exploited Owen's new position by using his
trips, funded by humanitarian aid dollars, to transfer
and receive information about the Contra war and the
fledgling resupply operation. Following his trips to
Central America, Owen would submit two reports —
one to NHAO describing humanitarian services per-
formed and another to North describing his activities
in coordinating lethal aid. The grant agreement with
the State Department barred Owen from performing
"any service" related to lethal supply "during the
term of this grant." ^^

North also told Owen that he should introduce
Gadd to Mario Calero, who was in charge of pur-
chases for the FDN in the United States, so that
Gadd might get a contract to fly humanitarian aid
supply missions. ^^ Later, North personally accompa-

63

Chapter 3

nied Gadd to meet with Ambassador Duemling and
urged Duemling to award Gadd an air delivery con-
tract, to which Duemling, unaware of Gadd's role in
the lethal resupply operation, agreed.^''

New Legislation— Congressional
Support Increases

On November 21, 1985, the Senate agreed to a con-
ference report on the Intelligence Authorization Bill
providing two significant Contra support measures:
the CIA was granted additional money to provide
communications equipment to the Contras and the bill
specifically provided that the State Department was
not precluded from soliciting third countries for hu-
manitarian assistance. The U.S. Government was still
barred from expending funds to provide lethal assist-
ance to the Contras but, according to North, "the
instructions were to bite off a little at a time and start
moving back toward full support." *^

Polndexter Visits Central America

On December 12, 1985, the newly appointed Na-
tional Security Adviser, Admiral Poindexter, took a
trip with North to Central America.^®

In a PROF note to Poindexter, North recommend-
ed the trip, suggesting that it be "billed as a quick
tour through the region to confer w/ top ranking
U.S. officials to reinforce the continuity of U.S.
policy in the region." That explanation would be a
"plausible cover" for the real purpose of the trip,
which included delivering to Central American offi-
cials "the messages we need sent." ^''

One of the messages was that "we [the United
States] intend to pursue a victory and that [a Central
American country] will not be forced to seek a politi-
cal accommodation with the Sandinistas." ** North
noted that this Central American country was at-
tempting to use support of the Contras as leverage to
force U.S. aid.^^

The Santa Elena airstrip in Costa Rica was also an
issue raised in discussions during the trip. North
brought Poindexter up to date on the progress of the
Santa Elena airstrip, and they discussed what meas-
ures "could be taken to encourage" Costa Rica to be
more cooperative with the Contras. When Poindexter
returned from his one-day trip to Central America, he
briefed the President on the morning of December 13,
including informing the President of the efforts to
secure the land necessary for the airstrip. Poindexter
testified, and his notes reflect, that Poindexter "did
talk to him [the President] about the private air-
strip." ««

Continued Funding Problems

By the end of 1985, North had put into motion the
airlift operation and the beginnings of the Southern

front. A critical problem remained how to fund these
efforts. Throughout 1985, North, Casey, and Singlaub
discussed a variety of methods to fund support for the
Contras. In early 1985, in connection with his solicita-
tion of Country 3, Singlaub suggested to Country 3
officials and to North that a portion of his proposed
arms sales to Country 3 be diverted and applied to the
benefit of the Contras. During the summer of 1985,
Singlaub worked without success through Geomili-
tech Consultants, owned by Barbara Studley, on di-
verting part of a $75 million proposed sale of torpe-
dos to Country 3. In the fall of 1985, Singlaub ar-
ranged for both North and Casey to meet with Stud-
ley to present yet another plan to aid the Contras and
democratic resistance forces worldwide. Geomilitech
would be a vehicle for a three-way trade to "enable
the U.S. Government, the Administration, to acquire
some Soviet-bloc weapons without having to go
through the painful process of appropriations," in
order to furnish weapons to anti-Communist insurgen-
cies in Nicaragua and around the world. The pro-
posed trade entailed the U.S.'s giving credit for high
technology purchases to another country, that coun-
try using the credit to deliver military equipment to a
totalitarian country, which would then transfer
Soviet-compatible weapons to a trading company. Ac-
cording to the plan, the company, at the direction of
the NSC and CIA, would distribute the weapons to
the Contras and other resistance movements, "man-
dating neither the consent or awareness of the De-
partment of State or Congress." These fundraising
ideas were never approved. The diversion from the
Iranian arms sales would provide the needed funds. ^'

Legislative Plans and a New Finding

At a January 10, 1986, NSC meeting, the first in 15
months on Nicaragua, the President heard the views
of his advisers. CIA Director Casey described a build-
up of Soviet weaponry and increasing Sandinista re-
pression in Nicaragua; Admiral William J. Crowe. Jr.,
discussed the inability of the Department of Defense
to provide logistical assistance that the Contras badly
needed; and Secretary Shultz voiced his approval for
resumption of Congressional funding for a covert pro-
gram. The President ended the meeting by instructing
his advisers to prepare to go back to Congress with a
request for full funding ($100 million) of a covert
action program. ^^

A week after the meeting, the President signed a
new Finding on Nicaragua, consolidating what had
been separate Findings governing various aspects of
the program. The Finding authorized the CIA to im-
plement the newly granted aid and to establish the
communications network for which Congress had just
provided funding.

64

Chapter 3

The Resupply Operation Begins

In January 1986, the plans set in motion by North
in the fall of 1985 were beginning to give shape to the
resupply operation. Gadd recruited flight crews,
agreed with Southern Air Transport that it would
handle all aircraft maintenance, and purchased the
first aircraft, a C-7 Caribou. A team was also sent to
Santa Elena and construction of the airstrip began in
earnest. ^^ Moreover, the problem of secure communi-
cations was solved with the help of the National Se-
curity Agency.

According to North, both Casey and Poindexter
had told him to seek some type of secure communica-
tions support. North turned to the National Security
Agency for secure communications equipment. ^'^

The National Security Agency provided KL-43 en-
cryption devices to North. On January 15, North
gave KL-43s to the principal members of the covert
operation: Secord, Gadd, Steele, Castillo, Quintero,
and William Langton, president of Southern Air
Transport. North also put a device in his office at the
Old Executive Office Building. Each month newly
keyed material was distributed to the group to enable
them to communicate with each other in a secure
manner. ^^

Throughout January 1986, North also pursued dis-
cussions with Steele and CIA representatives about
arrangements for using the Airbase and for establish-
ing the airstrip at Santa Elena. North's notebooks
indicate a series of telephone conversations with
Steele relating to obtaining the permission of Central
American officials for the resupply aircraft to operate
from the Airbase.®^

During that same period. North wrote to Poin-
dexter that General John Galvin, Commander of U.S.
Southern Command, was "cognizant of the activities
under way in both Costa Rica and at [the Airbase] in
support of the DRF [Democratic Resistance Force]."
North added, "Gen. Galvin is enthusiastic about both
endeavors." According to North's notebooks. North,
Poindexter, and others met with Galvin on January
16 to discuss, among other items, "covert strategy/
training/planning/support" for the Nicaraguan Resist-
ance. General Galvin testified that he knew of the air
resupply operation, but believed that it was being
financed and run by private individuals, not the NSC
staff"

Meanwhile, North continued his discussions on the
details of construction of the airstrip at Santa Elena.
His discussions covered arrangements for fuel storage
on site, the construction of guard quarters and even
instructions to the bulldozer operation.®*

In February, after consultation with Enrique Ber-
mudez and various commanders connected with the
Southern front. North and Secord decided to deliver
approximately 90,000 pounds of small arms and am-
munition geared for airdrop to the FDN, which also
could be delivered to the Southern front. This was

the first delivery of arms that North and Secord pro-
vided to the Contras without payment from them and
out of funds that had been contributed directly to the
Enterprise."^

Yet by February, supply problems still plagued the
operation. There was only one plane at the Airbase,
and it was damaged. On its arrival flight, the C-7
plane had developed mechanical problems. The crew
jettisoned spare parts, and even training manuals, but
the plane crash-landed nonetheless.'"'

Faced with the Contras' requests for resupply and
lacking aircraft to perform the job. North sought to
deliver arms to the Contra soldiers using aircraft that
had been chartered by NHAO to take humanitarian
supplies from the United States to Central America.'"

In February 1986, North called Gadd at home and
told him to charter an NHAO flight from New Orle-
ans to the Airbase in Central America. Once the plane
arrived at the Airbase, it was directed to an FDN
base where ammunition and lethal supplies were
loaded and airdropped to the FDN. NHAO later re-
fused to pay for the portion of the charter that cov-
ered the delivery of lethal supplies.''^

In the South, however, the Contra forces remained
without necessary supplies. In part, the problem was
logistical: the Costa Rican airfield was not yet open
and the only planes available at the Airbase could not
make the flight to southern Nicaragua. The problem
was also political: the FDN did not want to share its
scarce resources with the southern forces. In early
February, Owen warned North that "our credibility
will once again be zero in the south" if deliveries did
not soon start:

[T]hey have been promised they will get what
they need. Who is to be the contact for these
goods and who is to see that they are delivered?
A critical stage is being entered in the Southern
Front and we have to deliver.'^

In early March, North asked Owen to travel with
another NHAO humanitarian aid flight that, upon un-
loading, would be reloaded at the Enterprise's ex-
pense with lethal supplies for airdrop to the Southern
front. However, the FDN never produced the muni-
tions promised, even though CIA officials tried to
persuade the FDN to release the munitions. The mis-
sion thus resulted in failure. As Owen later wrote
North, "the main thing to be learned from this latest
exercise is . . . the FDN cannot be relied upon to
provide material in a timely manner."''*

The President Meets a Costa Rican
Official

In March 1986, a meeting North arranged for a Costa
Rican Official with President Reagan at the White
House occurred. The meeting was simply a photo

65

Chapter 3

opportunity, attended as well by North and Cas-
tillo.'s

After the Oval Office visit, North asked the Official
to meet with Secord that afternoon to work out some
issues concerning the airstrip. At the meeting, the
Official asked Secord for a letter, which the Official
dictated, to the effect that the Costa Rican Civil
Guard maintain control of the airstrip, have access to
it for training purposes, and that ecological and envi-
ronmental considerations apply. '^

Lethal Deliveries Begin

By the end of March 1986, the C-7 Caribou aircraft
was operating and flights finally began to ferry lethal
and nonlethal supplies for the FDN in the North. But
the problem of resupplying the Southern front re-
mained.'^

On March 28, Owen wrote to North that he,
Steele, Rodriguez, and Quintero reached a consensus
on what steps had to be taken to successfully resupply
the South: lethal and nonlethal supplies should be
stockpiled at the Airbase; the Caribou or better yet a
C-123 should load at the Airbase, deliver to the
South, and refuel at Santa Elena on the return to the
Airbase; and the Southern Air Transport L-lOO
should be used until Santa Elena was prepared to
refuel the C-7 and C-123.'8

While Gadd completed the purchase of a second C-
7 Caribou and the first C-123 in early April, North
responded to the growing needs of the southern
forces. Between early April and April 11, North co-
ordinated virtually every aspect of the first drop of
lethal supplies into Nicaragua by way of the Southern
front. He was in regular communication with Secord
and others to ensure that the drop was successful.
KL-43 messages among the planners involved in this
drop show both the level of detail in which North
was concerned and the coordination among various
U.S. Government agencies to ensure that the drop
succeeded. The first message, from North to Secord,
established the essential elements of the drop:

The unit to which we wanted to drop in the
southern quadrant of Nicaragua is in desperate
need of ordnance resupply. . . . Have therefore
developed an alternative plan which [Chief of the
CIA's CATF] has been briefed on and in which
he concurs. The L-lOO which flies from MSY to
[an FDN base] on Wednesday should terminate
it's NHAO mission on arrival at [the FDN base].
At that point it should load the supplies at [the
Airbase] which— theoretically [the CIA's Chief
of Station in the Central American country] is
assembling today at [the FDN base]— and take
them to [the Airbase]. These items should then be
transloaded to the C-123. . . . On any night be-
tween Wednesday, Apr 9, and Friday, Apr 11
these supplies should be dropped by the C-123 in
the vicinity of [drop zone inside Nicaragua]. The

A/C shd penetrate Nicaragua across the Atlantic
Coast. ... If we are ever going to take the
pressure off the northern front we have got to
get this drop in — quickly. Please make sure that
this is retransmitted via this channel to [Castillo],
Ralph, Sat and Steele. Owen already briefed and
prepared to go w/ the L-lOO out of MSY if this
will help. Please advise soonest.'^

Secord and Gadd arranged to lease the L-lOO plane
from Southern Air Transport. Secord transmitted the
following instructions to Quintero on April 8:

CIA and Goode [North's code name] report
Blackys [a Southern front military commandante]
troops in south in desperate fix. Therefore,
[CIA's Chief of Station in a Central American
country] is supposed to arrange for a load to
come from [the FDN base] to [the Airbase] via
LlOO tomorrow afternoon. . . . Notify Steele we
intend to drop tomorrow nite or more like Thurs
nite. . . . Meanwhile, contact [Castillo] via this
machine and get latest on DZ [drop zone] co-
ordinates and the other data I gave you the
format for. . . . CIA wants the aircraft to enter
the DZ area from the Atlantic. . . .*"

On April 9, Secord relayed to North that "all co-
ordination now complete at [the Airbase] for drop —
[Castillo] has provided the necessary inputs."*' After
the Southern military commanders relayed the drop
zone information to Castillo's communications center,
Castillo sent a cable to the Chief of the CATF at CIA
headquarters, requesting flight path information, vec-
tors based on the coordinates of the drop zone, and
hostile risk evaluation to be passed to the crew. CIA
headquarters provided the information, as it did on
three other occasions that spring.*^

After Secord's April 9 message, the L-lOO arrived
and was loaded with a considerable store of munitions
for airdrop to the South on April 10. Castillo had
provided the location of the drop zone to Quintero,
and Steele told the Southern Air Transport crew how
to avoid Sandinista radar. Despite North's intricate
planning, the L-lOO was unable to locate the Contra
forces. The maiden flight to the Southern front had
failed.®^

On April 11, the L-lOO tried again, airdropping
more than 20,000 pounds of lethal supplies inside
Nicaragua. This was the first successful drop to the
southern forces. Before the plane left, Steele checked
the loading of the cargo, including whether the as-
sault rifles were properly padded. Castillo reported
the drop to North in glowing terms:

Per UNO South Force, drop successfully com-
pleted in 15 minutes. . . . Our plans during next 2-
3 weeks include air drop at sea for UNO/KISAN
indigenous force . . . maritime deliveries NHAO

66

Chapter 3

supplies to same, NHAO air drop to UNO South,
but with certified air worthy air craft, lethal drop
to UNO South. . . . My objective is creation of
2,500 man force which can strike northwest and
Unk-up with quiche to form sohd southern force.
Likewise, envisage formidable opposition on At-
lantic Coast resupplied at or by sea. Realize this
may be overly ambitious planning but with your
help, believe we can pull it off*'*

The Resupply Operation Steps Up
Its Activities

While the April 1 1 mission to the South was the only
successful airdrop in that region, the air resupply op-
eration was, by April, operating regular, almost daily,
supply missions for the FDN in the North. Most
missions delivered supplies from the main FDN base
to the FDN's forward-operating positions. Other
flights dropped lethal cargo to units operating inside
Nicaragua. Many of these flights were helped infor-
mally by CIA field officers on the ground, who pre-
pared flight plans for aerial resupply missions, briefed
the air crews on Nicaraguan antiaircraft installations,
and provided minor shop supplies to the mechanics.
On one occasion, the CIA operations officer at an
FDN base flew Ian Crawford, a loadmaster for the
resupply operation, in a CIA helicopter with lethal
supplies on board over the border area so Crawford
could see where he and his crew were airdropping
cargo three to four times daily. However, the resup-
ply operation was not without problems. Poor mainte-
nance hampered the performance of the aircraft and a
lack of a closely knit organization contributed to the
Enterprise's troubles.*^

Because of these problems, North and Secord flew
to the Airbase in Central America on April 20 for a
one-day meeting with the Commander, Steele, Rodri-
guez, and the military leadership of the FDN. During
the meeting. North and Secord emphasized the impor-
tance of the Southern front and complained about the
difficulty of getting stocks out of the FDN, thus pre-
paring the FDN for the future storage of Southern
front supplies directly at the Airbase. There was some
misunderstanding as to whether the FDN were the
legal owners of the aircraft, but North and Secord
stated that the aircraft belonged to a private company
dedicated to support all the Contras, both the FDN
and the Southern front. In turn, the FDN leaders
expressed their dissatisfaction with the C-7 aircraft.
They were simply "too old" to operate effectively,
Bermudez told them. He wanted bigger and faster
aircraft. North responded that if he had the money to
buy better aircraft, he would, but they were financing
the operation with donated funds. *^

The possible purchase for the FDN of Blowpipe
surface-to-air missiles to use against the Sandinista
HIND-D helicopters was also raised. In December

1985, Secord and Calero had tried to purchase Blow-
pipes from a Latin American country. The transaction
proceeded to the point where the Enterprise placed a
deposit on the missiles. But necessary approvals for
the sale could not be secured, even though North
enlisted the help of Poindexter and of McFarlane,
who remained in contact with North by PROF ma-
chine even after he left the Government.*'

After the April 20, 1986, meeting, the first shipment
of lethal supphes by the Enterprise for the Southern
front arrived at the Airbase to be stored by the resup-
ply operation. At North's request, the Enterprise paid
David Walker $110,000 for two foreign pilots and a
loadmaster to fly missions inside Nicaragua so that
U.S. citizens would not be exposed to possible shoot-
down or capture.**

Secord took another step to overcome the resupply
problems. He recruited Col. Robert Dutton to
manage the resupply operation on a daily basis.
Secord knew Dutton from their active duty together
in the U.S. Air Force, where Dutton had considerable
experience in managing covert air resupply oper-
ations. Gadd's role was phased out and on May 1,
Dutton, retiring from the Air Force, was placed in
operational command of the resupply operation, re-
porting to Secord, and increasingly over time, direct-
ly to North on all operational decisions of conse-
quence.*®

At the outset, Secord emphasized to Dutton that
the air program would receive very little in the way
of additional funding. Dutton was instructed to
manage the operation with existing equipment and
conserve resources carefully as the money provided
was all "donated." ^°

When Dutton took over, he traveled to Central
America to assess the operation. There were approxi-
mately 19 pilots, loadmasters and maintenance opera-
tors at the Airbase. In addition, Felix Rodriguez and
his associate Ramon Medina coordinated with the
Commander and oversaw the local fuel account.
Dutton also examined the aircraft — two C-7s, one C-
123, and the Maule — and found that, indeed, they
were in "very poor operating condition." ®'

The resupply operation at the Airbase maintained a
warehouse stocked with an assortment of munitions —
light machine guns, assault rifles, ammunition, mor-
tars, grenades, C-4 explosive, parachute rigging, uni-
forms, and other military paraphernalia. The crews
lived in three safe houses and used a separate office
with maps and communications equipment. By May,
the Santa Elena airstrip, along with emergency fuel
storage space and temporary housing, was finished.®^

Because Secord (and later North) had impressed on
Dutton the need for strict accountability given the
limited nature of the donated funds, Dutton enforced
a stringent set of accounting requirements: Expendi-
tures had to be carefully documented and all missions
fully reported. Moreover, Dutton devised an organi-

67

Chapter 3

zation, based on a military hierarchy, that delineated
each person's role and responsibility. Dutton also de-
fined the legal constraints on the organization as he
had understood from Secord: no Contra combatants
could be airdropped into battle. These new require-
ments of accountability, reporting, and organization
were followed for the remaining life of the oper-
ation.^^

Despite these impending changes, North wrote to
Poindexter expressing his weariness and warning that
without Congressional authorization for CIA involve-
ment, "we will run increasing risks of trying to
manage this program from here with the attendant
physical and political liabilities. I am not complaining,
and you know that I love the work, but we have to
lift some of this onto the CIA so that I can get more
than 2-3 hrs. of sleep at night." ^*

Dutton's Reorganization Plan

Following his first trip to Central America in May,
Dutton began drafting a reorganization plan for the
Enterprise "to outline in one document exactly what
the basic operating locations were, and who the key
people were and what their responsibilities were."®^
The plan was reviewed, edited, and approved by both
Secord and North.^^ The plan stated that "B.C.
Washington has operational control of all assets in
support of Project Democracy."^' While Secord
maintained that B.C. Washington meant "primarily
myself and Robert Dutton," ^^ Dutton testified that
"B.C. Washington" described North and Secord. ^^

According to Dutton, the purpose of the reorgani-
zation plan was to disguise the role of Secord and
North. The lawsuit brought by freelance journalisits
Tony Avirgan and Martha Honey had named Secord
and was generating publicity. North and Secord, ac-
cording to Dutton, were concerned that Rodriguez,
who had become disaffected, was providing informa-
tion about the operation to Avirgan and Honey.
North and Secord, therefore, wanted to create the
pretense that they "had withdrawn from the oper-
ation, they were no longer part of it, and this new
company called B.C. Washington, which represented
the donators [sic], therefore the benefactors — that
they had come in to take over the operation." '°°
But, according to Dutton, "the fact was that Colonel
North and General Secord's relationship with the or-
ganization had not changed one bit.""" As Dutton
acknowledged, "B.C. Washington" was a facade that

North and Secord developed in order to cloak their
role. '"2

The Southern Front Resupply

On May 24, 1986, the day after Dutton left Central
America, another planeload of munitions, paid for by
the Enterprise arrived at the Airbase for the Southern
front. Because the FDN was reluctant to make arms
available to the independent southern Contra forces,

North and Secord decided in April 1986 that arms
and other supplies would now be stored under the
control of the Enterprise at the Airbase. This second
direct shipment of arms to the Airbase to be delivered
to the Southern front was part of the new plan. To-
gether with the late April shipment, there were now
more than $1 million in arms at the Airbase available
for airdrop to the Southern front forces. '°^

The warehouse, however, was not large enough to
accommodate the new munitions. Dutton had to ask
the Commander for permission to expand the ware-
house, while seeking North's approval for the addi-
tional cost of construction. After the Commander au-
thorized the expansion. North relayed to Secord his
approval for construction to proceed.'"*

With new arms and an expanded warehouse,
Dutton had the material to deliver to the Southern
front. However, while regular deliveries with the C-7
continued to the FDN in the North, no flights were
being made to the South. North told Dutton that the
Southern forces were adding 150 new recruits a day,
but that they had neither enough weapons for the
fighters nor enough medicine to treat the growing
problem of mountain leprosy.'"^

On June 2, Castillo called North and told him that
drops to the southern units were needed as soon as
possible. Castillo advised North that Quintero had all
the necessary vector information to make the drops.
Following Castillo's request, two deliveries were pre-
pared for the South totalling about 39,000 pounds,
and on June 9, after coordinating with Castillo the
location and needs of the Southern troops, the C-123
airplane tried to make an air drop. However, the
plane could not locate the troops inside Nicaragua,
and when it landed at the Santa Elena airstrip, it got
stuck in the mud.'°^

The stuck plane caused consternation at the U.S.
Embassy in Costa Rica. The month before, Oscar
Arias had been inaugurated as the new President of
Costa Rica. The new Costa Rican Government had
told Ambassador Tambs that it had instructed that the
airstrip not be utilized. Tambs, in turn, told Castillo to
notify North and Udall Corporation that the airstrip
had to be closed. Now Tambs was faced with explain-
ing to President Arias why a munitions-laden airplane
was stuck in the mud at Santa Elena. A plan was
devised by Tambs, Castillo, and others at the U.S.
Embassy to borrow trucks from a nearby facility to
free the aircraft, but the plane was able to take off
before the plan could be carried out.'"''

The needs of the FDN still had to be met. On June
10, North met with Calero who requested that the
Caribou planes fly more missions inside Nicaragua.
The Enterprise was just about to purchase additional
arms for the FDN.'"^ However, the most pressing
need. North wrote to Poindexter, was neither money
nor arms, but rather: "to get the CIA re-engaged in
this effort so that it can be better managed than it

68

Chapter 3

now is by one slightly confused Marine Lt. Col."
North further reported to Poindexter that "several
million rounds of ammo are now on hand . . . Criti-
cally needed items are being flown in from Europe to
the expanded warehouse facility at [the Airbase]. At
this point, the only liability we still have is one of
Democracy, Inc.'s airplanes is mired in the mud (it is
the rainy season down there) on the secret field in
Costa Rica." ^°^

The decision to purchase additional millions of dol-
lars in arms for the FDN was taken after the Enter-
prise learned from Bermudez and the FDN leaders
that FDN stocks were getting low. Hundreds of tons
of East European weapons were paid for in three
installments between June 27 to July 16. The ship-
ment, the last arms purchased for the Contras by
North and Secord, never reached them.''"

Despite the difficulties, North wanted to continue
to airdrop supplies, especially to the South. As soon
as the C-123 was freed from the mud, it embarked on
another mission with a full lethal load for the south-
ern troops. But this time, fog covered a mountain, and
William Cooper, the chief pilot for the resupply oper-
ation, hit the top of a tree, knocking out an engine.
After the plane reached the drop zone, Cooper could
not locate the troops, m

Communicating by KL-43, North told Castillo that
to facilitate further airdrops to the southern forces, he
had "asked Ralph [Quintero] to proceed immediately
to your location. I do not think we ought to contem-
plate these operations without him being on scene.
Too many things go wrong that then directly involve
you and me in what should be deniable for both of
us.""^

Meanwhile, North made further plans to ensure re-
supply to the Southern front. With the C-123 dam-
aged in flight, the remaining C-7 aircraft could only
make the trip to the South if it were able to refuel
before the return trip, and the Santa Elena strip was
not operational. North asked Dutton to look for an-
other C-123, and with Tambs' assistance, arranged for
a new flight pattern in which the empty C-7 aircraft,
after making its drops, refueled at the San Jose Inter-
national Airport in Costa Rica. The new refueling
plan permitted two small drops of supplies to the
Southern front. But, by the third week in July,
$870,000 worth of munitions were still sitting at the
Airbase waiting for the Southern forces. Despite all
the efforts, the vision of a year before for the South-
ern front had yet to become a reality. ''^

Alternative Funding Sources:
North's Response to
Congressional Action

The Administration continued to seek an appropria-
tion for the CIA to resume its program of covert
assistance to the Contras. In early May, according to

Poindexter, the President told him, "If we can't move
the Contra package before June 9, I want to figure
out a way to take action unilaterally to provide assist-
ance." Poindexter wrote his deputy, Donald Fortier,
"The President is ready to confront the Congress on
the Constitutional question of who controls foreign
policy. . . . George [Shultz] agrees with the President
that we have to find some way and we will not pull
out." ''*

North, who received a copy of Poindexter's PROF
note, responded immediately with a suggestion: The
Contras should capture some territory inside Nicara-
gua and set up a provisional government. The Presi-
dent would respond by recognizing the Contras as the
true government and provide support. Asked by Poin-
dexter whether he had talked to Casey about his plan,
North replied, "Yes, in general terms. He is support-
ive, as is Elliott [Abrams]. It is, to say the least, a
high risk option — but it may be the only way we can
ever get this thing to work."''^

The Money: Third Country Assistance

By the end of April 1986, the Contras' funding
needs were critical. North told Fortier: "We need to
explore this problem urgently or there won't be a
force to help when the Congress finally acts."''® The
same day, North wrote to McFarlane that "the resist-
ance support acct. is darned near broke," and asked
for assistance in filling the gap:

Any thoughts where we can put our hands on a
quick $3-5M? Gaston [Sigur] is going back to his
friends who have given $2M so far in hopes that
we can bridge things again, but time is running
out along w/ the money. So far we have seven
a/c working, have delivered over $37M in sup-
plies and ordnance but the pot is almost empty.
Have told Dick [Secord] to prepare to sell the
ship first and then the a/c as a means of sustain-
ing the effort. Where we go after that is a very
big question."'

An Aborted Solicitation

Despite North's reference to "Gaston," it was not
Gaston Sigur, but Singlaub who went to the Far East
in May 1986 in search of Contra aid. This time, Sing-
laub wanted to be sure that he would receive the
official U.S. "signal" these countries had previously
told him was a condition to their aid. Before he trav-
eled to Countries 3 and 5, Singlaub spoke to Elliott
Abrams at the State Department and, according to
Singlaub, explained that he wanted to know "how the
U.S. would send a signal." Singlaub testified that
Abrams told him that he (Abrams) would send the
signal."*

Singlaub arrived in Country 3, but before he could
meet with his contact, Abrams told him to stop the
plan. When Singlaub and Abrams later met, Singlaub

69

Chapter 3

testified that Abrams told him that the soHcitation
was "going to be handled by someone at the highest
level." Singlaub assumed that it would be someone
from the White House, although Abrams never gave
him a specific name. "^ However, Abrams disputed
Singlaub's testimony. While acknowledging that he
spoke to Singlaub about Singlaub's proposed solicita-
tion, Abrams testified that he never agreed to provide
to Singlaub a U.S. Government signal for the solicita-
tion.'^" Abrams' account is supported by the testimo-
ny of Richard Melton, at the time Director of the
Office of Central American Affairs at the State De-
partment, who was present during Abrams' conversa-
tions with Singlaub.'^'

The May 16, 1986, NSPG Meeting

On May 16, 1986, the President and his advisers
discussed the issue of obtaining funds from third
countries. In a memorandum to the President for the
National Security Planning Group (NSPG) meeting,
North suggested three ways to "bridge the gap" in
funding: (1) a reprogramming of funds from DOD to
the CIA ($15 million in humanitarian aid); (2) a Presi-
dential appeal for private donations by U.S. citizens;
and (3) a "direct and very private Presidential over-
ture to certain Heads of State." The last source of
funds would, as North put it, eliminate the need "to
endure further domestic partisan political debate." '^^

Director Casey opened the meeting and explained
the Contras' needs. The good news, he told the Presi-
dent, was that the Contras had infiltrated more troops
into Nicaragua than ever before, and the troops were
now being resupplied by air. '^^ The "bad news" was
that the Resistance was operating under the assump-
tion that it would receive new funding at the end of
May. Only $2 million remained from the humanitarian
assistance appropriation.'^*

Later in the discussion. Secretary Shultz returned
to the Contras' need for funds. Noting the unlikeli-
hood of an immediate Congressional appropriation
and the improbability that the intelligence committees
could be persuaded to reprogram funds. Secretary
Shultz suggested that third countries be approached
for humanitarian aid. North added that the Intelli-
gence Authorization Act of 1986 permitted the State
Department to approach other governments for non-
military aid.'^^

No one at the meeting discussed the fact that Coun-
try 2 had already given $32 million to the Contras,
including a $24 million donation committed to the
President personally. Nor was it mentioned that sev-
eral Far Eastern countries had been approached for
donations or that Country 3 had given $2 million only
6 months earlier. Instead, Shultz was instructed to
prepare for review by the President a list of countries
that could be solicited.

Later that day, North told Poindexter that the ur-
gency of the need had lessened: The Enterprise had

that day received the last $5 million of the $15 million
arms sales to Iran. North wrote Poindexter: "You
should be aware that the resistance support organiza-
tion now has more than $6 million available for imme-
diate disbursement. This reduces the need to go to
third countries for help." '^^ North later testified that
he wrote the message because "it was important he
[Poindexter] understand that Secretary Shultz didn't
need to go out that afternoon and go ask for addition-
al help." Poindexter testified that he understood the
$6 million to which North referred was coming from
the Iranian arms sales, but he did not tell the Presi-
dent the $6 million was available. North testified that
as he was leaving the NSPG meeting, he mentioned
to Poindexter that Iran was supplying $6 million for
the Contras, but that he did not know whether he
was overheard. '^^

North wrote Poindexter that he did not know
whether all those present at the NSPG meeting, such
as Chief of Staff Donald Regan, knew of "my private
U.S. operation." On the other hand. North noted to
Poindexter, "the President obviously knows why he
has been meeting with several select people to thank
them for their 'support for Democracy' in
CentAm."'28

North also realized that disclosure of a significant
sum of money earmarked for Contra support, but only
made possible by arms sales to Iran, could prove
politically embarrassing.

The more money there is (and we will have a
considerable amount in a few more days) the
more visible the program becomes (airplanes,
pilots, weapons, deliveries, etc.) and the more
inquisitive will become people like Kerry,
Barnes, Harkins, et al. While I care not a whit
what they may say about me, it could well
become a political embarrassment for the Presi-
dent and you.

He suggested that the problem could be "avoided
simply by covering it with an authorized CIA pro-
gram undertaken with the $15M" reprogrammed
funding from the DOD budget.'^*

Poindexter approved North's recommendation to
seek the $15 million reprogramming and responded to
his concerns: "Go ahead and work up the paper
needed for the $15M reprogramming. ... I under-
stand your concerns and agree. I just didn't want you
to bring it up at NSPG. I guessed at what you were
going to say. Don Regan knows very little of your
operation and that is just as well." By May 28, how-
ever, it was clear that "the votes were not there," and
the reprogramming effort was dropped in favor of a
campaign to obtain Congressional support for the
$100 million aid package.'^"

Meanwhile, the concerns that prompted North's si-
lence at the May 16 NSPG meeting persisted: Who
knew about the secret aid third countries had given

70

Chapter 3

earlier? In the prior 2 years, members of the NSC
staff had approached several countries for fmancial
assistance to the Contras. Of these, two had provided
funds or other forms of assistance. Those solicitations
were made without the knowledge of the Secretary of
State and other senior diplomatic officials.

The December amendment expressly provided that
soliticitations for humanitarian aid were not preclud-
ed. Now, Secretary Shultz and others were discussing
making approaches to countries that had already con-
tributed. Poindexter and North became concerned
that their prior actions would be uncovered.

On June 10, North wrote Poindexter, "[A]t this
point, I'm not sure who on our side knows what.
Elliott has talked to Shultz and had prepared a paper
re going to [Country 2 and Country 3] for contribu-
tions. Elliott called me and asked 'where to send the
money.'" North asked Abrams to "keep quiet" until
he talked to Poindexter. North added:

At this point I need your help. As you know, I
have the accounts and the means by which this
thing needs to be accomplished. I have no idea
what Shultz knows or doesn't know, but he
could prove to be very unhappy if he learns of
the [Country 2 and 3] aid that has been given in
the past from someone other than you. Did RCM
[McFarlane] ever tell Shultz. ^^'

North recommended that Poindexter and McFar-
lane meet to discuss "how much Sec Shultz does or
does not know abt [Country 2 and 3] so that we don't
make any mistakes." '^^ Poindexter declined to
follow North's advice: "To my knowledge Shultz
knows nothing about the prior financing. I think it
should stay that way." "'^

Nonetheless, McFarlane informed Secretary Shultz.
As the Secretary described the event, on June 16,
1986, he received a telephone call on a secure phone
from McFarlane, who had by then been out of the
Government for approximately 6 months. In a con-
versation that occurred completely out of context and
long after the donation had been made, McFarlane
told Secretary Shultz about the Country 2 donation to
the Contras. '3*

Soon thereafter, Abrams recommended Brunei as a
likely country from which to seek humanitarian assist-
ance for the Contras. As Poindexter put it, "[t]hey
have lots of money." '^^ Brunei also qualified for
another reason. The Secretary of State did not want
to be beholden to any country that was a recipient of
U.S. aid.'^® Brunei was not. Originally, the Secretary
of State was to make the approach during a meeting
with the Sultan of Brunei in June. Before Secretary
Shultz left, Abrams asked North for a Contra account
to which the money could be sent. North directed his
secretary to prepare an index card with the account
number on it. North told Abrams that the account
was controlled by the Contras and Abrams so in-

formed Secretary Shultz. •^'^ Following Poindexter's
instructions. North did not reveal that the NSC staff
"had access to the accounts." '^^ North gave the
index card to Abrams, who gave it to the Secretary
of State. The Secretary decided, however, that he
would discuss the general issue of Central America
with the Sultan but that he would not make an actual
solicitation. The card was not used on that trip. '^®

On August 8, 1986, Abrams met in London with a
representative of the Government of Brunei. In an
unusual occurrence for Abrams, he traveled under an
alias. The two men first met at a London hotel, then
walked in a nearby park where Abrams requested $10
million in bridge financing for the Contras. Asked by
the official what Brunei would receive in return,
Abrams responded, "Well, . . . the President will
know of this, and you will have the gratitude of the
Secretary and of the President for helping us out in
this jam."i*° The official persisted, asking, "What
concrete do we get out of this?" Abrams responded,
"You don't get anything concrete out of it." Abrams
then gave the account number that he had received
from North to the Brunei official.'*'

Although the Sultan of Brunei eventually trans-
ferred the $10 million, the funds never reached the
account for which they were intended. North testified
that he had intended to give Abrams the number of
the Lake Resources account controlled by Secord and
Hakim, but the account numbers had been inadvert-
ently transposed by North or by his secretary, Fawn
Hall.'*2

Felix Rodriguez Becomes Disaffected

Shortly after North traveled to Central America in
late April 1986, Rodriguez decided to leave Central
America. Rodriguez testified: "I don't know if I got a
sixth feeling or something, but after I saw the people
in there, I didn't feel comfortable with it and I
thought we had better leave." Rodriguez informed
Steele, citing fatigue as the reason for his depar-
ture.'*»

Rodriguez met with Vice President Bush in Wash-
ington on May 1. He had arranged the meeting
through the Vice President's National Security Advis-
er, Donald Gregg. The appointment scheduling memo
for the meeting states: "To brief the Vice President
on the status of the war in [a Central American coun-
try] and resupply of the Contras." Members of the
Vice President's staff gave conflicting testimony over
how this description was printed on his schedule. Sam
Watson, the Vice President's Deputy National Securi-
ty Adviser, testified that the memo was inaccurate,
and that he did not provide the description. Phyllis
Byrne, the secretary who typed the memo, testified
that Watson had given her the description.'**

In the Old Executive Office Building on his way to
the Vice President's office, Rodriguez stopped by to
tell North he was leaving the operation. Rodriguez

71

Chapter 3

said North asked him to remain in Central America,
but he ignored the request. Escorted by Gregg and
Watson, Rodriguez then met with the Vice Presi-
dent.'**

Before Rodriguez could tell the Vice President that
he was leaving Central America, North arrived and
told the Vice President about the good job Rodriguez
was doing. Embarrassed to tell the Vice President he
was going to leave, Rodriguez left the meeting with-
out discussing his resignation, and eventually returned
to Central America. Rodriguez testified that "at no
point in any of this conversation did I ever mention
doing anything that was remotely connected to Nica-
ragua and the contras." Moreover, former Senator
Nicholas Brady, who was also present at the meeting,
testified that the resupply operation was not dis-
cussed.'''®

Rodriguez stayed in Central America, but his rela-
tionship with Dutton became increasingly strained.
According to Dutton, they disagreed on how the
operation should be run. At the same time. North had
his own reservations that Rodriguez was "something
of a loose cannon" who might reveal the oper-
ation.'"'''

On June 8, Dutton complained about Rodriguez in
a KL-43 message to North: "He now wants a $10K
emergency fund that he will control. He also wants
partial control of our fuel fund ($50K)." Cash funds
translated into unaccountable slush funds so far as
Dutton was concerned. Furthermore, with the estab-
lishment of cash accounts, the resupply operation
would be "losing control of one of the most critical
portions of the operation, that is the money." '''^

Rodriguez was summoned to meet with North and
Dutton in Washington on June 25. North began by
showing Rodriguez the organizational plan drawn up
by Dutton, in which Rodriguez was designated "liai-
son officer." After North stated that he had intelli-
gence that Rodriguez was compromising the oper-
ation by talking over open, unsecured telephone lines,
Rodriguez complained that the poor condition of the
aircraft, the communications equipment, and the lack
of adequate radar had endangered the pilots and crew
on the flight which hit the mountain, even though on
that flight, despite the fog, the pilot was able to locate
the drop zone by using the aircraft's radar. North, in
turn, offered Rodriguez $3,000 a month to stay in the
operation, which Rodriguez later accepted. '■'^

Rodriguez testified that at the end of the meeting,
he asked to see North alone. Rodriguez told North
that he had learned "that people are stealing here," in
particular Thomas Clines, a former associate of
Edwin Wilson. Rodriguez expressed his concerns that
arms were being sold at inflated prices. North disput-
ed Rodriguez's conclusions and told Rodriguez that
Clines was a patriot, and that he was not buying
equipment, only helping to transport the goods. In
fact, none of the arms furnished to the FDN and the
Southern front since Rodriguez became involved in

the operation were sold to the Contras. Instead, the
Enterprise purchased arms with money obtained from
the arms sales to Iran and private U.S. donors.'*"
At the close of the meeting, according to Rodri-
guez, North made one last comment. Congress was
voting that day on the $100-million Contra aid legisla-
tion, and the television in North's office carried the
floor debate. According to Rodriguez, North looked
at the television and said: "Those people want me but
they cannot touch me because the old man loves my
ass." North did not recall that part of his conversation
with Rodriguez. That meeting was the last between
the two.'*'

New Legislation

On June 25, 1986 the House approved the Adminis-
tration's request for $100 million in Contra aid. Al-
though the bill would not become law for another 3
months, the vote ensured passage of the Contra aid
legislation. The President announced at 11:30 a.m.
that day that the vote "signalled] a new era of bipar-
tisan consensus in American foreign policy. . . . We
can be proud that we as a people have embraced the
struggle of the freedom fighters in Nicaragua. Today,
their cause is our cause." '*^

The $100 million aid package marked the first time
in more than 2 years that the House had voted to
provide lethal assistance to the Contras. By June
1986, North had established air resupply to both the
Northern and Southern fronts. The Enterprise had
succeeded in flying lethal material to the Contra fight-
ers inside Nicaragua; even Americans in the employ
of North's organization were flying into that country,
all financed by donated funds and proceeds from the
Iranian arms sales overseen by North. None of
North's activities were disclosed to Congress in ad-
vance of the House vote. Only 1 month later, before
the aid bill had been signed, Poindexter would write
to Congress that the NSC was complying with the
letter and spirit of the Boland Amendment.'*^

Selling the Assets to the CIA

With the House vote in June, North's hopes to
reengage the CIA in Nicaragua were on the verge of
being realized. North was increasingly occupied with
the Iran arms initiative, and he was anxious to give
the Contra resupply operation back to the CIA. But
North wanted the Enterprise to recoup its investment,
and urged the CIA to buy the assets of the resupply
operation in Central America.'**

Secord had Dutton prepare a plan to present to the
CIA. North wrote to Poindexter:

We are rapidly approaching the point where the
PROJECT DEMOCRACY [PRODEM] assets in
CentAm need to be turned over to CIA for use
in the new program. The total value of the assets
(six aircraft, warehouses, supplies, maintenance

72

Chapter 3

facilities, ships, boats, leased houses, vehicles,
ordnance, munitions, communications equipment,
and a 6520' runway on property owned by a
PRODEM proprietary) is over $4.5M.

All of the assets — and the personnel — are owned/
paid by overseas companies with no U.S. connec-
tion. All of the equipment is in first rate condi-
tion and is already in place. It wd be ludicrous
for this to simply disappear just because CIA
does not want to be "tainted" with picking up
the assets and then have them spend $8-10M of
the SIOOM to replace it — weeks or months later.
Yet, that seems to be the direction they are head-
ing, apparently based on NSC guidance.

If you have already given Casey instructions to
this effect, I wd vy much like to talk to you
about it in hopes that we can reclaim the issue.
All seriously believe that immediately after the
Senate vote the DRF [Nicaraguan Democratic
Resistance] will be subjected to a major Sandi-
nista effort to break them before the U.S. aid can
become effective. PRODEM currently has the
only assets available to support the DRF and the
CIA's most ambitious estimate is 30 days after a
bill is signed before their own assets will be avail-
able. This will be a disaster for the DRF if they
have to wait that long. North predicted "disas-
ter" if his plan was not followed. '^^

The plan drafted by Dutton at Second's request
offered two options. The first was to sell the assets of
the organization to the CIA at cost; the second would
continue the operation on behalf of the CIA for a
monthly fee. Although Dutton, Secord, and North
differed in their public testimony over whose idea it
was to include these two options (and Secord denied
that he ever authorized a sale of the assets), Dutton's
plan contemplated that the Enterprise would continue
in operation. The plan indicated a preference for a
sale because the funds generated would permit the
Enterprise to engage in other covert action projects:
"[W]e prefer option I with the proceeds from the sale
going back into a fund for continued similar require-
ments." '^*

North testified that the idea to sell the Enterprise's
assets to the CIA was Director Casey's. In a PROF
note to Poindexter at the time. North said that the
sale to the CIA would be the only way to finance
purchases for the Contras prior to the time the Con-
gressional appropriation became effective:

Given our lack of movement on other funding
options, and Elliot/[C/CATF's] plea for
PRODEM [Project Democracy] to get food to
the resistance ASAP, PRODEM will have to
borrow at least $2M to pay for the food. That's
O.K., and Dick is willing to do so tomorrow —
but only if there is reasonable assurance that the

lenders can be repaid. The only way that the
$2M in food money can be repaid is if CIA
purchases the $4.5M worth of PRODEM equip-
ment for about $2.25M when the law passes.

Concluding his efforts to "sell" the project. North
offered to send Poindexter a copy of Dutton's "pro-
spectus," or, as he wrote, "the PROJECT DEMOC-
RACY status report. It is useful, nonattributable read-
ing." '^'

Poindexter responded that he had not given Casey
any "guidance" against the sale and, indeed, that he
approved of North's plan. Poindexter explained that
he had told CIA Deputy Director Robert Gates "the
private effort should be phased out," but he agreed
with North and asked him to talk to Casey about the
plan to sell Project Democracy to the CIA.'^*

Clair George, the CIA Deputy Director for Oper-
ations, testified that North asked him to buy the air-
craft, but that he declined because their use in private
resupply could result in criticism of the CIA. "I
wouldn't buy those planes if they were the last three
planes in Central America," he said.'^^

The Resupply Operation is Interrupted

Relations between Felix Rodriguez and the resup-
ply operation continued to deteriorate. Tensions in-
creased when early in August a dispute erupted be-
tween Secord's deputy, Rafael Quintero, and Rodri-
guez. Ignoring Quintero's instructions not to use the
aircraft, Rodriguez took an Enterprise-owned plane in
Miami and fiew into the Airbase with a load of spare
parts and medicine. By the time Rodriguez arrived in
Central America, Quintero was claiming that the
plane had been stolen. Quintero gave instructions to
refuel and send the plane back to Miami, full of the
supplies. Rodriguez ignored the order and told the
crew to unload.'®"

Rodriguez maintained that all the aircraft belonged
to the FDN, and expressed his concern to the Com-
mander that the Enterprise would pull out, taking the
planes away from their rightful owners — the
FDN.i^i On August 6, Dutton called North to tell
him that Rodriguez "took C-123K from Miami." "^^
North later complained to Gregg, the Vice Presi-
dent's National Security Adviser, that Rodriguez had
"made off with an airplane," and asked him, "Will
you call him and find out what the hell is going on?"
Rodriguez told Gregg he had decided to tell Gregg
"about what had been going on." '^^

Steele then called North to tell him that the "situa-
tion was not good." Steele warned North there was
no one on the "scene who can take charge," and that
the Commander was becoming a "potential problem"
because he believed that the aircraft "belong[ed] to
the DRF [Democratic Resistance Forces]." Steele
added that Rodriguez was "enroute to see Don
[Gregg]." '«*

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Chapter 3

North sent his colleague and aide, Lt. Col. Robert
Earl, to sit in on the Rodriguez-Gregg meeting. Brief-
ing Earl before the meeting, North portrayed Rodri-
guez as someone who had "insinuated himself into the
organization and was giving rudder orders and it was
not his place to do so." '^^

In the dispute with Rodriguez, Quintero had also
accused Rodriguez of air piracy. Now, after confer-
ring with Rodriguez, the Commander understood that
he too was accused of air piracy, and feared the
aircraft themselves would be taken.

On August 8, Rodriguez met with Gregg and set
out his allegations about the Secord group. Gregg
noted the points Rodriguez made: "using Ed Wilson
group for supplies"; "Felix used by Ollie to get
Contra plane repaired . . ."; "a swap of weapons for $
was arranged to get aid for Contras, Clines and Gen-
eral Secord tied in"; "Hand grenades bought for $3 -
sold for $9." Gregg, according to Earl, expressed
shock about the involvement of Clines. '^^

On August 12, Gregg convened a meeting to dis-
cuss Rodriguez's allegations with a group of Adminis-
tration officials involved in Central American policy-
making: Steele; Ambassador Edwin Corr; Deputy As-
sistant Secretary of State Walker; the Chief of the
Central American Task Force; and from the NSC,
Earl and Ray Burghardt. Gregg testified that he
"went over the notes with the people who were
there." Without mentioning North's involvement,
Gregg emphasized that he considered Clines not reli-
able but that he had faith in Rodriguez.'^'

Gregg knew by this time that North was involved
in the operation. Rodriguez had made that clear at his
initial August 8 meeting, and Gregg's notes reflect
that knowledge.'^* Gregg testified that at no time did
he pass that information on to the Vice President.
Gregg did not report the meeting, because he be-
lieved it "was a very murky business. . . . We had
never discussed the Contras. We had no responsibility
for it. We had no expertise in it. I wasn't at all certain
what this amounted to. ... I felt I had passed along
that material to the organizations who could do some-
thing about it, and I frankly did not think it was Vice
Presidential level." '®^

The Resupply Operation Resumes

Shortly after Gregg's August 12 meeting, Steele
was scheduled to meet with Dutton in Washington to
resolve the dispute with the Commander. Dutton had
told Steele by KL-43 that "It is everyone's intent to
continue to support the effort," but that the aircraft
were owned by an independent company, not the
FDN, in part so they could be used to support the
Southern front forces as well as the FDN. Secord,
too, insisted that the aircraft belonged to a private
company. Earl, North's deputy, told Secord by KL-
43 on August 13 that the crew should simply pull out
because the threat of a lawsuit against the Command-

er had "poisoned the atmosphere." Secord responded
that there was more than "1 million dollars worth
equipment" in Central America owned by the Enter-
prise, which had no intention of abandoning them.
Secord explained that the "threat of air piracy lawsuit
has nothing to do with [the Commander]. This was
comment made to VP by Ollie ref Max [Felix Rodri-
guez] vice [the Commander]." "°

Dutton later met with Steele in Washington and by
the end of the meeting, Steele had agreed to help to
solve the brewing "confrontation" between the Com-
mander and the resupply operation.''"

The warring parties reached an uneasy resolution
after Steele returned to Central America. Steele took
a more active role in overseeing the flights and was
told to inform the Commander that, while the assets
were made available to the Contra cause, they be-
longed to a private company whose desire was to
turn them over to the CIA once the Agency resumed
Contra support. Steele felt that he would have trouble
persuading the Commander to accept this position
until he was assured that the CIA would continue to
provide support. '^^

On August 22, Dutton was able to reassure Steele:

Received new guidance through Goode [North]
from his boss. We are to stay in full operation
supporting the drops until 1 Oct. At that time
NSC says that CIA will have been in operation
approx. 1 month. The CIA will go to [The Cen-
tral American government] and explain that they,
the CIA, are now in control. ' ' ^

During the fall of 1986, problems continued in the
resupply operation, but some success on both the
Northern and Southern fronts was finally achieved.
The resupply operation delivered more than 180,000
pounds of lethal supplies to the Southern front in
September alone."*

In late August, North attended a Restricted Inter-
agency Group meeting at which the Chief of the
CATF and others were asked what steps the airlift—
i.e., according to North, the "covert operation being
conducted by this government to support the Nicara-
guan Resistance" — should take now that the CIA was
due to assume control. According to North, he de-
scribed at that meeting the activities in which the
Enterprise was engaged and sought approval from the
Restricted Interagency Group to continue until the
CIA could take over.'" While the Chief of CATF
acknowledged that North discussed airdrops to the
Contras, he testified that he did not recall North dis-
cussing "his full service covert action program."'''*

On August 22, Dutton met with Quintero and de-
vised a new plan for Southern front resupply that he
presented to North: The initial arrival over the drop
zone should be at dusk; once the zone has been identi-
fied by the pilots, repeated sequential drops would be
made in the evening without communication to the

74

Chapter 3

troops. Castillo agreed with the plan, as did Steele.
North also approved it.'^^

On September 4, North met with Poindexter. North
asked Poindexter for the "go/no go" on sequential air
deliveries to the Southern forces. Shortly afterwards,
North told Secord to implement the new drop plan
and conduct a "force feed" operation to the South
where all supplies would be delivered sequentially in
accordance with Dutton's plan.'^*

On September 9, Dutton flew with the crew in the
second C-123 (now operational) inside southern Nica-
ragua to attempt a lethal drop to the troops Castillo
had identified. But this mission was unable to locate
the troops, prompting Dutton to propose to North
using two aircraft on each mission to increase deliv-
ery potential once troops were located and to protect
against increased Sandinista antiaircraft fire. Dutton
also asked North for help on weather information and
troop location. North approved the use of two air-
craft and told Dutton to obtain weather information
from Steele, and that he would speak to Castillo
about troop locations. North cautioned Dutton not to
personally fly inside Nicaragua again: The operation
could not afford the exposure if the plane were shot
down inside Nicaragua with Col. Robert Dutton at
the controls.'''^

The pace of delivery stepped up. The resupply op-
eration was finally becoming effective only weeks
before the CIA would be back in the business. On
September II, a lethal drop was successfully made to
the South using the C-123 while the C-7 delivered
more arms for the FDN in the northern regions.
Dutton reported the success of the southern delivery
to North. On the 12th, three aircraft made more de-
liveries: a C-123 delivered 10,000 pounds to the South
and a C-7 and a Maule delivered to the FDN. Sep-
tember 13 was "a red letter day," Dutton wrote to
North. All five aircraft fiew at the same time, with
lethal loads dropped in both the North and South.
"The surge is now in full force," Dutton relayed to
North. The plan at last was working. '*°

Things were going so well that Dutton advised
North that an additional $20,000 in cash was needed
for the fuel fund and that the "C-123 is now armed
with HK-2 1/7.62 machine gun on the aft ramp, bring
on the MI-24." In fact, before Dutton returned to
Washington, he could report to North that "all troops
should now have equipment. Will stand by for direc-
tion from [Castillo]. He already told us not to send
any more to [a Southern commandante] for a while.
Never thought we would hear that." ^*'

The "hand-to-mouth" operation that had limped
along on limited resources for so long had, with the
support of certain individuals, finally delivered the
goods. Under North's direction, Dutton's operational
control, Castillo's critical assistance in locating, dis-
patching, and scheduling the needs of the Southern
troops, and Steele's coordination with the Command-
er, the South received arms, while deliveries contin-

ued apace to the FDN in the North. Indeed, for the
rest of September, lethal drops were successfully
made to both the FDN and the Southern forces.
North duly reported the operation's success to Poin-
dexter.'*^

When Dutton returned from Central America later
that month, he met with North. North asked him to
arrange a 1-day trip to the region so that he could
personally thank the pilots and crew. North told him,
"Bob, you will never get a medal for this, but some
day the President will shake your hand and thank you
for it." '83

Dutton had also prepared a photograph album de-
picting the operation: the operational bases, drop
zones, aircraft, munitions, and the crew replete with
assault machine guns and other assorted weapons.
Dutton showed the album to North, who liked it and
said he wanted to show it to "the top boss."'*'* North
testified that he sent the album to Poindexter to show
to the President, but never heard further about the
album. Poindexter testified that he did not show the
album to the President.'*^

North Expands His Special Operations

Even with the $100 million in appropriated funds
becoming available in the near future. North tried to
get other aid for the Contras. In May, Israeli Defense
Minister Yitzhak Rabin had offered to provide Israeli
military advisers for the Southern front. Although
nothing came of this offer, North and Rabin met
again in September and discussed an Israeli transfer of
Soviet bloc weapons to the Contras. Rabin wanted
"to know if we had any need for So v Bloc weaps and
ammo he could make avail." Rabin asked whether
North's ship, the Erria, had left the Mediterranean.
When North responded that it was in Lisbon, Rabin
suggested that it dock at Haifa and "have it filled w/
whatever they cd assemble" of a "recently seized
PLO shipment captured at sea."'*®

Poindexter sanctioned the Israeli arms offer: "I
think you should go ahead and make it happen. It can
be a private deal between Dick [Secord] and Rabin
that we bless. . . . Keep the pressure on Bill [Casey]
to make things right for Secord." Later, Poindexter
cautioned "[ajbsolutely nobody else should know
about this. Rabin should not say anything to anybody
else except you or me." On September 15, North told
Poindexter that "orders were passed to the ship this
morning to proceed to Haifa to pick up the arms.
Loading will be accomplished by Israeli military per-
sonnel." '*^

Despite Poindexter's caution. North later recounted
the offer in a memorandum briefing the President for
a visit from Israeli Prime Minister Shimon Peres.
North wrote that Prime Minister Peres was likely to
raise certain sensitive issues, such as the transfer of
Soviet bloc arms by the Israelis "for use by the Nica-
raguan democratic resistance." North recommended:

75

Chapter 3

"If Peres raises this issue, it would be helpful if the
President thanked him since the Israelis hold consid-
erable stores of bloc ordinance compatible with what
the Nicaraguan resistance now uses." Next to this
sentence, Poindexter penciled: "Rabin. Very tightly
held." '88

As another expansion of his special operations,
North received an offer from a third party to engage
in sabatoge and other activities inside Nicaragua, to
be financed with Enterprise funds. Poindexter ap-
proved the sabatoge plan, but instructed North not to
become involved in conspiracy or assassinations.'*^
According to North, the plan was never implemented
because North was dismissed. '®°

The Operation Begins to Unravel:
Disclosure of the Airstrip

Along with others in the Administration, North had
helped to prevent the disclosure of his operation to
Congress. The extent of his involvement in Central
America, however, made him open to exposure. Al-
though the U.S. Congress was not told of North's
role in supporting the Contras, Central American
governments — including that in Managua — were
aware of it. Eventually, one of those governments
chose not to remain silent.

Early in the morning on September 6, North
learned that a Costa Rican official was threatening to
hold a press conference announcing the existence of
the Santa Elena airfield and alleging violations of
Costa Rican law by North, Secord, and Udall Re-
sources. North immediately called Assistant Secretary
Abrams and told him that the press conference had to
be stopped. Half an hour later. North had reached
Ambassador Tambs and placed a conference call to
Abrams.'^'

President Arias was scheduled to visit the United
States, and Abrams "instructed Tambs to advert to
the visit in a way which made it clear to President
Arias that his visit was at risk." Abrams testified, "It
was supposed to be diplomatic, but the message was
supposed to be clear." North's notes reflect the idea
of a greater threat than the cancellation of a White
House visit: "Conf call to Elliott Abrams and Amb.
Lew Tambs; -Tell Arias; -Never set foot in W.H.; -
Never get 5 [cents] of $80M promised by McPher-
son." An hour or two later, Tambs had made the call
(but did not threaten the cutoff of aid), and the press
conference was cancelled. '^^

In his report to Poindexter, North exaggerated his
own role in the crisis. In a PROF note. North told
Poindexter he had personally forestalled the crisis by
calling the President of Costa Rica and threatening to
cut off aid. North conceded to Poindexter that he
may have overstepped the bounds of his authority: "I
recognize that I was well beyond my charter in deal-
ing with a head of state this way and in making

threats/offers that may be impossible to deliver."
Poindexter responded: "Thanks, Ollie, you did the
right thing, but let's try to keep it quiet." North
admitted in his testimony that he had not called Presi-
dent Arias. He claimed, instead, that the PROF mes-
sage "was specifically cast the way it was to protect
the other two parties engaged." '*^

The Costa Rican officials were delayed but not
deterred by the call. On September 25, Costa Rican
authorities held a press conference announcing the
discovery of a "secret airstrip in Costa Rica that was
over a mile long and which had been built and used
by a Co. called Udall Services for supporting the
Contras." Olmstead was named as the man who set
up the airfield as a "training base for U.S. military
advisors."'^'*

North offered a "damage assessment" to Poin-
dexter, assuring him that "all appropriate damage con-
trol measures" had been undertaken to "keep USG
[U.S. Government] fingerprints off this." He wrote to
Poindexter:

Udall Resources, Inc., S.A. is a proprietary of
Project Democracy. It will cease to exist by
noon today. There are no USG fingerprints on
any of the operation and Olmstead is not the
name of the agent — Olmstead does not exist. We
have removed all Udall Resources ... to another
account in Panama, where Udall maintained an
answering service and cover office. The office is
now gone as are all files and paperwork. '^^

The New York Times picked up the story. North,
with assistance from Abrams and others, drafted press
guidance for the Administration's response. The
"guidance," approved by Poindexter, stated that the
airstrip had been offered to the Costa Rican Govern-
ment "by the owners of the property who had appar-
ently decided to abandon plans for a tourism project."
It concluded: "No U.S. Government funds were allo-
cated or used in connection with this site nor were
any U.S. Government personnel involved in its con-
struction. Any further inquiries should be referred to
the Government of Costa Rica." The U.S. Govern-
ment's role in facilitating the construction of the air-
field was concealed.'®®

At the same time North was promoting this cover
story, he suggested to Poindexter that steps be taken
to "punish" the Costa Rican Government for the dis-
closure.'^'^

On September 30, North again argued that any
attempt to benefit President Arias should be quashed:
"Those who counsel such a course of action are un-
aware of the strategic importance of the air facility at
Santa Elena and the damage caused by the Arias'
government revelations." '^*

76

Chapter 3

The Covert Operation Ends

The triumph of the airlift was short-lived. When Bill
Cooper wrote to Dutton in late September after an-
other successful drop, "Ho-Hum, just another day at
the office," Dutton warned him to be careful.'*®

On October 5, a C-123 left the Airbase at 9:50 a.m.
local time with 10,000 pounds of ammunition for a
drop to the FDN inside Nicaragua. Cooper was in
command. Buzz Sawyer the co-pilot, and Eugene Ha-
senfus the loadmaster who would actually dro"" the
supplies. An FDN fighter was also on board for radio
communications to the troops on the ground. Al-
though the mission was to support the northern FDN
forces, the plane flew a southern route to avoid San-
dinista guns.^""

First reports had the plane missing. Castillo sent
Southern front troops to look for the plane and
Dutton notified North's office in an attempt to mount
a search operation. Earl attempted to arrange for a
U.S. military search and rescue mission, while friend-
ly governments in the region also organized a discreet
search effort. Felix Rodriguez called the Vice Presi-
dent's Deputy National Security Adviser at his home,
telling him the plane could not be found. It was all to
no avail: the plane had been hit by a Sandinista SAM-
7 over Nicaraguan territory. Three crew members
were killed. Only Hasenfus survived, captured by the
Sandinistas.^"'

Abrams called North and asked him to arrange to
retrieve the bodies. The State Department issued
press statements claiming no U.S. involvement in the
mission. ^"^

But the Enterprise had begun to unravel. The
bodies of the crew were found bearing Southern Air
Transport identification cards. The Federal Aviation
Administration and the U.S. Customs Service began
to investigate. With secrecy no longer possible, the
resupply operation was shut down.^"^

Presidential Authorization and
Knowledge

The President told the Tower Review Board that he
did not know that the NSC staff was assisting the
Contras.^"* After the Tower Report was issued, the
President stated that private support for the Contras
was "my idea." ^°^ In fact, the President knew of the
contributions from Country 2.^°® According to Poin-
dexter, the President's policy was "to get what sup-
port we could from third countries." '"''

In general, Poindexter understood that the Presi-
dent wanted the NSC staff to support the Contras,
including encouraging private contributions. The
President also knew, according to Poindexter, that
North was the chief staff officer on Central America
who was responsible for carrying out the President's
general charter to keep the Contras alive. Poindexter

regularly reported to the President on the status of
the Contras, the fact that they were surviving, and
"in general terms" North's role in facilitating their
survival. As a result of these briefings, Poindexter
thought that the President understood that both he
and North were coordinating the effort to support the
Contras. Poindexter also believed the President under-
stood that "Col. North was instrumental in keeping
the Contras supported without maybe understanding
the details of exactly was he was doing." ^"^

As to the level of detail provided to the President
on the Contra support operation, Poindexter testified
that he:

would not get into details with the President as
to who was doing what. The President knew that
there was a Boland Amendment, he knew there
were restrictions on the government. As he has
said. I think, since November of 1986, that he did
not feel that the Boland Amendment applied to
his personal staff and that that was his feeling all
along. I knew that.

He knew the Contras were being supported, and
we simply didn't get into the details of exactly
who was doing what.^°*

Poindexter testified that on one occasion, he briefed
the President with some specificity about the Contra
support program, but understood that the President
did not recall the briefing:

Now, you know, the President doesn't recall ap-
parently a specific briefing in which I laid out in
great detail all of the ways that we were going
about implementing the President's policy, and I
frankly don't find that surprising. It would not,
frankly, at the time have been a matter of great
interest as to exactly how we were implementing
the President's policy.^*"

Without getting to the "extraneous detaiUs]" of
how the President's policy was being implemented,
however, Poindexter briefed the President on the
Santa Elena airstrip in Costa Rica. Poindexter testified
that in December 1985, after he returned from Central
America, he specifically briefed the President about
the local assistance provided in establishing the air-
strip. In addition, Poindexter informed the President
that the "private individuals" were also involved in
establishing the airstrip. At the same time, Poindexter
excluded the "extraneous detail" that North, through
Tambs and Castillo, had facilitated the construction of
the airstrip.^" Similarly, while Poindexter thought
that the President was aware of North's role in sup-
porting the Contras, "it did not include something as
specific as directing Col. North to conduct air supply
operations." 2'2 North testified that he believed that
the President approved his efforts to resupply the
war. In fact, his actions support that belief While

77

Chapter 3

Poindexter testified that he did not show the photo-
graph album detailing the operation to the President,
North testified that he sent the album to the President
through Poindexter and told Dutton that the Presi-
dent would thank Dutton for his efforts.

Conclusion

Although the North-Secord resupply operation ended
on a disastrous note, with the shooting down of the
Hasenfus plane, North had successfully managed,
with the approval of his superiors, the covert pro-
gram to assist the Contras for almost 2 years. The
covert program that North had developed inevitably
created conflicts of loyalties and shadings of duties
among the persons whom he coopted to assist him.
Felix Rodriguez was a close associate of Donald
Gregg, the National Security Adviser to the Vice
President. Yet North instructed Rodriguez not to tell
Gregg that he was secretly working for North, and
Rodriguez testified that he complied until the summer
of 1986.^'^ According to North, Director Casey
wanted to insulate the CIA's career employees from
North's operation so that the CIA could not be
charged with a violation of the Boland Amend-
ment.^'* CIA officials admitted that, far from their
traditional role, they "actively shunned information.
We did not want to know how the Contras were
being funded . . . we actively discouraged people
from telling us things." ^'^

The CIA's attempt to remain uninformed failed as
North sought out the assistance of CIA personnel in
Central America. Particularly after Congress amended
the law to allow the CIA to exchange intelligence
with the Contras, many flights undertaken by the
Enterprise were reported by CIA field offices to CIA
headquarters; and at least one CIA Chief of Station
provided information necessary for the Enterprise to
make accurate airdrops and avoid Sandinista fire.

A CIA Chief of Station, the U.S. Ambassador to
Costa Rica, and other operatives — both Government
employees and private citizens — that North recruited
with the approval of his superiors provided necessary
support to his covert program of military support for
the Contras. Yet throughout this time, the NSC staff
repeatedly assured Congress that it was complying
with the letter and spirit of the Boland Amendment.

The NSC staffs resupply operation provided essen-
tial support to the Contras' during 1986. Not only did
North coordinate that effort, but he decided with
Secord, after consulting the Contras' military com-
manders, what supplies were needed in order to con-
duct the entire Contra operation, both on the ground
and in the air.

North directed the Enterprise's efforts on behalf of
the Contras with Poindexter's approval and in the
belief that the President likewise concurred. The
result was that, with the help of other U.S. Govern-
ment officials, North managed to provide to the Con-
tras what Congress had not: a full-scale program of
military assistance.

78

Chapter 3

Table 3-1. — Resupply Flights Made by the North/Secord Resupply Operation During 1986

DATE

AIRCRAFT

FDN/SOUTHERN

NOTES

23 March 86

24 March 86

25 March 86

26 March 86
28 March 86
28 March 86
28 March 86
31 March 86
31 March 86
31 March 86
1 April 86

1 April 86
4 April 86

6 April 86

7 April 86

8 April 86

9 April 86

10 April 86
10 April 86

1 1 April 86
1 1 April 86

1 May 86
1 May 86
5 May 86
5 May 86

7 May 86

8 May 86

8 May 86

9 May 86
12 May 86
12 May 86
12 May 86
12 May 86

12 May 86

13 May 86
13 May 86
13 May 86
13 May 86

13 May 86

14 May 86
14 May 86

14 May 86

15 May 86

19 May 86

20 May 86
20 May 86
20 May 86

20 May 86

21 May 86

21 May 86

22 May 86
6 June 86

9 June 86

10 June 86

C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
L-lOO

C-7 Caribou
L-lOO

C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou

C-7 Caribou
C-7 Caribou
C-123

C-123

C-7 Caribou

N/A

N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
FDN
N/A
FDN
N/A
FDN
FDN
FDN
FDN
Southern

FDN

Southern

FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
FDN
N/A

FDN
FDN

N/A

Southern

FDN

Local Flight-No Cargo

Local Flight-No Cargo

Local Flights-No Cargo

3 Local Flights-No Cargo

2 Local Flights

2 Local Flights

2 Local Flights-No Cargo

Local Flight-No Cargo

Local Flight-No Cargo

Training-No Cargo

Lethal Cargo 3,440 lbs.

Local Flight-No Cargo

Lethal Cargo (2 nights) 9,200 lbs.

Training

Lethal Cargo (2 flights) 8,600 lbs.

Lethal Cargo (2 flights) 11,500 lbs.

Lethal Cargo (3 flights) 18,000 lbs.

Lethal Cargo (2 flights) 7,900 lbs.

Arrived DZ on time but never saw
inverted or strobe light. Aborted
after staying in area 25 minutes.
Lethal Cargo: 18 bundles

Lethal Cargo (3 nights) 16,250 lbs.

Lethal drop UNO/ South received
20,000 lbs. ammo, grenades, rock-
ets, launchers, rifles, magazines,
etc.

Lethal Cargo: Hard - 800 Soft - 700
Lethal Cargo

Lethal Cargo: 1000 lbs.
Lethal Cargo
Cargo: Soft 6300
Cargo: Soft 3700

Cargo: Soft 4150

Lethal Cargo: 5140 lbs.

Cargo: Soft - 6000

Lethal Cargo: 3000 lbs.

Lethal Drop

Cargo: Hard - 3000 Soft - 2000

Cargo: Hard - 3700 Soft - 1000

Cargo: Hard - 500 Soft - 1500

Cargo: Hard -4150

Cargo: Hard - 1000 Soft - 3850

Cargo: Hard - 450 Soft - 4058

Cargo: Hard - 2175 Soft - 3850

Cargo: Soft - 5178

Cargo: Soft - 600

Cargo: Soft - 3756

Cargo: Soft - 3778

Cargo: Soft - 3714

Cargo: Soft - 3778

Airbase to Santa Elena airstrip and
return

Cargo: Soft - 3358

Cargo: Soft - 358

Airbase to Santa Elena airstrip and
return

Stuck in mud at Santa Elena 10,000
lbs of munitions, uniforms & medi-
cines.

Lethal Drop

79

Chapter 3

Table 3-1.— Resupply Flights Made by the North/Secord Resupply Operation During 1986— Continued

DATE

AIRCRAFT

FDN/SOUTHERN

NOTES

1 1 June 86

C-123

12 June 86

C-7 Caribou

13 June 86

C-123

14 June 86

C-123

15 June 86

C-123

N/A
FDN

Southern
Southern

21 June 86

8 July 86

9 July 86

9 July 86

10 July 86

12 July 86

13 July 86

28 July 86

29 July 86

31 July 86

13 Aug 86

14 Aug 86

15 Aug 86

15 Aug 86

17 Aug 86

18 Aug 86

18 Aug 86

19 Aug 86

20 Aug 86

20 Aug 86

21 Aug 86

22 Aug 86

23 Aug 86

25 Aug 86

26 Aug 86

27 Aug 86

28 Aug 86
5 Sept 86

C-7 Caribou

C-7 Caribou

C-7 Caribou

C-123

C-7 Caribou

C-7 Caribou

C-7 Caribou

C-7 Caribou
C-7 Caribou

C-7 Caribou

C-7 Caribou
C-7 Caribou

C-7 Caribou

C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou
C-7 Caribou

C-7 Caribou

C-123

C-123

C-123

C-7 Caribou

C-7 Caribou
C-7 Caribou
C-7 Caribou

Southern

FDN

FDN

Southern
FDN

Southern

FDN

FDN
FDN

FDN

FDN
FDN

FDN

FDN
FDN

Southern

FDN

FDN

FDN

Southern

FDN

Southern
Southern
Southern
Southern

Southern
Southern
Southern

Return with 5000 pounds to Airbase

5000 pounds lethal

Loaded 7 pallets and Hold. Gross
weight 7038 lbs. lethal Bad weath-
er put flight on hold until 1600

Lethal No drop zone contact

Lethal, no drops made. While over
Costa Rica, A/C bounced over the
trees & damaged engine. By
Checking radar with LORAN (a
Navigational aid), A/C then flew
over drop zone twice, avoiding
enemy anti-aircraft fire. No DZ
contact with troops. Plane down 7-
10 days.

Refueled at San Jose AP Cargo: HK-
21 machine guns, cartridges, gre-
nades Successful drop inside Nica-
ragua

Successful drop of lethal supplies to
the FDN inside Nicaragua

Lethal 8000 lbs.

Airbase to Parrots Beak

Drop 3 pallets of boots. 81 mm mor-
tars & ammo plus small ammo, 6
pallets medical clothing & small
ammo. DZ receipt confirmed.

Lethal Cargo: Cartridges, grenades
and non-lethal. Landed in San
Jose, then returned to Airbase.

Lethal drop made 1-1/2 mile from
original DZ.

Lethal drop.

Lethal Cargo including ammunition
is successfully dropped inside Nica-
ragua. Inbound-received sporadic
37 mm AAA when crossing a
road Receipt of cargo confirmed
by radio

Lethal cargo dropped inside Nicara-
gua. Receipt of cargo confirmed
by radio

Landed with 1500 lbs.

Air drop 4580 lbs. lethal inside Nica-
ragua. 30 mins in DZ

Air Drop 4580 lbs. lethal Dropped 7
FDN parachute school graduates.

4030 lbs.

Local Training

4000 lbs. Lethal Load

2,400 hand grenades

Maintenance

Still problems w/right engine

C-7 Caribou returned w/4500 lbs. to
be added to 7000 lbs.

Still problems w/right engine

Abort

Aborted 10,000 lbs. lethal

Lethal Cargo Dropped

Lethal 4800 pounds Returned w/load
no radio contact no lights visible

Lethal 4560 lbs. Bad weather.

Lethal 4600 lbs.

Lethal— 10,000 lbs. No drop— 20mm
over DZ — no lights no r.idio con-
tact—DZ UNO

80

Chapter 3

Table 3-1.— Resupply Flights Made by the North/Secord Resupply Operation During 1986— Continued

DATE

AIRCRAFT

FDN/SOUTHERN

NOTES

7 Sept 86
9 Sept 86

10 Sept 86

1 1 Sept 86
1 1 Sept 86

12 Sept 86

C-123

C-123

C-7 Caribou
C-7 Caribou
C-123

C-123

12 Sept 86

C-7 Caribou

13 Sept 86

C-123

13 Sept 86
13 Sept 86

13 Sept 86

14 Sept 86

C-123

C-7 Caribou
C-7 Caribou
C-123

14 Sept 86
17 Sept 86

C-7 Caribou
C-123

19 Sept 86

20 Sept 86

C-123
C-123

23 Sept 86

C-123

29 Sept 86

C-123

29 Sept 86

30 Sept 86
30 Sept 86
5 Oct 86

C-7 Caribou
C-7 Caribou
C-7 Caribou
C-123

Southern

Southern

FDN

FDN

Southern

Southern

FDN

Southern

FDN

FDN
FDN

Southern

FDN

Southern

Southern

FDN in the Southern Provinces

Southern

Southern

FDN
FDN
FDN

FDN in the Southern Provinces

Lethal HK-21 machine guns, car-
tridges, C-4 explosive, hand gre-
nades, shells
Lethal No drop No contact in DZ
Troops on ground unable to identi-
fy coordinates of DZ. Bad weath-
er. Arrived at coordinates early

Weapons & supplies.

Lethal 384 81mm shells

Lethal load 10,000 lbs. No drop
made Bad weather. Called North's
office to get assistance w/ weather
reports.

Drop 10,000 lbs. Rifles, grenades
mortar shells, cartridges and non-
lethal

3800 lbs. of ammo grenades and non-
lethal

10,000 lbs. dropped cartridges, hand
grenades and non-lethal

5.000 lbs food 4,630 grenades

1500 lbs of chutes & straps

Additional delivery

10,000 lbs cartridges, shells, machine
guns, and grenades

mortar shells

9850 lbs. cartridges, C-4 explosive,
fuses, detonators, and grenades.

10,500 lbs. lethal

10,500 lbs. lethal 3 machine guns,
ammo, grenades, all received in
good shape.

10,100 lbs 15 pallets Lethal: grenades,
AK's 702 ammo

Lethal Drop Cartridges, shells, and
grenades

2,400 hand grenades

Lethal Drop

Lethal

Lethal; Plane shot down. Carrying
guns & other ammo. Left Airbase
at 0950. Full fuel and 10,000 lbs.
route same as usual. Planned to
return to Airbase 1530. Never
reached DZ.

Source: Flight logs and mission reports compiled by air resupply operation pilots and flight crew.

77-02b 0

81

Chapter 3

Chapter 3

I. Secord Test., Hearings, 100-1 at pp. 57-65; (hereinafter
"Secord"), North Test., Hearings, 100-7 I at 162; (herein-
after "North"), Signed Memorandum of Interview of Rich-
ard V. Secord, Aug. 18, 1987 (hereinafter "Secord Inter-
view").

l.Id.

3. Secord, Id.

4. Secord, Hearings, 100-1 at 58.

5. Id.; Owen, Hearings, 100-2, at p. 36. See also Section
on Enterprise of the Narrative.

6. See Note 1 supra.
l.Id

S.Id

9. Id. Although the participants did not decide to author-
ize specific action, they agreed on the need to conduct
resistance activities inside Nicaragua's urban areas. This too
was a subject that North and Calero had previously dis-
cussed. Indeed, North had in December introduced Calero
to David Walker, a British insurgency expert, to conduct
such operations.

10. North Test., Hearings, 100-7, at 94.

II. McFarlane Test., Hearings, 100-2, at 96-97.

12. Poindexter Test., Hearings, 100-8, at 8 (hereinafter
"Poindexter"). See also North, 100-7, at 150 and Secord at
60 61, 138.

13. International Security and Develop. Act of 1985, Pub.
L. 99-88, 99 Stat. 149.

14. Supplemental Appropriations Act for 1985, Pub. L.
99-88.

15. Calero Test., Hearings, 100-3, at 12.

16. Duemling Deposition, 8/20/87, at 9-11.

17. Duemling Deposition, 8/20/87, at 46-48.

18. Duemling Deposition, 8/20/87, at 28-29; Abrams
Test., 100-3 at 35-36.

19. Secord Test. Id., Secord Interview and Deposition of
Richard Gadd, May 1, 1987 at 6-7.

20. Id

21. Id.; Castillo Test., Hearings, 100-4, at 40 et seq. (here-
inafter "Castillo").

22. Poindexter, Test., Hearings, 100-8, at 75.

23. Tambs Test., Hearings, 100-3, at 367-68, 375, 427;
North, 100-7, 7/8/87, at 150.

24. North Test., Hearings, 100-7, Part 1 at 173-174. North
did not identify which members of the Restricted Inter-
Agency Group were present during these discussions. (Id.)

25. Abrams Test., Hearings, 100-5 at 20.

26. North Notebooks, 8/10, 8/18/85; Castillo at 11-15,
Exhibits TC-1 and TC-2 at 87 et seq.

27. Memo from TC (Owen) to BG (North), 8/25/85,
RWO Exhibit 9; Castillo at 14 and 60 et seq.

28. Owen at 351; Castillo at 16; North Notebooks 9/3/86
and 9/17/86; Interview of Joseph Hamilton; H6345 (summa-
ry of CSF Ledger).

29. North Notebooks 10/3/85; Gadd Dep., 5/1/87, at 19-
22.

30. North Notebooks, 9/10/85.

31. Gregg Dep., 5/18/87 at 27.

32. North Notebooks, 9/16/85.

33. Rodriguez Test., Hearings, 100-3, at 289-90; Ex. FIR-1
(hereinafter Rodriguez).

34. Poindexter Test., Hearings, 100-8, at 75.

35. North Notebooks 7/23-24/85, 8/3/85, 8/15/85;
Dutton Test., Hearings. 100-3, at 212 and 283 (hereinafter
Dutton); Coors Test., Hearings, 100-3, at 44.

36. Gadd Dep., 5/1/87, at 13-16; Dutton at 212.

37. Gadd Dep., 5/1/87, at 16-19; Secord Interview Para.
3; North Notebooks 11/15/86; Abrams Test.. Hearings, 100-
5, at 145-46; N12087 PROF Note 11/20/85, Exhibit OLN-
87.

38. Secord Interview, Para. 4; Gadd Dep., 5/1/87, at 12-
13. While the search for aircraft continued, in October 1985,
North directed troop salary payments to the FDN and in
December 1985, another 85,000 pounds of ammunition and
other arms arrived for the FDN from the Enterprise.(M ,
CSF Adjusted Ledger)

39. McFarlane, Test., Hearings, 100-2, at 28-29.

40. North Test., Hearings, 100-7, at 78-79.

41. Sigur Test., Hearings, 100-2, at 286-287.

42. North Test., Hearings, 100-7, at 78-79.

43. Ex. RCM-26.

44. Sigur Test., Hearings, 100-2, at 288-89.

45. Sigur Test., Hearings, 100-2, at 289.

46. Sigur Test., Hearings, 100-2, at 290.

47. North Test., Hearings, 100-7, at 79.

48. Sigur Test., Hearings, 100-2, at 291, id at 286-292.

49. Owen Test., Hearings, 100-2, at 11-14; North Test.,
Hearings, 100-7, Part I, at 208. Congressman Jenkins gave
this political context for the contribution from Country
Three: "In October 1985 when the NSC staff was schedul-
ing an appointment for Colonel North to meet with one of
these countries that later contributed $2 million, I was in-
volved in a tough legislative battle in this House. On Octo-
ber 12, I believe, of 1985, this House passed a textile bill,
very controversial. At that very time. Colonel North appar-
ently was soliciting, from a nation that was impacted by this
bill, funds secretly and that country later delivered $2 mil-
lion, according to the testimony. The President vetoed that
bill in December 1985 and between December 1985 and
August 1986, when the Congress decided to sustain the
President by an eight-vote margin, there were entreaties
apparently made to many other nations that were impacted
by this legislation." McFarlane 100-2, at 279.

50. S4344, Handwritten Notes, 9/24/85.

51. Owen Test., Hearings, 100-2, at 355; Duemling Dep.,
8/20/87 at 65-68 and 60-63.

52. Owen Exhibit RWO-14, 100-2 at 825-26; RWO-17,
100-2 at 831. The contract between Institute for Democra-
cy, Education and Assistance, Inc. and NHAO provided
that as a condition of the receipt of this grant, the grantee
[IDEA] agrees . . . "that Mr. Robert Owen shall not during
the term of this Grant perform any service which is related
to the acquisition, transportation, repair, storage or use of
weapons, weapons systems, ammunition or other . . . [lethal
aid]." RWO-17, Duemling Dep. at 69.

53. Owen Test., Hearings, 100-2, at 380.

54. Gadd Dep., 5/1/87, at 24-26.

55. North Test., Hearings, 100-7, at 268.

56. Poindexter Depo., 5/2/87 at 64; Memo from North to
Poindexter, 12/2/85.

57. PROF Note, North to Poindexter, 12/5/85, 22:12:05.

58. N49179, Memo, North to Poindexter, 12/10/85.

59. Id

60. Poindexter at 222-27, 310; Tambs at 380-81; Deposi-
tion of Poindexter, 5/2/87 at 64-68.

82

Chapter 3

61. Singlaub Test., Hearings. 100-3, at 89-90; Exhibit JKS-
6 at 462-65.

62. N 10720-28, Memo from Burghardt to Poinde.xter,
1/14/86.

63. Gadd Dep., 5/1/87, at 15, 21 and 26.

64. North Test., Hearings, 100-7, at 140-41; 151.

65. Gadd Dep., 5/1/87, at 42; North at 7/7/87 at 84, 150,
Secord at 65, 252; Dulton at 208-09; Poindexter at 75;
North Notebooks 1/15/86.

66. At the end of December 1985, Steele called North to
report that all was "OK" on fmal flight arrangements at the
Airbase and that fuel for the aircraft had to be handled on a
"pay as you go" basis. On January 6, North talked to Steele
about problems with Felix Rodriguez, including security
concerns and Rodroguez' ties to an arms dealer connected
to the military of a Central American country. Despite
various organizational problems, Steele called North a week
later to report significant progress. The Commander was
now "fully aboard." The building construction for a ware-
house was underway, and all that was needed was money to
pay for the fuel. On January 16, North discussed with
Steele the 3 Butler buildings Gadd was constructing and
operational security at the Airbase. North talked to Steele
again on January 20 concerning additional operational prob-
lems and determined (apparently after a call from the Chief
of the CATF) that flight planning data for resupply aircraft
should be passed to Steele for local coordination. North
Notebooks 12/19/85, 12/23/85, 1/6/86, 1/20/86, 1/31/86;
Depo. of Col. James Steele 4/21/87 at 27, 68.

67. Id., North Notebooks 1/16/86; Dep. of Gen. John
Galvin, 6/13/87 at 32-33; Castillo, Test.. Hearings, 100-4, at
15-16.

68. Id. By this time. North had also coordinated with
Castillo, Quintero's arrival and help in overseeing the air-
strip construction, particularly in obtaining local supplies.
(Id.)

69. Secord Int. Para. 8; North Notebooks Feb. 27, 1986.

70. Rodriguez Test., Hearings, 100-3, at 292.

71. On Feb. 18, North wrote in his notebook; "Call [Chief
of the CATF at the CIA] ASAP. Find A/C: L-lOO C-7
standby. See Duemling - Americit crews." The C-7 at that
time was still on standby while the L-lOO were the aircraft
Gadd had chartered from Southern Air Transport to deliver
humanitarian supplies under NHAO contract from the
United States to Central America. North Notebooks 2/18/86
and 2/29/86; Gadd at 34 et. seq.; C/CATF Dep. I 5/1/87
at 91, 103-05, 114.

72. Id

73. Owen, RWO-11, 100-3 at 816-17.

74. Owen, at 358, and RWO-14 at 825.

75. Poindexter at 222-27; Castillo Test., Hearings, 100-4, at
33.

76. Id

11. See Table of Resupply Flights made by the North/
Secord Resupply Operation During 1986, infra.

78. RWO-14a, 100-3 at 825.

79. Gadd Dep., 5/1/87, at 39; KL-43 Message April 1986;
OLN-88, Hearings. 100-7, Part 3.

80. Gadd Dep., 5/1/87, at 34-35; KL-43 Message 4/8/86,
Secord to Quintero (82330Z Apr 86).

81. KL-43 Message, 4/9/86 [Copp: 4/9/86 0945].

82. Castillo at 21-23; C/CATF Dep. I 5/1/87 at 114.

83. Castillo at 24; Dep. of Ian Crawford, 3/13/87 at 60-
61; Secord Ex. 3, 100-1 at 418-20.

84. Castillo at 22; Exhibit TC-6, 100-4. (KL-43, 4/12/86);
Dep. of Ian Crawford, 3/13/87, pp. 58-63.

85. See Note 77 supra; Crawford Dep., 3/13/87 at 58-63;
Dep. of CIA Field Operations Officer, at 45 et. seq.

86. Rodriguez Test., Hearings, 100-3, at 299; Gadd at 37-
38; Secord Int. at Para. 6.

87. North to McFarlane Memorandum dated Dec. 4,
1984; Secord at 66-67; Exhibits OLN-83, 84, 281, 282. See
also Chapter 2.

88. Secord at 68; Secord Int. Para. 8; H893 Wire Trans-
fer; Dutton at 214.

89. Secord at 64; Dutton at 204-08.

90. Dutton at 208. See also Dutton Chronology of Events
for May.

91. Dutton at 208, 212-13; Dutton Chronology of Events,
entry for 5/19/86.

92. Id

93. Dutton at 208, 223; Secord at 68.

94. PROF Note, OLN to JMP, 5/16, 19:29:43.

95. Dutton, Test.. Hearings. 100-3, at 54.

96. Dutton, Test.. Hearing.',. 100-3. at 118.

97. Dutton Ex. RCD-14.

98. Secord 5/7 at 111.

99. Dutton at 119-20.

100. Id. at 119-20.

101. Id.

102. Id.

103. Dutton at 213-14; Secord Int. Para. 8; Exhibits RCD-
14 and RCD-15, 100-3.

104. Dutton at 214-15; Secord at 251.

105. Dutton at 215 and 218.

106. Dutton at 216-17; KL-43 Message dated 6/9/86;
Pilot Mission Reports; Secord at 74.

107. KL-43 #R00022; Tambs at 381-83 and 407; Castillo
at 32-33; Interview of John C. Taylor, Commander of the
Office of Defense Cooperation, U.S. Embassy, Costa Rica.

108. North Notebooks, 6/10/86; Secord Int. Para. 7;
H495 Wire Transfer.

109. PROF Note, North to Poindexter, 6/10/86, Ex.
OLN-70, 100-7, Part III.

110. See Note 108 supra.

111. Dutton at 217; Pilot Mission Report of Bill Cooper
and John Piowatty; Dutton Chronology for June. See also
Note 74.

112. KL-43 Message North to Castillo 6/16/86, Ex.
OLN-89, 100-7, Part III.

1 13. Dutton at 217-219; Ex. RCD-14 at 8.

114. PROF Note, 5/2/86, Ex. JMP-45, 100-8.

115. PROF Note, Ex. OLN-287, 100-7, Part III.

116. PROF Note, Ex. OLN-27, 100-7, Part 3.

117. PROF Note, Ex. OLN-4; 100-7, Part III.

118. Singlaub Test., Hearings, 100-3, at 90.

119. Id. at 91.

120. Abrams Test. Hearings. 100-5, at 56-58, 124.

121. Depo. of Richard Melton, May 27, 1987, at 14-15,
20-21, 25 and 32.

122. Memo, Ex. JMP-50, N3873-34; N3738 Drop by CSIS
Briefing (Robinson) 6/10/86.

123. N 10290, Memo from Burghardt to McDaniel, 6/4/86.

124. N3738, Drop by CSIS Briefing (Robinson) 6/10/86.

125. N 10296, Memo from Burghardt to McDaniel, 6/4/86.
See also Shultz Test., at 17-19.

83

Chapter 3

126. PROF Note, North to Poindexter, Ex. OLN-10, 100-
7. Part III.

127. North Test., Hearings, 100-7, Part 1, at 311-13.

128. Id. at 310; Ex. OLN-10, 100-7, Part III.

129. Id.

130. Ex. OLN-11, 100-7, Part III; PROF Note, Ray
Burghardt to RBM, 5/28/86, 18:36, N 18096.

131. PROF Note, North to Poindexter, Ex. OLN-70, 100-
7, Part III.

132. Id.

133. Id. and Ex. JMP-52, 100-8.

134. Shultz Test., Hearings, 100-9, at 4, 18-19, Ex. GPS-8.

135. PROF Note, 6/10/86 Poindexter to North, Ex.
OLN-81.

136. Abrams Test., Hearings, 100-5, at 34; Shultz at 19.

137. Shultz Test., Hearings, 100-9, at 20.

138. PROF Note, 6/10/86, Poindexter to North, Ex.
OLN-81.

139. Shultz Test., Hearings at 19-20.

140. Abrams, 100-5 at 126-31.

141. Abrams, 100-5 at 34.

142. Abrams, 100-5 at 42; North, 100-7, Part 1 at 33; Hall,
100-5 at 88.

143. Rodriguez Test., Hearings, 100-3, at 252-55.

144. N46325; Memo from Don Gregg to Debbie Hutton,
4/16/87; Deposition of Phyllis M. Byrne, 6/16/87 at 13;
Samuel Watson Dep., 6/16/87 at 26-27.

145. Rodriguez at 257-60.

146. Id., Depo. of Nicholas Brady, Oct. 1, 1987.

147. Dutton at 255-56; Dep. of Robert Earl 5/22/87 at
163.

148. KL-43 Message Dutton to North, 6/8/86 Ex. RCD-
1; Dutton at 220-21.

149. Dutton at 221-22; Rodriguez at 305 et seq.

150. Rodriguez at 306. See Note 65.

151. Id; North, 100-7, Part 1 at 48.

152. N37096, Memo dated 6/25/86, Presidential State-
ment: Victory of Contra Aid Legislation.

153. Poindexter, 100-8 at 104.

154. North, 100-7 at 312; Dutton at 222-25.

155. Ex. OLN-198, 100-7, Part III.

156. Secord Ex. 4, 100-1 at 439.

157. Ex. OLN-158, 100-7, Part III; North, 7/14/87 at 146.

158. PROF Note, 7/86, 15:31, Poindexter to North.
North continued to hope, up through September, that the
assets could be sold. On Sept. 3 or 4, North met with
Ambassador Tambs and told him that he wanted to sell the
assets because the Freedom Fighters were out of money.
North hoped to raise about $5 million. Tambs was skeptical.
He knew that the Costa Rican Government closed down
the airstrip. Tambs asked North: "How could you sell
something which you couldn't use?" North did not reply.
Tambs, 5/28 at 170-72, 234.

159. George Test., Hearings, 100-11, at 35-36.

160. Dutton at 225-226; Rodriguez at 307-309; KL-43
Messages in July and August.

161. Id

162. North Notebooks, 8/6/86.

163. Dep. of Donald Gregg at 11-12.

164. North Notebooks, 8/7/86.

165. Dep. of Robert Earl, 5/2/87 at 101-04.

166. Rodriguez at 309-10; Earl at 166-69. Sam Watson,
Gregg's deputy, was also at the meeting. His notes state:

"Felix— Tom Clines, Secord— Ripping Off Contras— Fraud,
a crime to profit." N46663.

167. Gregg Dep. 5/18/87 at 28-29.

168. Gregg Dep., 5/18/87 at 14, 34.

169. Gregg Dep. at 30-31; Earl Dep. at 175.

170. KL-Messages # 340, 342, 347, 351, and 345. See also
Secord Ex. 3, 100-1 at 430 et seq; Dutton at 225-27.

171. Dutton at 225-27; Steele Dep. at 72.

172. See Note 170 supra.

173. KL-43 8/22/86 Secord Exhibit 3 at 431.

174. Dutton at 234.

175. North, 100-7 I at 86-89 and 158.

176. Hearings, Testimony of C/CATF 8/5/87 at 66-67.

177. Dutton at 229-30; KL-43 8/22/86 RCD-5.

178. Id North Notebooks 9/4/86; KL-43, Secord Ex. 3 at
434.

179. Dutton at 230-35 and accompanying exhibits, RCD-
6, 7, 8 and 9.

180. Id

181. KL-43 Messages Ex. RCD-9, 10 and KL-43 Message
Dutton to North, 9/17/86, #423.

182. Dutton at 232-34; Ex. OLN-162, 100-7; PROF Note
North to Poindexter Sept. 15, 1986.

183. Dutton at 236.

184. Dutton at 236-37.

185. North at 133; Poindexter at 227.

186. PROF Note, 9/12/86, 21:50, North to Poindexter
(N12163).

187. Ex. OLN-60, OLN-160, OLN-161, 100-7, Part III;
Ex. JMP 60, 100-8.

188. Ex. OLN-303, 100-7, Part III.

189. North Test., Executive Session.

190. Id

191. North Notebooks 9/6/86; Tambs at 210.

192. W., Abrams at 124-25.

193. Ex. OLN-203, 100-7, PROF Note, 9/7/86, 11:18:45,
Poindexter to North; Ex. OLN-301, 100-7, Part III; North
Test., 100-7 I at pp. 86-87.

194. PROF Note, 9/25/86, 11:23, Poindexter to North.

195. N18064-65, Prof Note, 9/25/86, 17:39:51 North to
Poindexter

196. N30783, Memo North to Poindexter, 9/30/86

197. N18063, Prof Note, 9/25/86, 11:23:45, Poindexter to
North

198. N30782, Memo, North to Poindexter, 9/30/86

199. Dutton at 237-38.

200. Dutton at 238-39; KL-43 Message, Ex. RCD-12.

201. Id

202. Abrams Test., Hearings, 100-5, at 62.

203. Dutton at 239-40.

204. Report of the President's Special Review Board,
February 26, 1987 at III-24.

205. The New York Times, May 16, 1987 at A 1.

206. McFarlane Test., Hearings, 100-2, at 17.

207. Poindexter Test., Hearings, 100-8. at 54-55.

208. Poindexter, 100-8, at 54-55, 73-76, 89, 222-29.

209. Poindexter, 100-8 at 101.

210. Id

211. Poindexter, 100-8 at 225-226.

212. Id at 229.

213. Rodriguez, 100-3 at 67.

214. North at 223-225.

215. Gates Test., Senate Select Committee on Intelligence
Dec. 4, 1986, at 38.

84

Chapter 4

Private Fundraising: The Channell-Miller

Operation

While donations from other countries and profits from
the Iran arms sales provided most of the money for
lethal assistance to the Contras after the Boland
Amendment, the network of private foundations and
organizations formed by Carl R. "Spitz" Channell and
Richard R. Miller also played a role. Channell's prin-
cipal organization, the tax-exempt National Endow-
ment for the Preservation of Liberty (NEPL), used
White House briefings and private meetings with the
President to raise more than $10 million from private
contributors, almost all for the Contra cause. Over
half of this total came from two elderly widows —
Barbara Newington and Ellen Garwood — who made
the bulk of their contributions after receiving private
and emotional presentations by Lt. Col. Oliver North
on the Contras' cause and military needs. One dozen
contributors accounted for 90 percent of NEPL's
funds in 1985 and 1986.

Of the $10 million that was raised, only approxi-
mately $4.5 million was funnelled to, or spent on
behalf of, the Contras, including more than $1 million
for political advertising and lobbying. The rest was
retained by Miller and Channell for salaries, fees, and
expenses incurred by their organizations, including
compensation to their associates, David Fischer and
Martin Artiano.

The NEPL money spent for direct and indirect
assistance to the Contras was disbursed primarily by
Miller at the direction of North. Approximately $1.7
million was "washed" by Channell through Miller's
domestic and Cayman Island entities — International
Business Communications (IBC) and I.C., Inc. — to the
Enterprise, where it was commingled with funds from
third-country contributions and the Iranian arms sale.
Another $1 million was passed at the direction of
North through Miller's entities to accounts controlled
by Adolfo Calero, and approximately $500,000 was
distributed at North's request to other persons and
entities engaged in activities relating to the Contras.

Channell and Miller made elaborate efforts to con-
ceal the nature of their fundraising activities and
North's role. Certain funds received by NEPL for
Contra assistance were allocated on Channell's books
to a project denominated "Toys," a euphemism for
weapons. The NEPL and IBC employees were in-
structed to refer to North by a code name, "Green."

Funds were transferred to the Contras, not directly —
which would be traceable — but through Miller's
anonymous offshore entity, I.C., Inc. North misrepre-
sented to several White House officials the nature of
the network's fundraising activities. For instance, the
President apparently was led to believe that the funds
were being raised for political advertising; the Presi-
dent's Chief of Staff, Donald Regan, was deliberately
kept in the dark by North and Admiral John Poin-
dexter; and North misrepresented to Congress and
White House personnel the nature of his involvement
in the activities of NEPL and IBC. As a result, the
network was able to operate successfully until the
latter part of 1986, when increased Government aid to
the Contras and public disclosure of both the Iranian
arms sales and the Contra resupply network made
further assistance efforts unnecessary and unwise.

By using a tax-exempt organization to funnel
money to the Contras — for arms and other purposes —
Channell and Miller provided tax deductions to
donors. As a result, the U.S. Government effectively
subsidized a portion of contributions intended for
lethal aid to the Contras. In the spring of 1986, Chan-
nell and Miller pled guilty to criminal tax charges of
conspiring to defraud "the United States Treasury of
revenues to which it was entitled by subverting and
corrupting the lawful purposes ... of NEPL by using
NEPL ... to solicit contributions to purchase mili-
tary and other non-humanitarian aid for the Contras."
At his plea hearing, Channell identified Miller and
North as his co-conspirators.

The Background

Carl R. "Spitz" Channell

Channell, 42, was raised in Elkton, West Virginia.
He attended American University from 1963 to 1968
and then, for a brief period, the Union Theological
Seminary in Virginia. He left to join the Army and,
after service for 3 years, received an honorable dis-
charge.^

In 1976, Channell began to work for Terry Dolan,
the founder of the National Conservative Political
Action Committee (NCPAC). His initial responsibility
was assisting in Congressional campaigns. After the

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1978 elections, Dolan asked Channell to shift to fund-
raising. To Channell's own surprise, he was an instant
success, and was named by Dolan as NCPAC's first
national finance chairman. In that position, Channell
concentrated on NCPAC's "high dollar donor pro-
gram" and set up a number of briefings in Washington
for potentially large contributors.^ This fundraising
method was to become the standard operating proce-
dure for the Channell-Miller network.

In 1982, Channell left NCPAC to form his own
political consulting organization, the Channell Corpo-
ration, to offer fundraising advice to campaigns and
candidates. By 1984, he began to establish a network
of other politically-oriented foundations. First, he
founded the American Conservative Trust (ACT) as a
Political Action Committee (PAC). At approximately
the same time, he incorporated NEPL and sought
Internal Revenue Service (IRS) recognition of NEPL
as a tax-exempt foundation under Section 501(c)(3) of
the Internal Revenue Code.^

In its application for tax-exempt status, NEPL as-
serted that it was formed "to educate members of the
general public on American political systems and soci-
etal institutions." The application further stated that
this education was to be accomplished through the
study of the development of American political sys-
tems and the influence of such systems on societal
institutions in the United States. NEPL indicated to
the IRS that it would collect information on these
topics, make that information available to the general
public, and eventually conduct seminars.*

On December 12, 1984, the IRS issued a determina-
tion letter stating that, based on the information con-
tained in NEPL's application and assuming that its
operations would be consistent with the program out-
lined in the application, NEPL qualified as an exempt
organization under Section 501 (c)(3). s*

According to Channell, when he formed NEPL in
late 1984, most "Washington insiders" doubted that
anyone could raise money to advance foreign policy.
Channell, however, believed that he could succeed
because his major donors were committed to Presi-

•Channell formed additional entities between 1983 and 1986. The
American Conservative Trust State Election Fund (ACT-SEF) was
formed as a state PAC to take advantage of state laws allowing
corporate contributions to such entities. "Sentinel" was formed in
1983 as a lobbying organization under Section 501(c)(4) of the tax
code. The "American Conservative Foundation," a 501(c)(3) corpo-
ration also established in 1983, was intended to focus on issues that
were "more worldwide in scope and interest" than NEPL. The
"Anti-Terrorism American Committee" (ATAC) was formed in
1986 as a PAC focusing on "congressional attitudes toward terror-
ism and policies associated with terrorism." "Grow Washington"
and "Hill Potomac" were corporations established to pursue specif-
ic initiatives that, according to Channell, never materialized. Those
entities have therefore remained inactive and unfunded. In 1986,
Channell assumed control of another conservative organization.
Western Goals, which had been established by the late Representa-
tive Larry McDonald. Channell Dep., 9/1/87, at 62-66.

dent Reagan and his philosophy toward foreign af-
fairs.®

At first, NEPL concentrated on raising funds to
publicize "European issues," e.g., SALT, summits,
and nuclear freeze proposals. In January 1985, after
NEPL ran a large newspaper advertisement congratu-
lating President Reagan on his inauguration, Channell
received a call from Edie Eraser of the public rela-
tions firm. Miner & Eraser. According to Channell,
Eraser indicated that she admired the ad and asked
for NEPL's assistance in organizing and promoting a
fundraising dinner for the Nicaraguan Refugee Fund
(NRF). This was Channell's introduction to the Con-
tras' cause.'

To assist him, Channell recruited Daniel Conrad, a
fundraising consultant from San Francisco, with
whom Channell had dealt on earlier occasions.
Conrad came to Washington, and together he and
Channell initiated NEPL's involvement in the Nicara-
guan issue.*

Daniel L. Conrad

Conrad, 44, received a bachelors degree in English
and Political Science from Northwestern University
in 1965. He also did graduate work in philosophy and
business at Northwestern and the University of Michi-
gan.^ In the late 1960s, after short stints as a manage-
ment trainee at Ford Motor Company and a fundrais-
er for Northwestern, Conrad joined Harvey Fundrais-
ing Management of Milwaukee, Wisconsin, as a field
director for campaigns. '°

In the early 1970s, after a brief career as a stock-
broker, Conrad started his own firm, the Institute for
Fundraising, in San Francisco. It was a sole propri-
etorship that presented seminars, produced manuals,
and offered consulting services in the field of fund-
raising. ' '

In the late 1970s, Conrad incorporated his business
as Public Management Institute (PMI), which evolved
from a training and consulting services firm to one
primarily engaged in the publishing of periodicals and
reference materials on financial grants and capital
campaigns. Conrad himself continued, however, to
consult on fundraising matters. '^

Conrad first met Channell in 1978 or 1979 at a
seminar on fundraising being taught by Conrad in
Alexandria, Virginia. After their initial meeting,
Channell called Conrad periodically for informal
advice on fundraising. In 1983 or 1984, Channell hired
Conrad as a consultant to advise him on how to build
a political consulting business, an assignment that
lasted approximately 1 week.'^

Given Channell's history of looking to Conrad for
advice, it was natural for Channell to ask Conrad to
assist him in fundraising for the Contras — even
though Conrad had never been involved in political
fundraising and had no particular interest in the Nica-
raguan issue.'* Their financial arrangement was never

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Chapter 4

formalized. According to Conrad, Channel! just gave
him money periodically. For his efforts on the NRF
dinner, for example, Conrad recalls receiving $10,000
or $15,000 from Channell, $10,000 from the NRF, and
$1,500 from Miner & Fraser. After that time, Con-
rad's compensation "kept changing," with Channell
deciding at various intervals how much to pay him.
According to Conrad, he signed on with Channell's
organizations more as a matter of friendship than as a
matter of business. ' ^

Although Conrad had no formal position or title,
he served initially as the number two person in each
of Channell's organizations. Channell eventually gave
him the title, "Executive Director."'®

When Conrad joined Channell, the common offices
for Channell's various entities were in a small town-
house at 305 4th Street, NE, in Washington, D.C.
Later, in August 1986, as money from Contra donors
rolled in, they moved to luxurious and spacious new
quarters in National Place, 1331 Pennsylvania
Avenue, NW, Washington, D.C, and hired additional
staff and fundraisers.

Lines of authority in Channell's organization were
informal. Fundraisers reported either to Conrad or
Channell, who shared responsibility for training them.
Channell, however, was generally in charge of pre-
paring the script to be used for soliciting prospective
donors. ' '

Richard R. Miller and IBC

Miller, 35, received a bachelors degree in 1976 from
the University of Maryland. During parts of 1979 and
1980, he served as director of broadcast services for
the Reagan campaign. William Casey, Director of the
1980 Presidential campaign, furloughed him when
funds ran short but then rehired him. During the
furlough, Miller formed Ram Communications, a
short-lived public relations firm.'*

After the 1980 election. Miller served on the transi-
tion team and then briefly as special assistant to the
director of public affairs in the Department of Trans-
portation. From February 1981 to February 1983, he
was chief of news and public affairs for the Agency
for International Development (AID). He was then
promoted to public affairs director at AID, where he
remained until 1984.'^

Upon leaving AID, Miller established IBC as a sole
proprietorship to engage in media relations, strategic
planning for public affairs, political analysis, and exec-
utive branch liaison. In 1984, he began to work with
Francis Gomez who recently had left his position as
Deputy Assistant Secretary for Public Affairs in the
State Department. Miller had first met Gomez in Feb-
ruary 1982.20

Immediately upon leaving the State Department in
February 1984, Gomez received a contract from the
State Department to assist its newly formed Office of
Public Diplomacy for Latin America and the Caribbe-

an (S/LPD) with public relations advice and support.
The original purchase order for the contract specified
that Gomez was to write talking point papers on
Central America, prepare speaker kits, identify and
refute distortions and false allegations regarding U.S.
policy, draft sample speeches, prepare op-ed pieces
and feature articles, assist Central American refugees
and exiles visiting Washington, arrange media events
for them, and make them available for Congressional
interviews.^'

This contract was renewed with Gomez in May
1984 and then assumed by IBC in August or Septem-
ber 1984. Before it terminated in September 1986 after
several renewals, Gomez and IBC received a total of
$441,084 from the State Department. 22*

By mid- 1984, with the assumption of the State De-
partment contract, IBC was functioning as an infor-
mal partnership between Miller and Gomez, even
though Gomez was technically a subcontractor to
IBC. At a later time. Miller and Gomez would each
establish personal corporations — Miller Communica-
tions, Inc. and Gomez International, Inc. — and, effec-
tive January 1, 1986, would restructure IBC into a
partnership of those two entities. There is not, howev-
er, any written partnership agreement. ^3**

In September 1984, IBC also began to represent one
of Adolfo Calero's organizations, the Nicaraguan De-
velopment Council (NDC). Initially, IBC charged
NDC $3,000 a month for public relations services, a
fee that was later raised to $5,000 a month when IBC
hired a full-time employee to do work for NDC. This
relationship gave Miller and Gomez significant oppor-
tunities to work closely with Calero, Alfonso Robelo,
and Arturo Cruz. 2*

In the course of assisting the Contras with their
public relations. Miller was introduced to North, ap-
parently by either Otto Reich or Jonathan Miller (no
relation) — Director and Deputy Director of S/LPD —
who were IBC's principal contacts at the State De-
partment. ^^ In early 1985, Richard Miller became in-
volved with the NRF dinner, with which Channell
and Conrad were also engaged. This was the begin-
ning of their relationship, although the dinner de-
manded little of their respective energies and was
organized and run principally by others.

•In Audit Report No. 7PP-008, July 1987, the State Depart-
ment's Office of Inspector General filed its conclusions reached
after a special inquiry into the awarding and supervision of these
contracts with Gomez and IBC. That report concluded, in summa-
ry, that, while the original contract was justifiable, its utility
became questionable during its later stages. The Inspector General
also criticized the sole-source, noncompetitive process for awarding
and administering the contracts, especially the classification of one
version of the contracts as "SECRET," indicating that the classifi-
cation was unjustified and improper. Audit Report at 32-33.

••In July 1986, IBC entered into a joint venture with David C.
Fischer & Associates, a consulting firm founded by a former aide to
President Reagan. R. Miller Dep., 8/20/87, at 93-95.

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The NRF Dinner

According to Channell, the NRF dinner had to be
postponed several times and was an organizational
disaster. When it finally took place on April 15, 1985,
President Reagan attended and delivered the keynote
address. The NRF dinner proved to Channell that
large and expensive functions were not an efficient
method of raising money for the Contras, but the
President's commitment to the Contra cause con-
vinced Channell that the Nicaraguan issue was fertile
ground for fundraising and public education.^^

Thereafter, Channell and Conrad, with the assist-
ance of Miller, concentrated on private meetings with
potential large donors, who would be given an audi-
ence with North and, in some cases, a photo opportu-
nity with the President.

The idea of focusing on potential big givers to the
Contras was not new. Edie Fraser, one of the princi-
pal organizers of the NRF dinner, testified that at the
suggestion of the State Department she met with
North on December 11, 1984, to seek White House
"participation" in the dinner. At that meeting, Fraser
mentioned the Sultan of Brunei to North as a possible
contributor to the NRF. Fraser explained that the
Sultan had come to her attention because he had
made a contribution to UNICEF in honor of Mrs.
Reagan. On December 28, 1984, Fraser sent further
biographical information on the Sultan to North, but
does not know if North ever followed this lead.^''

On March 4, 1985, Fraser sent additional informa-
tion to North on the planned dinner. At the bottom of
the cover letter she added a handwritten note: "OUie,
Very Imp., Two people want to give major contribs
i.e. 300,000 and up if they might have one 'quiet'
minute with the President." ^®

According to Fraser, she added this note to the
letter because of her conversations with Channell and
Conrad, who suggested that some of their contribu-
tors might make large donations to the NRF dinner if
they could meet alone with President Reagan. As far
as Fraser can recall, she added the number of donors
("two") and the possible amount of money
("300,000") to her note to give the offer some defini-
tion. She cannot be sure that either Channell or
Conrad were that specific in their conversations with
her. 2^ Neither Channell nor Conrad recall discussing
such an offer with Fraser.^"

Fraser received no response from North regarding
the offer. In fact, Fraser says she never heard from or
spoke to North again after their initial meeting on
December 11, 1984. Her letters were not answered by
North; someone else at the White House ultimately
assumed responsibility for liaison with the group plan-
ning the dinner.^'

NEPL and IBC Meet

In late March 1985, prior to the NRF dinner, Chan-
nell called the office of Edward Rollins, then White

House Political Affairs Director, to ask how NEPL
could help support "the President's agenda in Central
America." Rollins's office referred the call to John
Roberts, then a White House aide, who agreed to
have lunch with Channell and Conrad. ^^

At that lunch, according to Channell, Roberts re-
sponded to their interest in the Nicaraguan issue by
stating that they should talk to Miller and Gomez, the
principals of IBC. Roberts told Channell and Conrad
that IBC was "the White House outside the White
House" on this issue. Shortly thereafter, Channell and
Conrad set up a meeting with Miller.^''*

Roberts had called Miller prior to that meeting and
alerted him to the referral, suggesting that Channell
and Conrad wanted to "help the President" on Nica-
ragua. In particular, Roberts told Miller that Channell
and Conrad wanted to do a media campaign. Roberts
did not mention any possibility of direct financial as-
sistance to the Contras.^*

Channell-Miller Network— The
Beginnings

In late March or early April 1985, Channell, Conrad,
Miller, and to a significantly lesser degree, Gomez,
embarked on an effort to assist the cause of the Con-
tras. Their joint efforts would extend into the latter
portion of 1986. According to Miller, Channell initial-
ly offered to IBC a retainer of $15,000 per month,
which IBC accepted. ^^

In exchange for this retainer, IBC was to handle
media relations, political analysis, research, advertis-
ing copy, film production, and other public relations
functions. There was never any written agreement,
however, reflecting the arrangement between NEPL
and IBC.36

At first, IBC lent support to the American Con-
servative Trust and NEPL in their efforts to educate
the public on the Nicaraguan issue. Very quickly,
however, Channell expressed to Miller an interest in
raising money for the Contras. Because of their prior
contact with the Contras' organization and leaders.
Miller and Gomez believed that they could be of
assistance. One of Channell's first steps, with IBC
help, was to secure a letter from Adolfo Calero au-
thorizing NEPL to solicit contributions on behalf of
his organizations.^' This letter, dated April 10, 1985,
opened "Dear Spitz," and read in part:

Please help us to achieve our dream, a free and
democratic Nicaragua, not tied to a hostile Soviet
threat but to a peaceful democratic American
tradition.

♦With respect to this conversation, Roberts told the Committees
in an interview that he possibly described Miller as "fronting for
the State Department" or as "in the family." Roberts Int., 7/17/87.

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Chapter 4

All resources you can raise will be appreciated.
We can put all of them to good purposes.

Richard Miller and Frank Gomez can keep you
informed of our progress and serve as our con-
tact point in the United States.^*

The Initial Solicitations

In early April 1985, Channell spoke with one of his
prior contributors, John Ramsey of Wichita Falls,
Texas, who Channell felt might be interested in con-
tributing to support the Contras. Ramsey seemed re-
ceptive to the idea, but wanted to meet Calero in
person to ensure that any money he contributed
would, in fact, be used to support the Contras.^*

Channell scheduled a dinner for himself, Conrad,
Miller, Gomez, Ramsey, and Calero in Washington,
D.C., on April 10, 1985. At the last minute, however,
Calero was unable to attend and the dinner went
forward without him. Going into the dinner, Channell
had told Miller and Gomez that Ramsey was a
"tough cookie" who probably would be most interest-
ed in the Contras' need for arms and other lethal
supplies. *°

At the dinner, in a private room at the Hay-Adams
Hotel, Miller and Gomez spoke at length about the
Contras' need for supplies, both lethal and non-lethal.
Gomez showed Ramsey a book of photographs taken
during a recent trip Gomez had made to various
Contra bases in Central America. This collection in-
cluded pictures of Contra fighters, mortars, and ma-
chine guns.*'

Conrad openly tape-recorded the conversation
during dinner, supposedly because he was learning
new information about the Contras and wanted to
preserve it.*^ The transcript of the tape, as further
interpreted by Channell, Conrad, and Miller during
depositions, confirms that Channell, Miller, and
Gomez discussed the Contras' military and non-mili-
tary needs at length, often in response to questions
from Ramsey. At one point, Miller deflected a sugges-
tion by Ramsey that people be solicited to send used
shotguns to the Contras:

RAMSEY: "The best I can tell, a shotgun is the
best thing to use in jungle warfare."

GOMEZ(?): "Or a very rapid fire machine gun.
That's why the AK-47s and the M16s are the
best weapons."

MILLER: "The M16 fires a 22.5 caliber bullet."

RAMSEY: "I bet I could get 10,000 people to
give their old shotguns to this."

MILLER: "Only one problem. You can't export
guns without a license."*^

Shortly after this exchange, the subject turned to
methods of counteracting Soviet-supplied HIND heli-
copters:

GOMEZ or MILLER: "Calero has said publicly,
so that the Sandinistas could hear on secret radio
communications in the field saying we have red
eyes [missiles]. It's a big lie."

UNKNOWN: "They're playing a psychological
war against the Sandinistas."

MILLER(?): "The more sophisticated of the
shoulder-held missiles, the red eyes. There's 2
different kinds. One that's a little less expensive
and there's one that's $8,000. It can take it
out." **

Later, Channell itemized some of Calero's needs:

CHANNELL: "Calero wants those red eye mis-
siles. He wants boots. He wants back packs. He
wants AK-47 rounds which you can get on the
international market. He wants communications
equipment." *^

Ramsey, however, returned again to his suggestion
to provide the Contras with donated arms, which is
not what Channell and Miller had in mind:

RAMSEY: "We're going to call it the Shotgun
Drive. And we're going to get Remington to put
up the amo [sic]. Dupont owns Remington.

"We're going to start on CBs. We're not even
going to invoke the electronic media until we get
support or we have about three semis going
north on Tobacco Road out of North Carolina
full.

"And they keep calling on another semi.

"We got an empty semi out there? Somebody got
an 18-wheeler empty can come down and help
liberate Central America?" *^

Near the end of the transcript, the Channell-Miller
group succeeded in turning the discussion back to
missiles and money:

UNKNOWN: "Between now and May 1 the red
eye missiles could be the entire key.

"Because if they succeed at this point in launch-
ing an offensive including tanks and MI24 heli-
copters into that region and go for the

"There's two different kinds of red eye missiles.
There's one that's very unsophisticated which is
just a direct shot missile. And then there's one
that's able to take on the Hind [sic] because the
Hind has major decoy devices, has heavy arma-

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Chapter 4

ment, and it has these flares on the back of the
exhaust from the jets — the expulsion from the
engine — that mask the heat.

"So you have to have the $8,000 red eye to make
it work.'""

The transcript concludes with an observation, at-
tributed to Miller, summing up well the philosophy
with which Channell, Conrad, and Miller approached
their solicitations:

MILLER: "If you provide money for ammuni-
tion, the money they've set aside for ammunition
can go to boots.

"On the other hand, if you provide money for
boots, what they've set aside for boots can go to
ammunition."**

The solicitation was a success. The next morning
Ramsey had breakfast with Calero and, at that time or
shortly thereafter, donated $20,000 directly to the
Nicaraguan Development Council. As noted earlier,
the NDC had previously retained IBC as a public
relations consultant.*

Later, in early June 1985, Miller received a tele-
phone call from North, who asked him to try to raise
$30,000 for an undisclosed purpose related to the
Contras. North also gave Miller the name and number
of a Robelo-controlled account in the United States —
although Miller did not know that — into which any
contribution could be deposited.*^

At Channell's suggestion. Miller contacted Ramsey,
who sent $10,000 directly to the Robelo-controlled
account. *° North later confirmed to Miller that the
contribution had been received.^'

Channell then asked Miller to have North send
telegrams of appreciation to both Ramsey and Chan-
nell. Miller got North's approval for these telegrams
and sent them over North's name.^^ In those June 6,
1985 telegrams. North thanked Ramsey and Channell
for their support. ^^

The Ramsey solicitation was not, however, to
become the model. It did not produce enough money
for the effort and the donation was sent directly to
Robelo so that the Channell-Miller group was not
compensated. A new approach was undertaken.

North's Maiden Presentation

After the Ramsey solicitation, Channell drew on his
experience with NCPAC briefings, and worked with

Miller to sponsor a White House "event" for prior
and potential NEPL contributors. This event was in-
tended to educate contributors about the situation in
Nicaragua and to solicit funds for the Contras.
Through North, Miller and other IBC associates were
successful in arranging a White House briefing for a
group invited by NEPL.^*

The briefing was held on June 27, 1985, in the Old
Executive Office Building next to the White House
with North as the principal speaker. According to
Channell, North delivered what became his standard
speech about Nicaragua and the Contras. North
showed slides during his presentation, some of which
had been provided by IBC.^^

North's speech was an impassioned plea. He dis-
cussed the Communist threat posed to Nicaragua's
neighbors by the Soviet and Libyan military buildup
in Nicaragua, the political and religious repression in
Nicaragua, the humanitarian and military needs of the
Contras, and the importance of United States support
for the Contras. North also emphasized that the
United States would be flooded with millions of refu-
gees if Nicaragua continued under its existing regime
and policies.* This briefing was the initial substantive
encounter between Channell and North. **^^

After the briefing, the potential donor group was
taken across the street for a reception and dinner at
the Hay-Adams Hotel. As was to become customary,
NEPL arranged and paid for food and lodging at the
Hay-Adams for persons attending this special White
House briefing. At the dinner, Channell presented
Calero with a check for $50,000, which represented
all Contra-related contributions received to date by
NEPL. At Miller's instruction, the check was made
payable to a Calero account.^'

Channell testified that his understanding was that
the contributed funds would be used for humanitarian
supplies. This understanding was based on Calero's
specific appeal that night for medicine and food.^*

The Establishment of I.C., Inc.

Meanwhile, in March or April 1985, North was
contacted by Kevin Kattke — whom North described
to Miller as an "intelligence community gadfly" —
about an alleged Saudi Prince who proposed donating
to the Contras $14 million of profits derived from the
sale of Saudi oil.*** North referred the Prince — who

•When Ramsey was shown a copy of the dinner transcript, he
indicated that, while portions of the dialogue seemed familiar,
"[tjhere is very much on there I have never heard of before."
Ramsey Dep. at 70. Ramsey suggested that Channell, Conrad,
Miller, and Gomez "might not have ask[ed] for the money [for
lethal supplies] directly." Instead, "[t]hey were just saying that if
the [Contras] had the money they could buy them " Ramsey Dep.
at 87.

•North presented a version of his slide presentation during the
public hearings. North Test, Hearings. 100-7, Part II. at 142-46.

"Some donors who contributed money to Calero through
NEPL had received expressions of appreciation from North prior
to the June 27 briefing. E.g., RM .^577. These communications
were apparently arranged by Miller at Channell's request. R. Miller
Dep., 6/23/87, at 27.

••'The Prince eventually was determined to be a fraud, and now
is imprisoned for a separate swindle involving a Philadelphia bank.

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used a variety of pseudonyms, the most common of
which was Ebrahim al-Masoudi — to Miller, who was
engaged to market the Prince's oil. Miller and the
Prince met several times over the course of the next
several months. Miller's interest was twofold; he and
North wanted to raise money for the Contras, and he
was to receive $1 million of the profit that would be
derived from the sale of the oil.^^

Miller kept North fully apprised of his dealings
with the Prince, which eventually also included a
prospective gold transaction and assistance in freeing
the hostages held in Lebanon.^" Indeed, Miller be-
lieved that he "was an agent working on [North's]
behalf in connection with these and other activities
undertaken at North's request.^' *

On April 26, 1985, Miller and Gomez incorporated
a Cayman Islands corporation known as I.C., Inc.^^
This entity originally was intended to receive the
profits from the transactions conducted with the
Prince. Gomez was included because Miller needed a
second corporate director under Cayman Islands law
and Gomez was a close business associate on whom
Miller could rely.*^

The Cayman Islands were chosen by Miller on the
recommendation of a "political friend." Miller wished
to keep "offshore" any money that he derived from
his transactions with the Prince, because: (1) he did
not want to incur federal income tax on these pro-
ceeds; and (2) he and North "took precautions all the
time . . . not to have organizations be readily available
for public view." Miller was told that it was cheaper
to maintain bank accounts in the Cayman Islands than
in Switzerland. He also received advice from an attor-
ney that such an offshore "collection point" was a
lawful arrangement.^''

Although no proceeds were derived from the ven-
ture with the Prince,** I.C., Inc. became an integral
part of the Channell-Miller fundraising network for
the Contras. It served as a conduit, protected by
Cayman Islands bank secrecy laws, through which
the funds contributed to the tax-exempt NEPL could
be transferred to the Contras or to the Enterprise.

Miller advised North in late April or early May
1985 of the actual formation of I.C., Inc.®^ Indeed,
North testified that he directed Miller to establish this
Cayman Islands corporation to be used for Contra
funding efforts. ^^ In May 1986, Miller changed the
name of I.C., Inc. to "Intel Co-Operation, Inc.," and
amended the corporate charter to specify that the
company was engaged, among other things, in provid-

•For a more detailed account of the Prince's activities in connec-
tion with operations and persons under investigation by the Com-
mittees, see Chapter 5.

"According to Miller, he spent approximately $370,000 on ac-
tivities involving the Prince. North was aware of and approved
these expenditures. Miller did not incur monetary loss, however,
because North authorized Miller to reimburse himself for these
expenditures from Contra assistance funds transferred to IBC from
NEPL. R. Miller Dep., 8/21/87, at 404-07.

ing grants to "political and benevolent" organiza-
tions.^' At that time. Miller told North about this
name change and charter amendment, which Miller
asserts was not aimed at providing increased cover
for the operation. 8*

The Creation of the Network

Soon after the June 1985 briefing, Channell asked
Miller to arrange a meeting with North. Certain con-
tributors to NEPL were concerned about press re-
ports suggesting that contributions for the Contras
were being skimmed or spent on unnecessary or obso-
lete items. ^^ In addition, Channell wished to express
his appreciation to North for the June 27 briefing.'"

Miller ultimately arranged a meeting on July 9 for
himself, North, Channell, and Conrad at the Grill
Room in the Hay-Adams Hotel. At the meeting,
Channell asked North how best to ensure that funds
contributed to NEPL for the benefit of the Contras
actually were used for that purpose. North told Chan-
nell that henceforth "continued" contributions to
NEPL for the Contras should be passed to IBC for
proper dispersal. From shortly after this meeting
through the fall of 1986, NEPL made all Contra as-
sistance payments to IBC or to I.C., Inc.''

North had shown a flow chart to his deputy,
Robert Earl, and Miller sometime in 1985, which
showed NEPL, IBC, and I.C., Inc. as vital parts of an
elaborate Contra funding network. While this chart
turned out not to be a fully accurate depiction of the
actual workings of the network. North used it with
Miller to explain "how a covert operation is set up."
Miller recalls that the chart was similar to (although
not as complete as) a chart found in North's safe and
reproduced in the Tower Review Board Report at C-
17.'2

Channell-Miller Network— The
Operation

White House Briefings and Hay-Adams
Gatherings

The North briefing in June 1985 served as the blue-
print for other similar briefings during the next year
for NEPL contributors or potential contributors.
These group briefings occurred on October 17, 1985,
November 21, 1985, January 30, 1986, and March 27,
1986.

The White House briefings were meticulously
planned by NEPL, IBC, North, and White House
personnel. Internal White House memorandums ob-
tained by the Committees show that North was the
switching point for arranging and coordinating the
briefings with White House liaison. White House
Counsel, and White House security.

91

Chapter 4

NEPL prepared and sent invitations to persons se-
lected by Channel! and his associates. A typical invi-
tation to a briefing stated in pertinent part:

You are one of a small group of dedicated Amer-
icans who has stood by President Reagan ... in
support of his agenda. ... It will be a pleasure
to meet you in Washington on [date] when you
attend our special security briefing followed by a
working dinner. . . . Please be reminded that
your accommodations at the Hay-Adams Hotel
are taken care of and there is no expense to
you.''^

For those who attended, NEPL met them at the
airport with a limousine and escorted them to the
Hay-Adams Hotel, where all expenses were paid by
NEPL.

The group typically was taken from the Hay-
Adams to a reception room in the Old Executive
Office Building, where they were introduced to
North and other White House personnel. Other than
North, among those who participated in these brief-
ings were Patrick Buchanan, White House Communi-
cations Director; Mitch Daniels, Political Assistant to
the President; Linas Kojelis, Special Assistant to the
President for Public Liaison; Linda Chavez, Deputy
Assistant to the President and Director of the Office
of Public Liaison; and Elliott Abrams, Assistant Sec-
retary of State for Inter-American Affairs. For the
January 30 briefing, David Fischer — a former Special
Assistant to the President who became a highly paid
consultant to NEPL and IBC — even arranged for a
Presidential "drop-by."

North always delivered the principal speech and
slide presentation along the lines of the June 1985
briefing. While he was an effective speaker. North
generally was careful not to ask for money, often
telling the audience that he could not solicit funds
because he was a Federal employee. He did, however,
suggest that persons interested in contributing funds
for the Contras should speak with Channell. At least
one attendee at these briefings recalled North's stating
that there were certain matters he could not discuss
with them "on this side of Pennsylvania Avenue" but
that Channell would raise later "on the other side of
the street," a reference to the Hay- Adams Hotel.'*

An account of North's presentation was provided at
the public hearings by an eventual contributor in at-
tendance at the March 1986 briefing, William
O'Boyle:

[North] described the military and political situa-
tion in Nicaragua. He had photographs of an
airport in Nicaragua that had been recently built;
the purpose of the airport was ostensibly com-
mercial, but it was in fact a disguised military
airport. One of the uses for which the airport was
intended was to recover the Russian Backfire

bombers after they made a nuclear attack on the
United States.

Another possible use of this airport was to fiy a
certain kind of mission that was currently being
flown out of Cuba, up and down the east coast of
the United States. Apparently every day a Rus-
sian plane leaves Cuba, as I recall, and goes right
up the 12-mile limit, has some kind of large
device on the outside of the plane. . . . This
Nicaraguan air base would allow the Russians to
fly the same kind of mission up the west coast to
the United States. . . .

He described the refugee problem . . . and we
could look forward in the next few years to mil-
lions of refugees flooding across our borders as
this happened. . . .

He showed photographs which indicated that the
Nicaraguan government officials were indicated
in smuggling dope. . . . He also told an anecdote
about some Nicaraguan agents that were recently
caught with dope and money and so forth and
disguised as American agents.'^

O'Boyle indicated also that North furnished him with
classified information designed to show that the Sovi-
ets were managing the diplomacy of the Nicaraguans
before the United Nations.''^

After the briefings, Channell, Miller, and their asso-
ciates hosted a cocktail party and dinner at the Hay-
Adams, often attended by Contra leaders and some
U.S. Government officials. During the reception and
dinner, NEPL and IBC employees attempted to deter-
mine which attendees were the most likely contribu-
tors. The enticement of purchasing lethal supplies for
the Contras was often used with potential contribu-
tors. Those persons who expressed a serious interest
in contributing money for the Contras were offered
the opportunity to meet one-on-one with North, and,
if they gave enough, a meeting with the President. ''
Large contributors to NEPL uniformly received
thank you letters from North (and often from the
President) for their support of the President's policies
in Central America, although without specific refer-
ence to any contribution.''*

North's Involvement in Solicitations
Intended for the Purchase of Lethal
Supplies

In his public testimony. North testified that "I do
not recall ever asking a single, solitary American citi-
zen for money. "''^ He readily admitted, however, that
"I showed a lot of munitions lists" to Contra contrib-
utors or potential contributors "in response to ques-
tions about the cost of lethal items."*" The Commit-
tees received evidence on North's activities thai shed
light on these statements.

92

Chapter 4

1. "Big Ticket Items" and "Ollie's New Purchase"
Lists. In the late fall or early winter of 1985, Channell
asked Miller to have North prepare and provide a list
of "big ticket items" to be used in soliciting contribu-
tions for the Contras. At Miller's request, North recit-
ed a list that included heavy lifting of cargo by air-
craft (approximately $675,000 worth); training and
outfitting of an "urban tactics unit"; the resupply of a
Contra fighting unit known as the "Larry McDonald
Brigade" (a Contra unit); and probably missiles of
some kind.®'

Miller typed the list onto his computer, printed a
single copy, gave that copy to Channell, and deleted
the computer entry. Channell used this list, which
totalled approximately $1.2 million, to solicit contribu-
tions.*^ An apparently different "big ticket items" list
was prepared by North and used by him and Channell
in a solicitation of Nelson Bunker Hunt. Handwritten
notes produced by Miller indicate other conversations
with North about fundraising for lethal supplies. A
note dated September 18, 1985, contains entries read-
ing "$41 5,000- Weapons, C4, M79" and "520,000
MAUL."®^ "C4" refers to an explosive, "M79" likely
refers to a grenade launcher, and "$520,000 MAUL"
refers to the cost of eight Maule airplanes. Miller
testified that North provided this information to him
with the understanding that it would be used for
fundraising.®*

Another handwritten note of Miller's contains the
entry "Ollie's new purchase list." The note is dated
February 5, 1986.** Miller does not recall the deriva-
tion of this entry. ®^

2. North 's Special Appeals. As North testified public-
ly, he met with scores of potential contributors to
convey the plight and needs of the Contras. Insofar as
North's actual role, the more revealing of these meet-
ings are those that were conducted in private. As the
descriptions below indicate. North prepared potential
large contributors for what Conrad termed "the call
to the altar." *'

a. Nelson Bunker Hunt — In September 1985, Chan-
nell arranged a meeting in Dallas between North and
Nelson Bunker Hunt, a wealthy Texas businessman
who had contributed $10,000 to NEPL the previous
July. Channell rented a private airplane for $8,000 to
$9,000 to transport North to and from Dallas.®® * The
trip was worth the cost.

In Dallas, there was a private dinner at the Petrole-
um Club attended by Hunt, Conrad, Channell, and
North. North gave his standard briefing, without
slides, and showed Hunt a list of various Contra
needs. The list was divided about evenly between
lethal and non-lethal items, and included Maule air-
craft and a grenade launcher possibly described as an

* This was the first time North used an airplane supplied by
NEPL; on one other occasion, NEPL chartered a plane to fiy
North and his family for a weekend visit to Barbara Newington's
house in Connecticut. Channell Dep., 9/1/87, at 148.

"M-79." The total price was about $5 million. Ac-
cording to Channell, after discussing the items on the
list and their prices, North "made the statement that
he could not ask for funds himself, but contributions
could be made to NEPL, or words ... to that
effect." North then left the room, a maneuver that
had been "pre-arranged."®^

Channell explained that the list was his idea because
he wanted a "fundraising objective" to take to Hunt.
He therefore had asked North to prepare a list total-
ling about $5 million for use in the solicitation of
Hunt.90

Despite this evidence, Hunt has told the Commit-
tees that Channell never spoke to him about the Con-
tras' need for weapons. According to Hunt, Channell
told him that the Contras had "unpaid bills" for
"[f]ood and shelter, medicine, [and] general
expenses. . . ." ^ ' Hunt testified that he does not
recall any conversation he had with North at the
dinner. ^2

Nonetheless, as a result of this dinner. Hunt made
two payments to NEPL of $237,500 each.^^ One of
them was a contribution and one was a loan. The loan
was evidenced by an unsigned promissory note be-
cause Channell would not agree to the loan (especial-
ly after he was unable to find a contributor to guaran-
tee the loan on NEPL's behalO. Nevertheless, he held
the $237,500 principal for 4 months, repaying it to
Hunt in January 1986 without interest.^* Hunt subse-
quently paid $237,000 to NEPL in March 1986 as a
contribution, making his total contributions to NEPL
$484,500.9 5

In the case of Hunt's initial $10,000 contribution in
1985, he sent NEPL a personal check drawn pursuant
to a "check request" and marked "contribution." He
also itemized the $10,000 contribution as a charitable
deduction on his 1985 tax returns. By contrast, each
step in the later transactions was conducted with
Hunt's law firm — Shank, Irwin & Conant (SI&C) of
Dallas, Texas — acting as an intermediary, and issuing
its own checks, backed by Hunt's funds.®^

Hunt testified that he handled these transactions in
this manner in an effort to avoid publicity in the
"liberal media" over the contributions. He acknowl-
edged that the NEPL gifts were the only ones he had
ever made indirectly. Moreover, none of the check
requests or check stubs for the three large checks has
any entry in the section designated for "purpose."
Documentation for other checks produced by Hunt
consistently included this entry. Hunt indicated that
he must have overlooked this omission on the three
checks in question. 9'

Finally, Hunt did not itemize the $237,500 contribu-
tion on his 1985 tax return or the $237,000 contribu-
tion on his 1986 return. He explained that, because of
large losses each year, he did not need the deductions.
Nonetheless, numerous other contributions apparently
were itemized by Hunt on those tax returns. 9®

93

Chapter 4

In short, it seems that Hunt took great pains to
keep his large contributions to NEPL "off the books."
As indicated above, a note made by Miller 1 day after
Hunt issued the checks for the contribution and loan
to NEPL contains the entries "$415,000 — Weapons
C4, M79" and "$520,000 MAUL," referring to muni-
tions and airplanes. ^^ This same note refers expressly
to Hunt in a different context. '°°

b. Barbara Newington — Barbara Newington, a
wealthy widow from Greenwich, Connecticut, had
been a large contributor to Channell organizations
(and at least one predecessor organization) for a few
years. In 1985 and 1986, Newington contributed a
total of $2,866,025 to NEPL. On June 25 or 26, 1985,
she met privately with North because she was unable
to attend the Channell group meeting arranged for
the next day. She also met privately with President
Reagan on two occasions. ' ° '

In early November 1985, North, Miller, and Chan-
nell participated in a solicitation of significant contri-
butions from Newington. Miller's handwritten notes
leading up to the meeting indicate that Channell pre-
pared a proposed "pitch" for "Green" — the code
name for North used by NEPL and IBC — to use with
Newington. This "pitch" included statements such as
"[you are] the most secure person we know in the
U.S." and "[w]e are asking you to take on a project
that requires your kind of person. "'"^ Although
Miller does not specifically recall, he might have re-
layed a somewhat softened version of this solicitation
to North. » 0 3

In further preparation for the solicitation, Miller
created a file folder that contained an unclassified
photograph of a Soviet HIND helicopter on one side
of the folder and a picture of a shoulder-held surface-
to-air missile on the other side. He also included an
article from The New York Times on the capabilities
of the HIND helicopter. ^"^

The critical meeting took place in Newington's
suite at the Hay-Adams Hotel where Channell, Miller,
and Newington were joined by North. At the meet-
ing, North referred to the file folder prepared by
Miller, placed The New York Times article in front
of Newington, and described the capability of the
pictured surface-to-air missile to counteract HIND
helicopters. In response to a question from Newing-
ton, North indicated that he knew where to obtain
such missiles, although Miller cannot recall whether
North quoted any prices. North left the room shortly
thereafter. According to Miller, North's absence was
not specifically prearranged, "but it was his practice
not to be in the presence of the donor when they
were asked for money." '"^

Channell then solicited Newington for a substantial
amount of money. Over the course of the next 4 to 6
weeks, Newington made stock contributions to NEPL
worth approximately Sl.l million.'"^ Like Hunt,

Newington has denied that she ever made a contribu-
tion intended for the purchase of lethal supplies.'"''*

At some point in the spring of 1986, Channell and
Newington decided to invite North and his family to
Newington's house for a weekend of recreation and
relaxation. Miller, North, and North's family travelled
to Connecticut in a private plane chartered by Chan-
nell. It is unclear whether there was any discussion of
Contra assistance that weekend. '"^

c. William O'5ov/e— William O'Boyle testified that
he received several fundraising calls from NEPL in
early 1986. O'Boyle, an independently wealthy busi-
nessman from New York City, had been referred to
NEPL by a friend from Texas.'"*

In late March, he was invited by mailgram to a
private White House briefing on Nicaragua. He flew
to Washington on March 27, was met at the airport
by a limousine arranged by NEPL, and was delivered
to the Hay-Adams Hotel, where he met Channell,
Miller, and others. Channell escorted the group to a
meeting room in the Old Executive Office Building,
where North presented the briefing described
above.""

After the briefing, the participants returned to the
Hay-Adams for a cocktail reception and dinner at-
tended by Channell, Miller, and other NEPL and IBC
personnel. During the reception, O'Boyle indicated to
a NEPL employee, either Cliff Smith or Krishna Litt-
ledale, that he was interested in making a contribution
to purchase weapons for the Contras. He wanted to
know what weapons were needed and how much
they cost. The NEPL employee with whom O'Boyle
spoke told him later that a Blowpipe antiaircraft mis-
sile could be purchased for $20,000. ' ' »

After dinner, Channell told O'Boyle that there was
a small, select group of persons in the United States
who contributed money for lethal supplies to carry
out the President's policy in support of the Contras.
Channell asked O'Boyle if he would meet with North
at breakfast the next morning. O'Boyle agreed."^

Breakfast took place in the main dining room of the
hotel. Before North arrived, the conversation between
O'Boyle and Channell continued in the same vein as
the evening before. Channell told O'Boyle that they
had him "checked out" overnight to ensure that he
(O'Boyle) was reputable enough to join the select
group of Americans Channell had mentioned. "^

When North arrived, Channell told him that
O'Boyle was willing to contribute funds for the pur-
chase of weapons. North immediately began to de-
scribe from a notebook the Contras' needs, including
several million rounds of "NATO" ammunition. East-
ern bloc ammunition. Blowpipe and Stinger antiair-

•Miller later heard from Calero Ihat no missiles had been re-
ceived by the Contras. North told Miller that the Newington
money had been used to purchase "secure radios." R. Miller Dep..
8/20/87, at 237.

94

Chapter 4

craft missiles, and Maule aircraft. North explained
that Blowpipe missiles cost $20,000 each, but that
they had to be purchased in packs of 10. He also
mentioned that the cost of Maule airplanes was
$65,000 each. According to O'Boyle, North stated
that "he could not ask for money himself as a govern-
ment employee.""*

Either at this breakfast or the evening before,
Channell informed O'Boyle that if he contributed
$300,000 or more, a 15-minute "off-the-record" meet-
ing would be arranged between O'Boyle and Presi-
dent Reagan. Channell indicated that other people
who had contributed that amount of money had met
with the President. O'Boyle understood that these
meetings with the President were "off-the-record" be-
cause the subject matter was so secret and sensi-
tive. "^

O'Boyle told Channell that he wanted time to con-
sider whether to make a contribution. After returning
to his home in New York for a few days, O'Boyle
decided to contribute $130,000 to NEPL for the pur-
chase of two Maule airplanes.* He flew to Washing-
ton to deliver his check to NEPL headquarters and
was taken to the Hay-Adams Hotel by a NEPL em-
ployee. Channell met O'Boyle at the hotel. O'Boyle
then gave his check to Channell, who telephoned
North to join them at the hotel. "^

When North arrived, Channell showed him
O'Boyle's check, which North acknowledged. North
spoke to O'Boyle again of the Contras' military needs
and corresponding costs, but indicated that Blowpipe
missiles no longer were available. In North's presence,
Channell again told O'Boyle that a larger contribution
would warrant a meeting with the President and
asked for more money. ' ' '

Despite a visit in New York from Channell and
Conrad and another meeting with North in Washing-
ton in which North disclosed a purported "secret"
plan as to how the Contras would prevail in Nicara-
gua, O'Boyle informed Channell that he did not wish
to make further contributions to NEPL.** In any
event, in response to a subsequent mailing from
NEPL, O'Boyle made one more contribution for
$30,000. "«

d. Ellen Clayton Garwood — Ellen Garwood also tes-
tified at the Committees' public hearings. She had
been a NEPL contributor on several occasions. She is
a wealthy octogenarian widow from a well-known
family in Austin, Texas. Garwood first met North in

*The Committees have concluded from Enterprise records that
O'Boyle's contribution was used for general Contra support, not for
the purchase of two Maule aircraft.

••At the meeting in New York, O'Boyle expressed to Channell
some concerns about the legality of using tax deductible contribu-
tions for weapons. According to O'Boyle, Channell told him that a
lawyer had advised favorably on the question of legality, but that
in any event the money could not be traced because contributions
were being passed through a for-profit corporation and overseas.
O'Boyle Dep. at 91.

1984 at a Council for National Policy meeting. She
had been briefed privately by him on the Contras'
needs at least a handful of times, including once at a
small airport in Dallas when North flew there to
solicit Hunt in September 1985."^

Garwood travelled to Washington in April 1986 to
attend meetings of NEPL contributors. Prior to the
trip, Channell told Garwood that she would be pre-
sented with an appeal for much more money than had
been requested of her before.'^"

During the last day of the NEPL meetings, Chan-
nell asked Garwood to meet with him and North that
evening in the hotel lounge. At the evening meeting.
North told Garwood that the situation of the Contras
was desperate. With tears in his eyes. North explained
to her that the Contras were hungry, poorly clothed,
and in need of lethal supplies. He emphasized that the
Contra forces might not exist by the time the Con-
gress renewed Contra aid.'^'

Either North or Channell then produced a small
piece of paper with a handwritten list on it. They
discussed the list in hushed tones outside of Gar-
wood's hearing. After North left the lounge, Channell
showed the paper to Garwood. The paper contained
a list of weapons and ammunition, with a price oppo-
site each category of items. She recalls that the list
included hand grenades, antiaircraft missiles, bullets,
cartridge belts, and other items. '^^

Channell told Garwood that the items were what
the Contras needed to sustain their efforts and re-
quested her to provide the amount necessary to pur-
chase the listed lethal supplies. Channell transcribed a
copy of the list for Garwood to take with her.^^^

To supply the items on the list, Garwood immedi-
ately contributed more than $1.6 million to NEPL;
she wired $470,000 in cash and transferred stock
valued at $1,163,506. For this same purpose, she con-
tributed an additional $350,000 the next month. All
told, she contributed $2,518,135 in 1986. Garwood
stated unequivocally that the principal purpose of
these April and May 1986 contributions was to pur-
chase for the Contras the weapons and ammunition
on the list provided by North and Channell.'^*
*****

These descriptions of the Hunt, Newington,
O'Boyle, and Garwood solicitations are not exhaus-
tive. The Committees interviewed or deposed 13 of
NEPL's significant contributors during the relevant
time period, nearly all of whom reported personal
contact with North. The Committees have received
evidence that several of these contributors — including
John Ramsey of Wichita Falls, Texas, and C. Thomas
Claggett, Jr., of Washington, D.C. — made donations
intended for the purchase of lethal supplies. Chan-
nell's records reveal that 12 contributors, including
Newington and Garwood, accounted for slightly
more than 90 percent of NEPL's contributions in

1985 and 1986.

95

Chapter 4

By giving to the tax-exempt NEPL, the contribu-
tors were able to claim tax deductions even though
their contributions were intended for the purchase of
lethal supplies. The Committees have received evi-
dence that several of these contributors claimed tax
deductions for their NEPL contributions. For taxpay-
ers in the 50 percent tax bracket, this meant that the
public in effect paid for half their gifts.

The Role of the President

In a May 19, 1986, PROF note to Poindexter,
North wrote "the President obviously knows why he
has been meeting with several select people to thank
them for their 'support for Democracy' in Cent[ral]
Am[erica]."'2^ In fact, what the President knew is a
matter of some doubt.

The President, in his March 19, 1987, press confer-
ence said that he believed that contributors he met
had donated money for political advertising for the
Contras.*26 The minutes of the May 16, 1986, Nation-
al Security Planning Group (NSPG) meeting reveal
the same understanding on the part of the President.
He stated, "What about the private groups who pay
for ads for the Contras? Have they been contacted?
Could they do more than ads?" ^^'' Similarly, in prep-
aration for the January 30 briefing, Linda Chavez
wrote a memorandum to the President, stating that
"ACT and NEPL spent in excess of $3 million sup-
porting the President's programs through public
awareness using television and newspaper mes-
sages." '^^ In fact, much of the $3 million was direct-
ed toward Contra support activities, including arms.

Poindexter, however, testified at his deposition that
"[tjhere wasn't any question in my mind" that the
President was aware that the contributors he was
thanking were giving to the Contras ^^^ He added
that "in the White House during this period of time
that we were encouraging private support, we really
didn't distinguish between how the money was going
to be spent." '^° North testified that in writing his
May 19 PROF note, he assumed that the President
was aware that the contributions were for munitions,
as well as other things, although he denied ever dis-
cussing this with the President.'*'

The President met with and thanked several large
contributors for their support of his policies. David
Fischer, former Special Assistant to the President,
arranged Presidential photo opportunities or meetings
with at least seven major Channell-Miller contributors
in 1986. Fischer and Martin Artiano, a Washington
lawyer, were paid steep fees by IBC (which charged
these fees to NEPL) for arranging these meetings
(among other services). Channell's statement to
O'Boyle that these meetings carried a $300,000 price
tag is substantiated by Edie Eraser's cryptic note to
North (mentioned above); at least five of the six con-
tributors who donated more than $300,000 to NEPL
were invited to meet with the President.

The Role of David Fischer and Martin
Artiano

In late November or early December 1985, Miller
asked Martin Artiano, an acquaintance from the 1980
Reagan Presidential campaign, to help him find some-
one "who had some Washington experience at a rela-
tively senior level" to provide "consulting" assistance
to IBC on behalf of NEPL.'^a When Artiano learned
of IBC's needs, he contacted David Fischer, who had
been a friend since they worked together as advance
men in the 1976 Reagan campaign. '^^

After the unsuccessful 1976 Reagan Presidential
effort, Fischer worked as an employee of Deaver and
Hannaford, a public relations firm that did extensive
work for Mr. Reagan. Fischer was in charge of Mr.
Reagan's advance operations and served on occasion
as his personal aide during the years of preparation
for another Presidential run in 1980.'*'* During the
1980 campaign, Fischer became the full-time personal
aide to Mr. Reagan, travelling on the campaign plane
with the candidate. After the inauguration in January
1981, Fischer was appointed Special Assistant to the
President with an office adjacent to the Oval
Office.'*^ For the next 4 years— until April 1985—
Fischer was in almost constant contact with the Presi-
dent.

As President Reagan's second term began in early
1985, Fischer and his wife decided for personal rea-
sons to move to Utah. By the fall of 1985, however,
Fischer wanted to return to Washington and asked
Artiano to let him know about employment or con-
sulting opportunities'^^ When contacted by Artiano
about the IBC opportunity, Fischer authorized Ar-
tiano to pursue discussions with Miller on his
behalf.'"

When Miller decided to retain Fischer and Artiano,
he sought Channell's concurrence because NEPL ulti-
mately was to be the recipient of, and billed by IBC
for, the "consulting" services performed by Fischer
and Artiano. While all the participants recall that
Fischer and Artiano agreed to act as subcontractors
for IBC and provide services to Channell's organiza-
tions, there is sharp dispute over the terms of that
agreement. This dispute is only sharpened by the ab-
sence of a written understanding.

Channell and Conrad insist that they agreed to pay
Fischer and Artiano $50,000 for each meeting Fischer
scheduled with the President for a NEPL contributor.
Conrad claims to recall a meeting in December 1985
in Miller's office attended by Miller, Artiano, Fischer,
Channell, and himself at which Artiano broached, and
Channell accepted, this proposal.'** Channell recalls
Fischer and Artiano making this proposal but claims
that he rejected it as too expensive. Instead, according
to Channell, he opted for a straight retainer of
$20,000 per month. '*^ Gomez recalls that Fischer and
Artiano were to be compensated at least in part based

96

Chapter 4

on the number of Presidential meetings they could
arrange for NEPL contributors.''"'

Fischer and Artiano vehemently deny that any such
proposal was made or accepted. Artiano, who negoti-
ated with Miller on behalf of Fischer, testified that
they initially agreed to a 2-year consulting contract
for a monthly retainer of $20,000 a month. When he
and Fischer realized the amount of work Channell
demanded, however, Artiano testified that he request-
ed a $50,000 "acceleration" of their retainer. This
payment was made to them on January 31, 1986, and
was split evenly by Artiano and Fischer. Later, Fisch-
er demanded and received another $50,000 "accelera-
tion," which he did not split with Artiano. In July

1986, Fischer and Artiano recast their arrangement
with IBC entirely, replacing the 2-year consulting
contract with a formal joint venture between "David
C. Fischer & Associates" and ISC'"

According to both Fischer and Artiano, they
learned in early 1986 that Channell and Conrad were
operating under the assumption that there was a
straight fee-for-Presidential meeting arrangement. Ar-
tiano thereupon convened a meeting of all the princi-
pals and disabused Channell and Conrad of that
notion.'*^

Miller's recollection lends some credence to every-
one's account. He testified that the initial agreement,
struck in December 1985, was a $20,000-a-month con-
sulting arrangement. He testified, however, that this
initial agreement did not contemplate Fischer setting
up meetings at the White House. Shortly after striking
the original deal, according to Miller, Channell began
to make increased demands upon Fischer, one aspect
of which was setting up meetings between the Presi-
dent and major NEPL contributors. In exchange for
servicing those increased demands, Fischer and Ar-
tiano demanded, through Miller, an acceleration of
their retainer to $70,000 per month (that is, $50,000
per month more than the monthly fee of the original
arrangement). When Miller relayed this demand to
Channell, Channell suggested that, for such a sum,
NEPL should get at least one meeting with the Presi-
dent each month. According to Miller, Channell ulti-
mately did agree to this acceleration.'*^

All told, between December 1985 and February

1987, IBC paid Fischer $397,400 and Artiano
$265,000. Artiano transferred $60,000 of his payments
to Fischer. All of the payments were reimbursed to
IBC by NEPL.

When asked about allegations that Fischer was paid
$50,000 for each meeting arranged with the President,
Donald Regan, the President's Chief of Staff, testified
that he had no independent knowledge of such an
arrangement, but, if true, the allegations would be a
"real embarrassment." According to Regan, "we
thought he was doing it out of his concerns for the
contras and the goodness of his heart, a public pro
bono type of thing." He continued: "To find out he
was being paid for it was a real shock .... [A]nyone

getting paid to get a group into the White House, we
tried to block that." ■■'''

Fischer, however, contends that Regan knew by
the first meeting between the President and Channell
supporters — in January 1986 — that Fischer was acting
as a paid consultant to the Channell organization.
When he raised the subject with Regan, according to
Fischer, Regan responded, "I hope you're being com-
pensated for this."'*^

North's Other Fundraising Efforts

Separate from his Channell-related efforts, in the
fall of 1985, North enlisted Roy Godson — a consult-
ant to the National Security Council — to assist in rais-
ing funds for a humanitarian organization involved
with Nicaragua. Godson's efforts led to a deposit to
the I.e., Inc. account through first the Heritage
Foundation and then the Institute for North-South
Issues (INSI), a non-profit organization controlled by
Miller and Gomez. This deposit originally took the
form of a $100,000 grant from the Heritage Founda-
tion to INSI. The Heritage Foundation received the
money for the "grant" from a private contributor
arranged by Godson and Clyde Slease, a Pittsburgh
attorney and friend of Godson's. Godson had ar-
ranged for Slease to meet privately with North and
McFarlane on the need to raise funds for the humani-
tarian organization.'*^

The true objective of this "grant" was disguised in
correspondence between Miller (as Treasurer of
INSI) and Edwin J. Feulner (as President of the Her-
itage Foundation) with whom Godson had met pre-
viusly. Miller sent an INSI "grant proposal" to the
Heritage Foundation in September 1985 proposing the
preparation and dissemination of public information
materials in Central America. This proposal requested
$100,000. On October 15, the Heritage Foundation
sent INSI a check for $100,000, with Feulner stating
by letter that "[m]y colleagues and I have discussed
your proposal in some detail, and are pleased to re-
spond in a positive way." '''^

INSI passed to I.C, Inc. only $80,000 of the
$100,000 Heritage Foundation "grant," and retained
the $20,000 balance as an administrative fee. The ulti-
mate distribution of the $80,000 forwarded to I.C,
Inc. was made to an entity which, according to
Miller, North represented was an account controlled
by the humanitarian organization. INSI misrepresent-
ed on its 1985 IRS Form 990 the nature of the activi-
ties supported by this money.'**

Godson also arranged for John Hirtle, a stockbro-
ker in Philadelphia, to meet with North in Washing-
ton. Following this meeting, Hirtle and North met
again in Philadelphia with two prospective contribu-
tors.'*^ One subsequently donated $60,000 by check
dated December 13, 1985, directly to INSI. Shortly
thereafter, this amount was then transferred by INSI
directly to a Lake Resources account in Switzerland.

97

Chapter 4

What Happened to the Money

Just as only a small fraction of the Iranian arms
profits was used for the Contras, so only a small part
of the money Channell raised for the Contras reached
them. Fischer and Artiano received more than
$650,000 or more than five percent of the total money
raised, and Miller, Gomez, and their companies re-
tained a large percentage of the $5 million that IBC
received from NEPL. A total of $2,740,000 was trans-
ferred by IBC to I.e., Inc., and $430,000 directly to
Lake Resources. After deducting the payments to
Fischer and Artiano — which eventually were reim-
bursed by NEPL — the balance, approximately $1.2
million, was retained by IBC for fees-for-services and
expenses on NEFL's behalf.* This amount, however,
is not all that Miller and Gomez received from the
venture. Miller testified that North agreed in late 1985
that he and Gomez could begin to collect a 10 per-
cent commission on the payments funnelled to the
Contras through IBC and I.C, Inc. Miller stated that
North said that the 10 percent was reasonable since
"most of the other people in the business of providing
assistance to the Contras were taking 20% to
30%." '^° North, in his testimony, denied that he had
agreed to any specific percentage, but rather stated
that he had approved "fair, just, and reasonable" com-
pensation to Miller and Gomez. '^' Nonetheless,
North's notebooks contain an entry for November 19,
1985, which states "IBC - 10%."

Miller and Gomez formed another Cayman Islands
corporation in early May 1986, World Affairs Coun-
selors, Inc. (WACI) to receive the compensation ap-
proved by North. Miller instructed his Cayman Is-
lands agent to deduct automatically for WACI 10
percent of all funds transferred to I.C, Inc.^^^ A
total of $442,000 was taken by Miller and Gomez
pursuant to this commission arrangement. Miller
never told Channell that he and Gomez were receiv-
ing a 10 percent commission approved by North.
Both Miller and Gomez believed that once the Contra
assistance money left NEPL, it was subject to North's
total discretion and control. '^^

Including these commissions, IBC, Miller, and
Gomez received more than $1.7 million from the
money raised by NEPL for the Contras. Channell's
take was also substantial, though apparently not of the
magnitude of Miller's and Gomez's total compensa-
tion. He furnished his offices extravagantly and was
lavish in his expenditures. He drew compensation for
1985 and 1986 totalling $345,000, while Conrad and
his organization received more than $270,000, extraor-
dinary earnings for nonprofit fundraisers.

•During the relevant time periods IBC received $356,472 under
its contract with the State Department, $.19,000 from Calero for
services, $180,000 from affihated entities, and $407,304 from other
individuals or organizations. In other words, the amount retained
by IBC from NEPL accounted for nearly 60% of IBC's income in
1985 and 1986.

Out of the money raised by NEPL, the Contras and
their affiliated entities received only $2.7 million, with
approximately $500,000 going to other persons and
entities engaged in activities relating to the Contras.
The money was routed through IBC and I.C, Inc.
and disbursed at the direction of North to Lake Re-
sources, Calero, and the other persons and entities. In
virtually every case, Miller would tell North when
money was available and North would then instruct
him on what to do with it. Figure 4-1 depicts the
flow of money. In addition, as described in the next
section, more than $1.2 million was spent on political
advertising and lobbying for the Contras.

Political Advertising for the Contras

Apart from financial assistance to the Contras, the
major project of the Channell and Miller organiza-
tions in 1985 and 1986 was a "public education" and
lobbying program in support of U.S. Government aid
for the Contras.

The major vehicle in the "public education" cam-
paign was a series of television advertisements pre-
pared by the Robert Goodman Agency in Baltimore
that cost NEPL $1 million. Adam Goodman of that
agency, following the Senate's approval of the Contra
funding bill in 1986, wrote a letter to Channell de-
scribing their achievement:

By design, we launched the four-week national
television ad campaign in Washington, DC, in
late February. This reflected the economy of
reaching all 435 Members of the House (and 100
United States Senators) in one sitting. Beginning
with Week 2, and running through the first deci-
sive House vote in late March, we also aired spot
commercials in 23 additional television markets
across the country. These targeted markets, cov-
ering the home Districts of nearly thirty Con-
gressmen experts considered to be at the core of
the key 'swing vote' on Contra funding, added
scope and credibility to the ad campaign. In fact,
N.E.P.L.'s national television spot series was ulti-
mately seen by more than 33 million people, or
one out of every seven Americans. '^■'

Supplementing the television programs were press
conferences and speaking tours by persons supporting
the Contras. These were arranged by IBC and an-
other public relations firm, Edelman, Inc., retained by
Channell, which was paid $92,000 by NEPL.

NEPL paid $115,000 for extensive polling by the
Finkelstein Company as an aid to selecting areas
where television advertisements and speaking tours
would most likely have a favorable effect on a Con-
gressional vote. He also retained two companies,
Miner & Eraser and the Lichtenstein Company, to
generate letters to Congressmen supporting Contra
aid, and he paid two lobbyists for their services in

98

Chapter 4

support of this effort: Dan Kuykendall, who concen-
trated on undecided Repubhcans and conservative
Democrats, and Bruce Cameron, who focused on lib-
eral Democrats.

Another organization, Prodemca, which had con-
centrated on Central American issues, also received
payments from Channell. Its representatives apparent-
ly participated in strategy sessions about enlisting
Congressional support.

Finally, it appears that Channell engaged in adver-
tising targeted to defeat Representative Michael
Barnes's bid for a Senate seat in Maryland. Represent-
ative Barnes had been a vocal opponent of military
assistance to the Contras. Channell's Anti-Terrorism
American Committee ran a series of television adver-
tisements opposing Representative Barnes during the
primary campaign. When Representative Barnes was
defeated in the primary, Channell and his associates
(Cliff Smith and Krishna Littledale) sent a telegram to
North exulting in this result:

We have the honor to inform you that Congress-
man Michael Barnes, foe of the freedom fighter
movement, adversary of President Reagan's for-
eign policy goals and opponent of the President's
vision for American security in the future has
been soundly defeated in his bid to become the
Democratic candidate for the U.S. Senate from
Maryland.

His defeat signals an end to much of the disinfor-
mation and unwise effort directed at crippling
your foreign policy goals.

We, at the Anti-Terrorism American Committee
(ATAC), feel proud to have participated in a
campaign to ensure Congressman Barnes'
defeat. '^^

Channell-Miller Network: The End
The Beginning of the End

On October 18, 1986, the President signed legisla-
tion appropriating $100 million for the Contras ($30
million for humanitarian assistance and $70 million in
unrestricted aid). The anticipation of this legislation
led to a downturn in the activities of the Channell-
Miller fundraising and Contra assistance network (see
Figure 4-1) after the summer of 1986.

With the disclosure in early November of the sale
of arms to Iran, however, persons involved in the
network became concerned that the story of the net-
work would unravel and become public. This pre-
scient concern led to meetings between Miller and
North on November 20 and 21.

The initial meeting was requested by Miller. They
met in the hallway outside of North's office in the
Old Executive Office Building. Miller told North that
he was worried about the possible legal ramifications

and the costs associated with a legal defense. North
told Miller that he should use the money left in the
Intel Co-Operation (or I.C., Inc.) account (approxi-
mately $200,000) for any legal fees that might
arise. '^8

North called Miller the next day, November 21, to
arrange a meeting later that afternoon. Miller met
North in the Old Executive Office Building, and
North asked him for a ride to Dupont Circle. Miller
told North that money was needed from a foreign
source to fund public relations and congressional ac-
tivities on behalf of the United Nicaraguan Opposition
(UNO). Miller suggested contacting the Sultan of
Brunei or an Arab country. North's response was "I
gave one to Shultz already and he [screwed it up]."
North also stated that "if Shultz knew that the Aya-
tollah was bankrolling this whole thing he'd have a
heart attack." Miller did not understand either refer-
ence.'^'

Either that day or the day before. North told Miller
that the Attorney General had advised North to
obtain legal counsel.* Miller dropped North at the
office building at 1800 Massachusetts Avenue, N.W.,
where Tom Green's law offices, among others, are
located.'*®

The Lowell Sun Allegations

On December 14, 1986, the Lowell (Mass.) Sun ran
a story under the headline "Money from Iranian
Arms Sales Was Used to Back Conservatives During
1986 Election." The story stated that "[a]bout $5 mil-
lion from the almost $30 million in excess raised from
arms sales to Iran was filtered to conservative politi-
cal action groups" to "support candidates who backed
President Reagan's pro-Contra and Star Wars poli-
cies." The only such group named in the article was
NEPL.

The Committees have uncovered no evidence to
substantiate the allegation that NEPL or any other of
Channell's political action groups received any pro-
ceeds derived from the sale of arms to Iran. In this
regard, the Committees have accounted for virtually
all of the funds received by Channell's organizations
during the relevant period, none of which are trace-
able to the Iranian arms sales. Similarly, the Commit-
tees have accounted for virtually all expenditures
from the Enterprise, and none of these were paid to
Channell's organizations.

NEPL Activities in December 1986

In December 1986, NEPL's staff received an un-
usually lengthy holiday vacation from December 15
to January 5, 1987. The reason given for this lengthy
break was that the media were making it too difficult

*The Attorney General denied that he offered such advice to
North. Meese Dep., 7/8/87, at 103. See Chapter 20 for a more
complete description of the events in November 1986.

99

Chapter 4

for the organizations to conduct their work and that
the most sensible response was to close operations for
a couple of weeks. '*^

Immediately prior to the extended holiday, two
NEPL accounting employees were instructed by their
supervisors to delete from the accounting records any
and all references to the "Toys" project. As men-
tioned above, contributions intended for the purchase
of lethal supplies generally were designated on
NEPL's books for the "Toys" project. Alterations in
the accounting records and related floppy discs were
made to modify prior references to "Toys" to a neu-
tral project named "CAFF TV" (presumably Central
American Freedom Project — Television Advertis-
ing), i^o

In addition, NEPL's principal accountant took all
NEPL accounting materials home with him during
the vacation, including financial records, bank state-
ments, check books, deposit slips, and the like. '^'
The evidence obtained by the Committees suggests
that all such records were taken to perform year-end
accounting tasks and were returned by the accountant
without further alteration.

February 1987 Report from IBC to NEPL

On February 16, 1987, IBC issued a report to
NEPL that reconstructed the disposition of the
Contra assistance payments made by NEPL to IBC
and I.e., Inc. during the period from July 1985
through the end of 1986. The report contained sup-
porting documentation for many of the relevant trans-
actions.'^^

In a summary at the beginning of the report, IBC
acknowledged that most of the disbursements of these

funds were made "at the request of Lt. Col. Oliver L.
North." Moreover, the summary states that "we were
assured by [North] at the time that the funds were to
be applied solely for humanitarian assistance." '^^
Miller has told the Committees that he would write
these statements differently if he were writing them
today."^'**

Guilty Pleas of Channel! and Miller

On April 29, 1987, Channell pled guilty to a one-
count criminal information filed the same day by the
Independet Counsel. As noted above, the information
charged that Channell, Miller, "and others known and
unknown to the Independent Counsel" conspired "to
defraud the IRS and deprive the Treasury of the
United States of revenue to which it was entitled by
subverting and corrupting the lawful purposes ... of
NEPL by using NEPL ... to solicit contributions to
purchase military and other types of non-humanitarian
aid for the Contras," in violation of 18 U.S.C. Section
371. The acts identified by the information as part of
the conspiracy include the Ramsey, Hunt, Newington,
O'Boyle, Garwood, and Claggett solicitations. At the
hearing in which Channell's guilty plea was accepted
by the Federal district court, Channell named Miller
and North as his co-conspirators.

Miller pled guilty to a substantively identical crimi-
nal information on May 6, 1987. Both Channell and
Miller are awaiting sentencing.

•According to Miller, he told North in late 1986 that he "hoped
to hell the account had been used for humanitarian assistance."
North responded "Oh hell, yes." R. Miller Dep., 8/21/87, at 331.

100

Chapter 4

Figure 4-1. The Channell-Miller Contra Assistance Network

Naiionai

Endovvmeni fo'

Ihe P'esc'vaiion

0' Liberty (NEPL)

This chart represents the money flow of the Channell-Miller Contra Assistance Network.

Source: Senate Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition
and House Select Committee to Investigation Covert Arms Transactions with Iran.

101

Chapter 4

Chapter 4

1. Channell Dep., 9/1/87, at 2-4.

2. Id., at 6-10, 14-16, 21; 9/2/87, at 163.

3. Id.. 9/1/87, at 30-34.

4. CH 4477-80.

5. CH 4437.

6. Channell Dep., 9/2/87, at 163-64.

7. Id.. 9/1/87, at 40-41; 9/2/87, at 165.

8. Id.. 9/1/87, at 49-50.

9. Conrad Dep. at 4-6.

10. Id at 6-8.

11. Id. at 8-10.

12. Id. at 12-16.

13. Id at 20-22, 25-27.

14. Id at 24, 557, 559-60.

15. Id at 28-38.

16. Id at 38-39.

17. Id at 41.

18. R. Miller Dep., 8/20/87, at 92-93.

19. Id. 6/23/87, at 19-20.

20. Id.. 6/23/87, at 19-21; 8/20/87 at 93-95.

21. Audit Report No. 7PP-008, Office of Inspector
General.Department of State (July 1987).

22. Id

23. R. Miller Dep., 8/21/87, at 93.

24. Id, at 285-86, 306.

25. Id, 8/20/87, at 125-26.

26. Channell Dep., 9/2/87, at 165-67.

27. Fraser Dep. at 28, 31-39; N 6298.

28. Fraser Dep. Ex. 3.

29. Fraser Dep. at 41-60.

30. Channell Dep., 9/2/87, at 75-77; Conrad Dep. at 580-
81.

31. Fraser Dep. at 28-30, 48-49.

32. Channell Dep., 9/1/87, at 52-53.

33. Id. at 52-54.

34. R. Miller Dep., 8/20/87, at 135-37.

35. Id, at 137.

36. Id., at 137-39.

37. Id, at 14849.

38. CH 32022.

39. Channell Dep., 9/1/87, at 80-82; R. Miller Dep., 8/
20/87, at 141-42.

40. Channell Dep., 9/1/87, at 80-83; R. Miller Dep., 8/
20/87, at 142.

41. CH 36920-35; R. Miller Dep. Ex. 10.

42. Conrad Dep., 6/10/87, at 75-76; Gomez Dep. at 32-
33.

43. R. Miller Dep. Ex. 10.

44. Id

45. Id

46. Id.

47. Id

48. Id

49. R. Miller Dep., 6/23/87, at 24-25.

50. Ramsey Dep. at 55; R. Miller Dep., 6/23/87, at 27.

51. R. Miller Dep., 6/23/87, at 27.

52. Id

53. RM 3577; RM 3578.

54. Channell Dep., 9/1/87, at 76-78.

55. Id. 9/2/87, at 171.

56. Id. 9/1/87, at 87-88; 9/2/87, at 168-71. See also
O'Boyle Test., Hearings, 100-3, 5/21/87, at 117-19.

59.

57. Channell Dep., 9/1/87, at 78-80.

58. Id

59. R. Miller Dep., 8/21/87, at 382-89.

60. Id. at 389-90.

61. Id. 8/20/87, at 98-99.

62. RM 1136-44.

63. R. Miller Dep., 8/20/87, at 96-100.

64. Id. at 102-04, 113-14.

65. Id. 6/23/87, at 29.

66. North Test., Hearings. 100-7, Part II, 7/13/87, at 58-
9.

67. RM 1541-42.

68. Miller Dep., 8/20/87, at 124.

69. Id. 6/23/87, at 28.

70. Channell Dep., 9/1/87, at 91.

71. R. Miller Dep., 6/23/87, at 28-30.

72. Id. 8/20/87, at 110-13.

73. CH 35141.

74. McLaughlin Dep. at 50-52.

75. O'Boyle Test., Hearings. 100-3, 5/21/87, at 117-19.

76. Id

II. Id at 120.

78. R. Miller Dep., 9/15/87, at 511-15.

79. North Test.. Hearings. 100-7, Part I, 7/7/87, at 89-90.

80. Id. at 91.

81. R. Miller Dep., 6/23/87. at 32-33.

82. Id. at 32-34.

83. RM 971.

84. R. Miller Dep., 7/3/87. at 75-76; 8/20/87, at 252-56.

85. RM 859.

86. R. Miller Dep., 8/20/87, at 266-67.

87. Conrad Dep., 6/10/87, at 147-48.

88. Channell Dep., 9/1/87, at 123.

89. Id. at 113-20; 9/2/87, at 171-72.

90. Id. 9/1/87, at 110-11.

91. Hunt Dep., at 32-33.

92. Id. at 21.

93. Id. at 32, 48.

94. Channell Dep. 9/1/87, at 124-25.

95. Hunt Dep. at 52.

96. Id. at 46-55, 79-80, 82-83.

97. Id. at 34, 56, 80-85.

98. Id. at 67, 82-83.

99. RM 971.

100. R. Miller Dep., 6/23/87, at 75-76; 8/20/87, at 254-

101. Newington Dep., at 16-17, 36, 56-58.

102. RM 1042.

103. R. Miller Dep., 8/20/87, at 248-50.

104. Id., 6/23/87, at 34-35.

105. Id, at 34-36.

106. Id, at 36-37.

107. Newington Dep., at 33, 45, 86-87, 90-93.

108. Channell Dep., 9/1/87, at 148.

109. O'Boyle Test., Hearings, 100-3, 5/21/87, at 116-17.

110. Id at 117-18.

III. Id at 118-19.

112. Id at 119.

113. Id at 120.

114. Id at 120-21; O'Boyle Dep. at 42-44.

55.

102

Chapter 4

Hearings. 100-3, 5/21/87, at 120;

100-3, 5/21/87, at 121-22;

114;

115. O'Boyle Test.,
O'Boyle Dep. at 46-47.

116. O'Boyle Test., Hearings.
O'Boyle Dep. at 54-55.

117. O'Boyle Test., Hearings. 100-3, 5/21/87, at 122.

118. Id. at 123-24.

119. Garwood Test., Hearings, 100-3. 5/21/87, at 112-14;
Garwood Dep. at 12-15, 16-18, 20, 28-30, 32-36.

120. Garwood Test., Hearings. 100-3, 5/21/87, at 113.

121. Id. at 112-13; Garwood Dep. at 33-34.

122. Garwood Test., Hearings. 100-3, 5/21/87, at 113-14;
Garwood Dep. at 34.

123. Garwood Test., Hearings. 100-3, 5/21/87,
Garwood Dep. at 35-38.

124. Garwood Test., Hearings. 100-3, 5/21/87, at 115-16;
Garwood Dep. at 58-61.

125. N 12528.
New York Times, 3/20/87, at A- 10, col. 4.
N 10298.
N 22715.

Poindexter Dep., 5/2/87, at 203.
Id at 202.

North Test., Hearings. 100-7, Part I, 1/1/%1, at 92.
Artiano Dep. at 58-59.
Id at 44-45.

Id. at 45; Fischer Dep. at 6.
Fischer Dep. at 9; Artiano Dep. at 46-50.
Fischer Dep. at 159.
Artiano Dep. at 59.

138. Conrad Dep., 6/10/87, at 179-80.

139. Channell Dep., 9/1/87, at 155-59.

140. Gomez Dep. at 61-64.

126.
127.
128.
129.
130.
131.
132.
133.
134.
135.
136.
137.

141. Artiano Dep., at 64-72, 78-90; Fischer Dep., at 35-
38; 97-104, 111-119.

142. Fischer Dep., at 104-05.

143. R. Miller Dep., 8/21/87, at 358-62.

144. Regan Test., Hearings., 100-10, 7/30/87, at 58; 7/31/
87, at 116.

145. Fischer Dep. at 48.

146. Godson Dep. at 53-70; R. Miller Dep., 8/20/87, at
276-81; Slease Dep. at 20-36, 56-57.

147. RM 17211.

148. Godson Dep. at 9, 40, 47-85; R. Miller Dep., 8/20/
87, at 276-81; Slease Dep. at 20-36, 56-57.

149. Godson Dep., at 89-96; Hirtle Dep., at 27-48.

150. R. Miller Dep., 6/23/87, at 38.

151. North Test., Hearings. 100-7, Part II, 7/13/87, at
58-59.

152. R. Miller Dep., 8/20/87, at 226-28.

153. Id., at 228; Gomez Dep., at 88-89.

154. Letter from Adam Goodman to Spitz Channell, 3/
31/86, reproduced as part of Channell Dep. Ex. 1.

155. Channell Dep. Ex. 1, No. A36004.

156. R. Miller Dep., 6/23/87, at 5-8.

157. Id, at 9-14.

158. W.,at 14-15.

159. McLaughlin Dep. at 122-30.

160. S. McMahon Dep. at 50-54.

161. Id at 23-24.

162. RM 1-88.

163. RM 3.

164. R. Miller Dep., 8/20/87, at 236-37.

103

Chapter 5

NSC Staff Involvement In Criminal
Investigations And Prosecutions

During the period covered by the Boland Amend-
ment, federal law enforcement agencies conducted in-
vestigations that touched upon various aspects of the
secret Contra support operation. Concerned that these
investigations, if pursued, would expose the NSC
staffs covert operations, North and Poindexter react-
ed by contacting the agencies involved. They sought
to monitor investigations and, in some cases, to delay
or impede their progress by suggesting that national
security was at stake. Confronted with such assertions
from White House officials involved with the nation's
security, law enforcement agencies understandably
cooperated with the NSC staff by delaying some in-
vestigations, arranging to move a convicted former
foreign official whom North was afraid would dis-
close facts about the Contras to a minimum security
prison, and giving Poindexter and North information
about other investigations.

The Committees are aware of seven such episodes,
three involving the United States Customs Service
and four involving the Department of Justice. They
represent an integral part of the NSC staffs efforts to
keep its operations even from those with legitimate
law enforcement interests.

North and the Customs Service

Maule Aircraft Corporation

In the summer of 1986, the United States Customs
Service, following up on a CBS news report, began
an investigation into allegations that Maule Aircraft
Corporation of Macon, Georgia, had shipped four
aircraft into Central America to support the Contras
in possible violation of U.S. export control laws.^

In August 1986, the Commissioner of the U.S. Cus-
toms Service, William von Raab, was approached by
North, who told him that Customs agents in Georgia
were giving Maule Aircraft Corporation a hard time.^
North said the Maule Corporation shipped aircraft
such as "Piper Cubs" down south. North also said
that Maule was "a close friend of the President."
Commissioner von Raab told North he would look
into the Customs Service investigation and assigned
the matter to William Rosenblatt, Assistant Commis-
sioner for Enforcement.^

Rosenblatt contacted North, who told Rosenblatt
that the people involved in the sale and export of the
four Maule aircraft were "good guys" and had done
nothing illegal.* North insisted that the aircraft were
simply "super Piper Cubs" and were exported only to
a Central American country, where they were used to
supply the Contras with medical and humanitarian
supplies.^ Rosenblatt explained that in order to verify
the legality of the transactions. Customs needed cer-
tain documents and photographs of the aircraft,
which North promised to produce. In exchange, Ro-
senblatt agreed to postpone issuance of subpoenas.

Over the course of the next several weeks, Rosenb-
latt continued to contact North periodically to request
the promised documentation,^ which North led him
to believe would be forthcoming "momentarily." Be-
cause of North's promises, Rosenblatt told the agent
in charge to suspend issuing a grand jury subpoena
for Maule, although the agent asserted that the Maule
officials were "stone-walling" him.' In the interim,
Rosenblatt found himself dealing with North on two
other matters, one involving a Customs informant
named Joseph Kelso and another involving Southern
Air Transport's role in the Hasenfus aircraft, where
North asked Customs to narrow a subpoena so as not
to expose other sensitive operations (see Chapter 18).

On November 10, Rosenblatt met with Commis-
sioner von Raab to discuss North's assertions that the
Customs investigation could compromise national se-
curity, including an effort to obtain the release of the
hostages.* At that meeting, von Raab advised Ro-
senblatt to speak with Robert Kimmitt, General
Counsel to the Treasury Department, about his inabil-
ity to obtain the Maule and SAT records. Rosenblatt
scheduled that meeting for the afternoon of Novem-
ber 17.9

On the morning of November 17, Rosenblatt called
North to attempt again to get the promised docu-
ments on Maule Aircraft. To Rosenblatt's surprise.
North indicated that he had the documents and would
send them right over. When they arrived, however,
Rosenblatt was quite disappointed. They did not in-
clude purchase orders, photographs, or other docu-
ments sufficient to dispose of the Customs inquiry.
That afternoon, Rosenblatt met with Kimmitt and re-
lated the entire episode involving Maule and SAT. '"

105

Chapter 5

At that point, the investigation resumed, 6 weeks after
it had been halted at North's request.

While Rosenblatt testified he never mentioned the
Kimmitt or von Raab meetings to North and he had
no contact with North after November 17,'' North's
notes suggest that Rosenblatt did brief him on these
matters after November 17. A note dated "19 Nov.
86" reads:

—Bill Rosenblatt

— Joe Ladow - P/M Maule

— Letter from Justice

— Talk to Commissioner next week

— Talked to Kimmitt re relationship

— Profs w/C-123 military configuration required so-
journ

— Names in document - La dodge needed advice on
how to handle

—Call Von Raab 12

Kelso

Another matter on which Customs had dealings
with North involved Joseph Kelso. Kelso was on
probation after a conviction for illegally exporting
arms to Iraq. In 1986, he approached Customs under
an alias and offered to work as an informant.'^

In the spring of 1986, Kelso, accompanied by a
Customs informant, traveled to Costa Rica to gather
information on an alleged counterfeiting and drug
ring that supposedly included corrupt DEA agents.''*
Kelso and the informant had not notified the U.S.
Embassy or Costa Rican authorities of their investiga-
tion, and Kelso was detained and questioned by the
Costa Rican authorities and DEA agents as to what
he was doing in the country. '^ Kelso was then taken
to John Hull's farm. '8 Hull reported the incident to
North and Owen in a letter.''' At the same time,
Tambs complained to Customs about their sending
informants into Costa Rica without notifying the Em-
bassy.

After returning to the United States, Kelso, who
faced charges of violating his probation, turned over
tape recordings of his activities to Customs, and
claimed that, apart from his trip for Customs, he was
working for the inteUigence community.'* In or
about September 1986, Rosenblatt called North to
find out if Kelso was working for the intelligence
community.'^ North, who was already aware of
Kelso's visit to Costa Rica, suggested that Rosenblatt
allow Owen, whom Rosenblatt did not know, to
listen to Kelso's tapes to verify his claims. Rosenblatt
agreed on the assumption that Owen was part of the
NSC staff, or otherwise assisting North. ^°

After receiving the Kelso tapes from Rosenblatt in
October, Owen made two trips to Central America
where he met with DEA agents. Although Owen was
purporting to investigate Kelso's status, he never
communicated further with Rosenblatt, and Rosenb-

latt concluded from this silence that Kelso had not
been working for the intelligence community.^'

Miami Neutrality Investigation

In connection with another investigation, this one
conducted by the Office of the United States Attor-
ney for the Southern District of Florida, North and
Poindexter were able to obtain information concern-
ing the vulnerability of the Enterprise.

The Roots of the Investigation

On July 21, 1985, the Miami Herald published an
article by reporters Martha Honey and Tony Avir-
gan. In that article, a mercenary for Civilian Military
Assistance (CMA) named Steven Carr, who was then
imprisoned in Costa Rica, spoke of an arms shipment
from Fort Lauderdale to a Central American location.
The article caught the attention of the FBI in the
Southern District of Florida, which opened an investi-
gation into Carr's allegations and alerted FBI head-
quarters in Washington, D.C., as required in any
matter involving the Neutrality Act.^^

Garcia Allegations

In December 1985, an individual named Jesus
Garcia was convicted in the Southern District of
Florida on charges of possessing an unlicensed ma-
chine gun.^^

While Garcia was awaiting sentence, he offered
through his attorney to provide federal authorities
with information relating to paramilitary plots in Cen-
tral America. As a result of that offer, he was inter-
viewed on January 7, 1986 by two FBI agents. He
claimed that he had been set up on the machine gun
charge by a person who supposedly worked for Tom
Posey and the CMA, a pro-Contra paramilitary
group. According to Garcia, Posey was attempting to
neutralize him because of his knowledge of a CMA
plot to assassinate Ambassador Lewis Tambs to col-
lect a reward offered by a notorious drug kingpin in
Central America. The assassination, Garcia told the
FBI, would, as an added benefit, be blamed on the
Sandinistas, thereby assisting the Contras' cause.
Garcia also gave the FBI further details on the gun
shipment reported earlier in the Miami Herald.^*

The FBI agents and Jeffrey Feldman, the Assistant
United States Attorney conducting the investigation,
were all skeptical. ^^ Nevertheless, given the gravity
of Garcia's allegations, the investigation continued. At
the request of the FBI, embassy officials in Costa
Rica interviewed Carr and other American mercenar-
ies imprisoned in that country. Hotel records at the
alleged site of a critical meeting seemed to confirm its
occurrence. Flight plans and records suggested that
the alleged arms shipment also could have oc-
curred. ^^

106

Chapter 5

During this phase of the investigation, the FBI re-
ceived allegations that North, Owen, and John Hull
were involved in, or at least aware of, the gun run-
ning plots.^'' This information was not supplied by
Garcia, but came through other sources.^*

On March 14, 1986, an FBI agent and Feldman met
with Anna Barnett, the Executive Assistant United
States Attorney. While the FBI agent and Feldman
were in Barnett's office discussing the investigation.
United States Attorney Leon Kellner came in to in-
quire whether anyone was aware of an alleged plot to
assassinate Ambassador Tambs. According to Kellner,
he had just received a call from someone at the De-
partment of Justice in Washington who wanted infor-
mation about the investigation.^^ At or shortly after
that meeting, it was decided that the FBI agents and
Feldman would travel to New Orleans to interview
Jack Terrell, a/k/a "Colonel Flaco," a former CMA
mercenary who, they had been told, knew more de-
tails of the conspiracy.^"

Activity in Washington

The FBI agents had been advising headquarters by
telex throughout the early stages of the investigation
and in early March had received a request from
Oliver Revell, Executive Assistant Director of the
FBI, for a detailed summary of their findings. Their
report was forwarded to headquarters on March 20,
1986.31

Revell's inquiry was itself sparked by a request
from Deputy Attorney General D. Lowell Jensen for
an update on the investigation. ^^ Revell sent a sum-
mary of the agents' report five pages in length, to
Jensen. ^3

Upon receiving the memorandum, Jensen met with
Attorney General Meese to discuss the case. Jensen
recalls that he and Meese decided that Admiral Poin-
dexter, the National Security Adviser, should be
briefed on the matter because of its international im-
plications and the possibility of danger to an Ameri-
can diplomat. Jensen was uncertain, however, wheth-
er he or Meese initiated the proposal to brief Poin-
dexter.^"* Meese testified at his deposition that he did
not recall discussing this matter with Jensen. ^^

Jensen also forwarded a copy of Revell's memoran-
dum to Associate Attorney General Steven Trott,
who forwarded it in turn to Deputy Assistant Attor-
ney General Mark Richard. On the "buck slip" ac-
companying the memorandum, Trott wrote:

Please get on top of this. [Jensen] is giving a
heads up to the N.S.C. He would like us to
watch over it.

Call Kellner, find out what is up, and advise him
that decisions should be run by you.^®

On another buck slip attached to the memorandum
for his own record, Richard wrote, "3/26/86, spoke

to Kellner — AUSA not back yet from [New Orle-
ans]."3''

Richard recalls speaking with Kellner about the
case on several occasions over the next several
months. Trott and Jensen also believe they spoke to
Kellner about the case on a few occasions. Each of
them specifies that he never attempted to impede or
otherwise interfere m »he investigation itself, and the
Committees have no tvidence that contradicts this.'*

On March 26, 1986, Jensen went to the NSC and
showed Poindexter a copy of Revell's memorandum.
Jensen does not recall any discussion that may have
taken place. Poindexter testified that he does not
recall the briefing at all.^^

Terrell and Costa Rica

In New Orleans, Terrell provided the FBI agents
and Feldman with additional information on the al-
leged assassination plot and arms shipment. When
pressed, however, Terrell admitted that most, and
perhaps all, of his information was based on hearsay
rather than on his direct participation or observa-
tion.*«

Feldman and the FBI agents traveled to Costa Rica
on March 31, 1986, and reported to the U.S. Embas-
sy. There they met with Tambs, who wanted to know
the purpose of their visit. Feldman briefed Tambs
thoroughly on their investigation and intentions.
During that briefing, Feldman showed Tambs a chart
he had drawn to illustrate the supposed conspiracy
that had been described to him. The chart showed a
pyramid of participants, with lines of involvement
running up through John Hull and Robert Owen to
Ohver North at the top.*'

When he saw the chart, Tambs summoned
"Thomas Castillo," who introduced himself to the
investigators as a CIA station chief Castillo provided
them background information on Hull. According to
Feldman, Castillo also spoke of North warmly as "the
person who introduced me to the President of the
United States last week."*^

Over the course of the next two days, Feldman, the
FBI agents, and various embassy personnel inter-
viewed Steven Carr and several other imprisoned
mercenaries. They attempted to set up an interview
with Hull, who initially agreed and then declined to
speak to them.''^ Feldman was also told by an em-
ployee at the U.S. Embassy that Hull had been con-
tacted by the NSC about the investigation.**

North received a briefing from Owen on Feldman's
visit. In a letter dated April 7, 1986, Owen identified
each of the investigators who had appeared in Costa
Rica, then wrote:

According to [Castillo], Feldman looks to be
wanting to build a career on this case. He even
showed [Castillo] and the Ambassac'or a diagram
with your name at the top, mine underneath, and

107

Chapter 5

John's underneath mine, then a Hne connecting
the various resistance groups in [a Central Ameri-
can country.]

Feldman stated they were looking at the "big
picture" and not only looking at a possible viola-
tion of the neutrality act, but at possible unau-
thorized use of government funds. They went
several times to the prison to question the five in
jail. They tried to talk with John, but he was
advised not to talk with them unless he had a
lawyer present.*^

April 4 Meeting

Feldman met late on the afternoon of April 4, 1986,
with Kellner and Barnett to discuss the results of his
trip to Costa Rica. Also present were Larry Scharf
(Special Counsel to the United States Attorney) and
Richard Gregorie (Chief Assistant United States At-
torney).

Feldman explained to them that, while the assassi-
nation plot seemed to be fading as a cause for concern
or a vehicle for prosecution, the gun-running charges
seemed to have some basis in fact. Others at the
meeting believed, however, that Feldman was having
a difficult time fitting a complex combination of facts,
witnesses, and actors into a coherent theory of pros-
ecution.*^

At one point, the topic of the Boland Amendment
was raised. Because no one in the room was familiar
with the details of that legislation Barnett asked As-
sistant United States Attorney David Liewant to
locate it with the research computer.*'

According to Liewant, when he arrived at
Kellner's office with the printout, only Kellner, Bar-
nett, and Feldman were present and Kellner was on
the telephone talking to someone at the Department
of Justice.*^ According to Liewant, when Kellner
hung up, he turned to Barnett, Feldman, and Liewant
and said that the Department wanted them to "go
slow" on the investigation. Liewant could tell from
Kellner's expression and tone of voice that Kellner
was disdainful of that suggestion and had no intention
of actually slowing the investigation.*®

If Liewant's account of this meeting is correct, the
Department of Justice would appear to have been
exerting improper influence to delay an investigation,
albeit influence brushed aside by Kellner. But each of
the other participants in the April 4 meeting deny that
any such telephone conversation took place. ^° Rich-
ard, Trott, Jensen, and Meese also deny that any
telephone call like that described by Liewant oc-
curred or that anyone, to their knowledge, attempted
to slow the investigation at any time.^'

At the end of the meeting on April 4, Kellner asked
Feldman to draft a memorandum pulling together the
results of the investigation to date as well as Feld-
man's approach to any possible prosecution.^^

The Meese Aside

On April 12, Meese, along with Jensen and Revell,
arrived in Miami to visit a number of FBI agents
wounded in a shoot-out the day before. Kellner ac-
companied Meese on his visits. ^^

During the day, Meese pulled him aside and asked
him about the Garcia investigation. Kellner believes
that he told Meese that there did not appear to be
much substance to the assassination allegations, but
that the gun-running investigation was continuing.
Kellner testified that Meese neither stated nor implied
that the investigation should be slowed or conducted
in any other particular manner.^*

Meese recalls asking Kellner about the matter, al-
though he does not recall pulling Kellner aside to do
so. Meese testified that he mentioned that case in
particular because it had received attention by the
press.** Meese also denies that he attempted to affect
the course of the investigation.*^

The Feldman Memoranda

On April 28, Feldman provided the first in what
was to become a series of memorandums to Kellner.
Both Feldman and Kellner felt that it was unsatisfac-
tory.*' On May 14, Feldman therefore produced a
more detailed memorandum, 20 pages in length. It
reviewed the facts gathered to that time and conclud-
ed that it was appropriate to issue grand jury subpoe-
nas for various documents and witnesses. Feldman
wrote:

The Bureau believes that a grand jury is neces-
sary for several reasons. First, it would dispel
claims that the Department of Justice has not ag-
gressively pursued this matter. Second, a grand
jury would eliminate some of the deception they
believe they have encountered during their inter-
views with Jesus Garcia, Daniel Vasquez Sr.,
Ronald Boy, and Max Vargas. Finally, the grand
jury would give the Department of Justice access
to Costa Gun Shop's business records and
CANAC's bank records.

Within a few days, Kellner returned the memoran-
dum to Feldman with the notation "I concur, we
have sufficient evidence to institute a grand jury in-
vestigation into the activities described herein."*^

Kellner then convened a meeting in his office on
May 20 to discuss the case. Present, once again, were
Kellner, Barnett, Scharf, Gregorie, and Feldman. As
the discussion progressed, Scharf and Gregorie set
forth a number of reasons why they believed it pre-
mature to issue grand jury subpoenas. Gregorie, at his
deposition, summarized those reasons:

Before you go into the grand jury, as I told Jeff,
you have to have some idea where you're going
and what you're looking for.

108

Chapter 5

Up until that time, he had some wild stories that
were concocted by freelance newspaper reporters
about mercenaries who were unreliable, individ-
uals who had failed a polygraph, people who
were unreliable, and we did not have a stage set
of facts [sic], and I did not think it was appropri-
ate to go into the grand jury with a bunch of
people who we were later going to find out were
totally lying and totally misled in a grand jury,
going to confuse them.

What I saw was a confused mess of facts that
were leading in no particular direction, and had
no form or substance to them.^*

By the end of the meeting, a consensus developed
that further interviews should be conducted before
resorting to the grand jury. Feldman, who had re-
quested authorization to go to the grand jury initially,
acquiesced in the decision and agreed to have the FBI
conduct the additional interviews.®"

After Kellner changed his mind and concluded that
grand jury subpoenas would be premature, he asked
Feldman to redraft the May 14 memorandum to re-
flect that conclusion. Feldman did so, and submitted a
revised version to Kellner on May 22. Feldman did
not change the original date on the revised memoran-
dum.^*

Kellner asked Scharf to review this new version,
and Scharf made a number of changes. Most impor-
tant, he included a reference to the Christie Institute
litigation filed in the Southern District of Florida on
May 30 and added to the conclusion a number of
reasons why resort to a grand jury would be prema-
ture. Scharf had these changes made on a word proc-
essor, but did not change the original date or author.
As a result, when Kellner submitted the memorandum
to the Department on June 3, it still bore the date of
May 14 even though it referred to an event that
occurred on May 30. Feldman did not see this final
version of his memorandum before Kellner sent it on
to Washington. ®2

Further Investigation

The FBI agents undertook the additional investiga-
tion requested by Feldman. On July 31, 1986, they
presented Feldman with a lengthy "prosecution
memorandum" that included their most recent find-
ings. Feldman, in turn, forwarded that report to
Kellner on or about August 14.®^

On August 29, 1986, Kellner told Feldman to sus-
pend any further investigation on the matter until he
(Kellner) returned from an impending trip to Wash-
ington. According to Feldman, Kellner told him that
"politics" were involved. Feldman found this state-
ment surprising and disturbing, because it was the
first, and only, time Kellner had indicated to him that
such considerations were relevant. When Kellner re-

turned from Washington shortly thereafter, he told
Feldman to proceed.®*

Kellner confirmed Feldman's version of this inci-
dent. According to Kellner, shortly before he was to
leave for Washington he received a letter from John
Hull making serious allegations of impropriety by
members of Senator Kerry's staff, who were also in-
vestigating Garcia's allegations. Hull also had includ-
ed affidavits from some of the imprisoned mercenaries
retracting some of their prior statements regarding
gun-running and Contra support. Kellner stated that
he feared that he was being put into the middle of a
political dispute, and wanted to talk to Mark Richard
about the allegations before proceeding further. After
that discussion, Kellner immediately authorized Feld-
man to proceed. Both Feldman and Richard con-
firmed this explanation.®^

Meanwhile, Kellner had reviewed the prosecution
report cursorily and forwarded it, in mid-August, to
Richard Gregorie for his input. On October 6, the
day after the Hasenfus crash, Gregorie responded to
Kellner that he felt the case was ready to go to the
grand jury.®® The prosecution memorandum then
rested again with Kellner, who forwarded his own
approval to Feldman in the first week in November —
six months after Feldman had first suggested the need
for a grand jury. The relative inactivity from mid-
August to the first week in November was again
frustrating to Feldman and the FBI agents, and was
explained by Gregorie and Kellner as due to the gen-
eral press of other matters.®'

Upon receiving approval from Kellner, Feldman
proceeded with the investigation. The Independent
Counsel subsequently declined to take over the case
and Feldman was continuing to investigate the matter
at the time he was deposed by the Committees.®*

Reward for a Friend

In one episode, the NSC staff undertook to persuade
the Department of Justice to "reward" someone char-
acterized by North as a "friend" who had been con-
victed of plotting to assassinate a Central American
leader. In that episode, the NSC staffs motive appears
to have been a desire to prevent disclosure of certain
questionable activities.

According to a North PROF to Poindexter, the
"friend" was an official in a Central American coun-
try with whom North, the U.S. Ambassador, General
Gorman, and Dewey Clarridge arranged for bases for
the Contras as well as overall logistics, training and
support.®^

This official and other plotters were indicted prior
to 1986 for conspiracy to assassinate a Central Ameri-
can leader. ■'° Pursuant to a plea agreement, the offi-
cial pleaded guilty to two felony counts which car-
ried a significant maximum sentence; and he was later

109

Chapter 5

sentenced to two shorter, though still significant,
prison terms to run concurrently.'"

At the sentencing hearing, U.S. military officials
assigned to the State Department testified on behalf of
the official. The court provided that the official could
be immediately eligible for parole if so determined by
the Parole Commission and recommended he serve
his sentence at a minimum security institution. Mean-
while, Assistant Secretary of State Elliott Abrams
promised the official's government that he would look
into the case.''^

In a September 17, 1986 PROF message to Poin-
dexter. North noted that the official was under the
impression he would serve only a matter of days or
weeks at the minimum security institution and then be
released.''^ North was concerned that once the offi-
cial realized he was really going to serve a long
sentence, "he will break his longstanding silence
about the Nic[araguan] Resistance and other sensitive
operations."''' North noted the next morning he
would meet with Oliver Revell, Steven Trott, and
Elliott Abrams to explore the possibility of a pardon,
clemency, deportation, or sentence reduction. The ob-
jective of this exercise, as North put it, was "to keep
[the official] from feeling like he was lied to in legal
process and start spilling the beans."''* Admiral Poin-
dexter responded: "You may advise all concerned that
the President will want to be as helpful as possible to
settle this matter."''^

Representatives of different agencies of the Admin-
istration met to discuss the request for leniency.
Deputy Assistant Attorney General Mark Richard at-
tended a meeting where Defense Department repre-
sentatives argued on the official's behalf Richard con-
cluded their reasons were not sufficiently specific. '''
No one ever gave a detailed account of what the
official had actually done for the United States to
deserve leniency. He was always simply described as
a "friend of the United States.''''^ The State Depart-
ment agreed with the Department of Justice that the
official was a terrorist and should be punished. The
CIA did not express an opinion. ''^

At a subsequent meeting in North's office on Sep-
tember 24, 1986, North tried to convince Trott,
Revell, C/CATF (CIA) and James Michel, Deputy
Assistant Secretary of State, that the official was only
tangentially involved in the assassination plot and de-
served leniency.*" Revell disagreed. North asked
them to consider recommending a minimum security
correctional institution rather than the federal prison
to which the official had been assigned, despite the
court's recommendation, by the Bureau of Prisons.*'

In early October, North tried again with the De-
partment of Justice, this time with help from General
Gorman and Dewey Clarridge. Also at this meeting
were Mark Richard (filling in for Trott), Revell, and
Elliott Abrams.*^ North, Gorman and Clarridge all
argued for leniency for the official, explaining only
that the official was a "friend of the government"

who was "always ready to assist us" and "was helpful
in accommodating our military."*^ Abrams agreed
that the U.S. should do what it could for the official,
thereby reversing the State Department's earlier posi-
tion.*■* According to Richard, he offered to meet
with others in the Department and determine whether
the Department would oppose the transfer of the offi-
cial to the minimum security institution.

North's contemporaneous account of that meeting
portrayed the Justice Department as more committed
to assisting the official. In a PROF note to Poin-
dexter. North indicated that, after the last co-con-
spirator was convicted and sentenced, the Department
of Justice would have the defense attorney file a
motion to reduce the sentence to time served and
arrange to have General Gorman brief the court in
camera on the equities. North said Trott and Revell
believed this should result in the release and deporta-
tion of the official. North suggested that the official's
attorney should be discreetly briefed to mollify the
concerns of those involved that the official "will start
singing songs nobody wants to hear."**

Richard soon determined that neither Trott nor
Kellner had any objection to redesignating the official
to the minimum security institution, as contemplated
in the original court's recommendation and made the
appropriate arrangements with the Bureau of Pris-

The Fake Prince

As explained briefly in Chapter 4. an individual
named Kevin Kattke contacted North in March or
April 1985 about a Saudi "prince" who proposed do-
nating to the Contras approximately $14 million in
proceeds derived from the sale of the "prince's" oil.
North referred the "prince" to Richard Miller. Miller
and the "prince" met regularly over the course of the
next several months. The "prince" sought Miller's
help in marketing the oil, agreeing to pay Miller $1
million of the profits earned. Miller kept North regu-
larly apprised of his dealings with the "prince", which
eventually also included both a proposed gold trans-
action and assistance in freeing the hostages held in
Lebanon.*'' Indeed, Miller saw himself as "an agent
working on [North's] behalf " in connection with
these activities.** Yet while North was attempting to
develop the "prince" as an asset in both his Iran and
Contra initiatives, the FBI was investigating the
"prince" for bank fraud.

From the start. Miller had misgivings about the
bona fides of the "prince." He did library research
without much success in an effort to establish the
"prince's" authenticity. According to Miller, North
told him that the CIA had confirmed both the
"prince's" identity and the veracity of the "prince's"
information about the hostages.*®

110

Chapter 5

Early in their relationship, the "prince" told Miller
that he had information about the hostages in Leba-
non that would be useful to U.S. efforts to locate and
extricate the hostages. At North's suggestion, Miller
related this information to the Hostage Location Task
Force, representatives of which met with and inter-
viewed the "prince" in Houston. Miller continued to
inform North of the hostage-related information con-
veyed by the "prince."^"

In July 1985, North asked a DEA agent (Agent
1) — who was detailed to North in connection with
hostage release efforts — to accompany Miller and the
"prince" to England to assist the "prince's" entry into
the country, if necessary. Agent 1 agreed, and North
arranged for payment of his travel expenses.®'

The three men stayed in London for five or six
days. Based on discussions with the "prince" about
the situation in the Middle East, Agent 1 concluded
that it would be worthwhile to develop the "prince"
as a source in the hostage location effort.®^

In August 1985, the DEA agents embarked on fur-
ther activities with the "prince." At North's request,
they traveled to Geneva from Cyprus to help the
"prince" obtain travel papers after his passport had
allegedly been stolen. Even with the cooperation of
Ambassador Faith Whittlesey, Agent 1 was unsuc-
cessful in obtaining a U.S. passport for the "prince."
A week later, however. Agent 1 obtained travel
papers for the "prince" issued by another country.
Agent 1 remained with the "prince" in Europe for
some time thereafter, and paid the "prince's" ex-
penses.®^

At North's request, Secord met Agent 1 and the
"prince" in Geneva in September 1985. After meeting
the "prince," Secord expressed to Agent 1 concerns
about the "prince's" bona fides.®*

Meanwhile, during the spring and summer of 1985,
the "prince" developed legal problems in the United
States. In late spring, the "prince" cashed a $250,000
check at William Penn Bank in Philadelphia, which
was returned for insufficient funds. This event result-
ed in a referral to the FBI's Philadelphia field office
for bank fraud charges against the "prince." In con-
nection with the fraud investigation, the FBI's Wash-
ington field office was asked to interview both North
and Miller.®^

An FBI agent interviewed North on July 18, 1985.
According to the agent. North said that he had re-
ferred the "prince" to Miller because it was inadvis-
able (and potentially unlawful) for an NSC staff
person to meet with an individual who planned to
contribute funds to the Contras. North further in-
formed the agent that the "prince's" interest in donat-
ing to the Contras was discussed by North personally
with the President and with Robert McFarlane.®^
North "confidentially" advised the agent that the
NSC staff had maintained indirect contact with the
"prince" because of the Contras' desperate need for
funds.®''

North specifically requested that attempts by the
FBI to interview the "prince" be held in abeyance
until after the week of July 22, 1985, because the
Congress was expected to approve funding for the
Contras that week. After being pressed by the FBI
agent. North "backed down" on this request, al-
though he expressed his view that FBI contact with
the "prince" prior to the NSC's determination of the
"prince's" true intentions likely would eliminate any
possibility that the "prince" would aid the Contras.
On his departure from North's office, the agent was
introduced by North to Adolfo Calero, whom North
called the "George Washington of Nicaragua".®*

After the North interview, the FBI agent attempted
to contact Miller, who did not return several of the
agent's telephone calls. North called the agent on July
30, 1985, in apparent response to the agent's attempt
to reach Miller. North told the agent that Miller and
the "prince" were in Europe arranging a transfer of
funds from the "prince" to the Contras.®®

On August 27, the FBI agent finally interviewed
Miller, who outlined the history of his contacts with
the "prince." Miller mentioned that he knew North,
but did not disclose anything to the agent about Nica-
ragua. In October, Miller was interviewed again by
the FBI. During this session, he pledged complete
cooperation with the fraud investigation. ""'

During the course of the grand jury investigation of
the "prince," North called the FBI's Oliver Revell
once again to express concern that Miller might be
questioned about confidential governmental matters.
North told Revell that Miller was a consultant to the
NSC and the State Department on the hostage situa-
tion, but did not mention Miller's efforts on behalf of
the Contras. At North's request, Revell called the
Assistant United States Attorney who was handling
the "prince's" prosecution in Philadelphia. Revell re-
lated the concern expressed by North, and was as-
sured by the prosecutor that, if Miller testified, he
would not be questioned about any hostage-related
activities.'"'

According to Miller, he spent approximately
$370,000 on the activities involving the "prince."
North was aware of and approved these expenditures.
On at least three occasions — two of which occurred
after Miller agreed to cooperate fully in the investiga-
tion of the "prince" — Miller sent travelers checks to
the "prince" in Europe.'"^ Although the "prince"
requested these payments — which totalled $32,500 — at
least $15,000 was used to finance the DEA hostage
rescue operations. North approved all such pay-
ments.'"^

These expenditures, however, did not result in
monetary loss for Miller. He complained to North of
the money that the "prince" had cost him, and North
told Miller to take reimbursement for these costs from
Contra assistance funds that he had transferred to

111

Chapter 5

Miller's company by Carl "Spitz" Channell's tax-
exempt organization. '°''

In the end, it was determined that the "prince" was
neither a "prince," nor even a Saudi. He was an
Iranian con man, who pleaded guilty to bank fraud
charges on the eve of his trial. He now is incarcerated
in a federal penitentiary in Texas.'"*

Instigation of Investigations

North attempted to exploit his contacts with the FBI
to attempt to instigate or intensify investigations of
people and organizations perceived as threats to the
Enterprise. He was ultimately assisted in this effort by
Richard Secord and Glenn Robinette.

In early 1986, Secord had been the target of allega-
tions that he was running guns and drugs between
Central America and the United States. In May 1986,
these allegations blossomed into a lawsuit filed in
United States District Court for the Southern District
of Florida. The lead plaintiffs in the action were re-
porters Martha Honey and Tony Avirgan, who were
represented by the Christie Institute. The defendants
included Secord, Thomas Clines, Theodore Shackley,
and John Hull. '"«

At some point after the lawsuit was filed, North
again contacted Oliver Revell, this time to suggest
that the federal government ought to investigate the
plaintiffs because he thought they were probably
being funded or supported by the Sandinistas. Revell
told him that the FBI did not engage in that type of
investigation.""

On May 9, the FBI interviewed North about al-
leged measures taken against him. North claimed that
his car had been vandalized, he had been followed,
and his dog had been poisoned. North also claimed a
fake bomb device had been left in his mailbox. He had
not kept the device, however, for the FBI to analyze.
North told the FBI that he had written down the
license number of the car that was used to follow
him, but, after several requests from the FBI, he
failed to provide it, claiming he lost the number.'"*

The FBI checked with the local police regarding
the fake bomb device placed in North's mailbox.
North had told them he discarded it before it could
be examined. The FBI concluded it was probably a
prank rather than a threat.

On June 3, 1986, North met with FBI agents to
discuss an investigation they had been conducting into
allegations by North that he was the target of politi-
cally motivated vandalism and harassment, perhaps by
foreign intelligence sources. At this meeting, North
expressed his displeasure about the FBI's alleged lack
of effort in the investigation. In particular, he com-
plained that the FBI had never contacted an NSC
staffer who supposedly was the source of allegations
linking North to drug traffic, had not investigated
Daniel Sheehan of the Christie Institute, had not
interviewed a reporter who claimed North had threat-

ened him, had not examined allegations made by Sen-
ator Kerry against North, and had not attempted to
interview Senator Durenberger and Representative
Hamilton to determine the sources for allegations
made against North about which they had raised
questions.'"® Despite these complaints, the FBI ulti-
mately closed its investigation after concluding that
none of North's complaints could be traced to foreign
intelligence sources.""

North ultimately hit on a better formula, however,
with Secord's assistance. In March 1986, Secord had
retained Glenn Robinette, a security consultant and
former CIA officer, to conduct a private investigation
of some of the individuals ultimately involved in the
Honey and Avirgan lawsuit. ' ' ' One of the people
Secord singled out for such treatment was Jack Ter-
rell, also known as "Colonel Flaco." Terrell had at
one time been a pro-Contra mercenary associated
with Tom Posey and CMA. He ultimately became
disillusioned with the Contras, however, and began to
cooperate with the plaintiffs in the lawsuit. He threat-
ened to testify that North had helped provide secret
funding to the Contras and that he, Terrell, had used
CMA as a cover from which to carry out CIA-spon-
sored assassinations. ' ' ^

In mid-1986, the FBI received information from a
classified source that pro-Sandinista individuals might
have been contemplating an assassination of President
Reagan. The FBI suspected that Terrell might be
involved and disseminated this information to the
CIA, Secret Service, State Department, Department
of Justice, and NSC'^*

Shortly thereafter, on July 15, 1986, Revell re-
ceived a call from North, who indicated that he knew
a person familiar with Terrell's activities and would
make his contact available for debriefing."* The FBI
met that evening with Robinette, North's contact,
who told them he had met Terrell on July 1 1 while
posing as an attorney exploring the possibility of col-
laborating with Terrell on a book, movie, and televi-
sion program. Robinette, who was in daily contact
with Terrell, offered to assist the FBI in gaining infor-
mation about him."*

On July 22, 1986, FBI agents interviewed North.
He told them he had heard of Terrell eighteen
months earlier when a Contra intelligence officer
complained of Terrell's brutality."* North claimed
he suggested at the time of that incident that local
officials should expel Terrell. North stated that he had
heard that Terrell had tried to import guns into a
Central American country and had claimed to be for-
merly with U.S. Army Special Forces and the CIA.

The FBI agents asked North about Secord and
Robinette. North said Secord ran an import-export
business and was a consultant to the Defense Depart-
ment and emphasized Secord did not work for him.
He said Robinette was a security consultant hired by
Secord to investigate Terrell. North acknowledged he

112

Chapter 5

met with Robinette prior to sending him to the FBI
and that Robinette gave him copies of the Terrell
manuscript and the other materials Robinette shared
with the FBI. North stated that neither he nor his
staff was responsible for arming, funding, or adminis-
tering Contra programs and denied he was involved
with covert operations being run from the U.S."''
The FBI decided to watch Terrell with Robinette's
help. Although Robinette refused to wear a recording
device, he reported back to the FBI after he met with
Terrell. Shortly thereafter, Terrell went to Miami at
the same time President Reagan visited Miami.
Agents observed him there and concluded he was not
a threat to the President. The FBI then terminated
this investigation. "*

Summary

These seven episodes collectively show how the NSC
staff, and North in particular, tried to prevent expo-
sure of the Enterprise by law enforcement agencies.
We do not mean to impugn the integrity of the law
enforcement officials involved. Suggestions that na-
tional security could be compromised, coming from
NSC aides, inevitably were given weight by law en-
forcement officials and led them on occasion to pro-
vide information to the NSC staff and to delay inves-
tigations. The fault lies with the members of the NSC
staff who tried to compromise the independence of
law enforcement agencies by misusing claims of na-
tional security.

77-026 0

113

Chapter 5

Chapter 5

1. Rosenblatt Dep., 9/25/87, at 7.

2. von Raab believes that his first contact with North
occurred a few months before this conversation. According
to von Raab, he received a telephone call from General
Singlaub who inquired about a helicopter, the "Lady
Ellen," that Customs was detaining enroute to a Central
American country. When von Raab informed Singlaub that
the helicopter needed a license before it could be released,
Singlaub indicated that he would obtain one. Singlaub then
suggested that von Raab call North about the matter. When
von Raab did so. North told him that the individuals in-
volved with the helicopter were "good guys." Ultimately,
Customs issued the appropriate license and released the
helicopter. William von Raab, Int., Tower, 2/11/87,
N36038-36041.

3. Id.

4. Rosenblatt Dep., 9/25/87, at 16. Rosenblatt testified
that, "to the best of [his] recollection," North did not men-
tion any involvement of Richard Secord with the aircraft in
question. Rosenblatt Dep., 9/25/87, at 13. A North note
dated "27 Aug," raises questions because of the following
entry: "Bill Rosenblatt - Customs - DOJ observed CBS film -
Secord involved - DOJ asked Customs to look into [this?] -
Agent preparing to subpoena Maule records - If this is for a
"right organization" - 2 to 4 have already gone - Joe Tost/
Justice - U.S. Attorney on this - Need docs on who air
planes went to and what was on them - Foreign Assets
Control." North Notebook, 8/27/86, Q2369.

5. Rosenblatt Dep., 9/25/87, at 12.

6. Id., at 17-21.

7. Id., at 16-17.

8. Id., at 90-93.

9. Id., at 96-99.

10. Id., at 32, 99.

11. M, at 35.

12. North Notebook, 11/19/86, Q2634. The entry relating
to the "C-123" may refer to a requirement that the Hasenfus
air plane have a "sojourn permit" before it left the United
States. "Ladodge" may be a reference to Larry LaDodge,
the Customs agent in charge of the Kelso matter.

13. Rosenblatt Dep., 9/25/87, at 51.

14. Id., at 48-49.

15. Id

16. Id

17. Id. at 60-62.

18. Id. at 54-57.

19. Id. at 55-56.

20. Id., at 57-58, 62-63. North was not questioned on this
matter.

21. Id., at 62-69.

22. Currier Dep., 5/5/87, at 6-7.

23. Id. at 8-9, 11; Feldman Dep., 4/30/87, at 5, 8-9.

24. Currier Dep., 5/5/87, at 12-14; Feldman Dep., 4/30/
87, at 12-15. "CM A" originally stood for "Civilian Military
Assistance." In April 1986, it was changed to "Civilian
Materiel Assistance." Posey Dep., 4/23/87, at 7.

25. Kiszynski Dep., 5/5/87, at 11-12; Currier Dep., 5/5/
87, at 12-14; Feldman Dep., 4/30/87, at 16. A polygraph
examination conducted on January 14 did nothing to bolster
Garcia's credibility. The test was "inconclusive" on wheth-
er Garcia was telling the truth about a key meeting where
the assassination plot was supposedly discussed, and labelled
him "deceptive" on his allegations about Posey's involve-

ment. Currier Dep., 5/5/87, at 14; Kiszynski Dep., 5/5/87,
at 14; Feldman Dep., 4/30/87, at 17-18. In his sworn testi-
mony to the Committees, Posey vigorously denied Garcia's
allegations. Posey Dep., 4/23/87, at 72, 77, 84-85, 89.

26. Currier Dep., 5/5/87, at 16; Feldman Dep., 4/30/87,
at 21-22.

27. Allegations about North's own involvement in Contra
resupply efforts had been reported in the press as early as
the summer of 1985. See, e.g. "Private Sources Are Used to
Skirt Ban on Contra Aid," Miami Herald, June 24, 1985, at
lA; "Nicaraguan Rebels Getting Advice from White House
on Operations," New York Times, August 8, 1985, at AI.

28. Currier Dep., 5/5/87, at 16-18; Kiszynski Dep., 5/5/
87, at 13-14.

29. Feldman Dep., 4/30/87, at 26; Kellner Dep., 4/30/87,
at 7. The Committees have not been able to establish with
any certainty the trigger for this inquiry from Washington.
Kellner believes the call came from Mark Richard, Deputy
Assistant Attorney General for the Criminal Division, and
had been sparked by a letter from Garcia's wife that had
found its way to Richard's desk. Richard, on the other
hand, does not recall being aware of the investigation until
some time later in March, when he received a "buck slip"
on the matter from Steven Trott, then Assistant Attorney
General for he Criminal Division. Kellner Dep., 4/30/87, at
7-8; Richard Dep., 8/19/87, at 53-54.

30. Feldman Dep., 4/30/87, at 26-27, 37. Garcia's sen-
tencing proceeding had been scheduled for March 19, 1986.
On March 18, Feldman filed a motion to continue this
proceeding for 30 days, alleging that the day before, "at
approximately 4:30 p.m., the United States Attorneys Office
for the Southern District of Florida was requested by the
Department of Justice to seek a continuance of the sentenc-
ing hearing." J 19348. No one is quite certain, however, who
made or even who received this request. Kellner Dep., 4/
30/87, at 9-11; Feldman Dep., 4/30/87, at 31-32; Richard
Dep., 8/19/87, at 71-73.

31. Currier Dep., 5/5/87, at 38-40; Kiszynski Dep., 5/5/
87, at 21-22.

32. Jensen Dep., 7/6/87, at 48-49.

33. Id., at 48; Ex. EM73. Because the investigation re-
mains an open matter, the memorandum's contents are clas-
sified in their entirety.

34. Jensen Dep., 7/6/87, at 54. Jensen, Trott, and Richard
all contend that the sensitive nature of the investigation, its
international overtones, and the possible danger to Ambas-
sador Tambs made an NSC briefing advisable. They also
concur that the level of supervision exercised by the De-
partment of Justice was consistent with the nature of the
investigation. Jensen Dep., 7/6/87, at 48, 53, 55; Trott Dep.,
7/2/87, at 87; Richard Dep., 8/19/87, at 87. Jensen ex-
plained that he briefed only the NSC on this matter because
Revell's memorandum, which remains classified, indicated
that the CIA and the State Department were already being
briefed. Jensen Dep., 7/6/87, at 55-57. At his deposition,
Meese could not think of anything about the case that
merited a special briefing of the NSC. Meese Dep., 7/8/87,
at 227.

35. Meese Dep., 7/8/87, at 221.

36. Ex. EM73.

37. Ex. EM73.

38. Richard Dep.. 8/19/87, at 68-70, 87, 92-93; Trott
Dep., 7/2/87, at 9; Jensen Dep., 7/6/87, at 57-59.

114

Chapter 5

39. Jensen Dep., 7/6/87, at 60-61; Poindexter Test., 7/21/
87, at 180-81.

40. Feldman Dep., 4/30/87, at 37-38.

41. Id., at 47-50.

42. Id., at 56-59.

43. Id., at 56-59. Although Hull told Feldman he had not
spoken to anyone at the embassy before he cancelled the
interview, Kirt Kotula, an embassy official, told Feldman
that he had, in fact, spoken to Hull and advised him of his
right to counsel. Feldman Dep. 4/30/87, at 58-61.

44. Feldman Dep., 4/30/87, at 60-61.

45. Exhibit TCI 5. Castillo has testified that he never
discussed the investigation with Owen. Castillo Test., 5/29/
87, at 158, 192, 197 (Executive Session). He was uncertain
whether he had ever discussed the investigation with North.
Castillo Test., 5/29/87, 154-58 (Executive Session). North's
notes suggest that he was advised of the investigation by
Castillo. In an entry dated "31 Mar 86," North wrote:
"1700— call from [Thomas [Castillo?]] * » • - Asst. U.S.
Attorney/2 FBI + Resident Agent - Rene Corbo - Terrell
(Flaco) - CMA - Guns to [a Central American location].
North Notebook, 3/31/86, Q 2078.

46. Feldman Dep., 4/30/87, at 68-71; Barnett Dep., 7/17/
87, at 27-31; Scharf Dep., 7/17/87, at 31; Gregorie Dep., 7/
17/87, at 12-15.

47. Barnett Dep., 7/17/87, at 33-34.

48. Testimony by all the other participants in the meeting
indicates that Scharf and Gregorie were also in Kellner's of-
fice when Liewant arrived. Scharf Dep., 7/17/87, at 15-17;
Gregorie Dep., 7/17/87, at 15-20; Kellner Dep., 4/30/87, at
17-20; Feldman Dep., 4/30/87, at 68-70; Barnett Dep., 7/
17/87, at 38-41.

49. Liewant Dep., 6/2/87, at 9-14.

50. Barnett Dep., 7/17/87, at 38-41; Scharf Dep., 7/17/
87, at 15-17; Gregorie Dep., 7/17/87, at 15-20; Kellner
Dep., 4/30/87, at 17-20; Feldman Dep., 4/30/87, at 68-70.

51. Richard Dep., 8/19/87, at 92-93; Trott Dep., 7/2/87,
at 9; Jensen Dep., 7/6/87, at 58-59; Meese Dep., 7/8/87, at
222. Nor do the incomplete telephone records available to
the Committees reflect any calls from the Department of
Justice to Kellner on the afternoon of April 4. Because the
federal government uses a separate network, "FTS," for
intra-governmental telephone calls, commercial toll records
are not useful. The General Services Administration, which
maintains and monitors the FTS network, routinely records
information for only 20% of the calls made on the network.
A review of these records for April 1986 reveals a call on
April ,4 from the Office of the Deputy Attorney General to
the Office of the United States Attorney for the Southern
District of Florida. The call took place at 11:33 a.m. and
lasted only 1 minute. It was, therefore, too early and too
brief to be the call described by Liewant, J20977-J21016.
This evidence is not, of course, conclusive, since the call
described by Liewant could have originated in Miami or
could have been among the 80 percent originating at the
Department of Justice but not recorded.

52. Feldman Dep., 4/30/87, at 69.

53. Kellner Dep., 4/30/87, at 25-27. There are conflicting
accounts as to who rode in what cars with whom. Compare
Kellner Dep., 4/30/87, at 26-27; Jensen Dep., 7/6/87, at 63-
64; Meese Dep., 7/8/87, at 225.

54. Kellner Dep., 4/30/87, at 28-33.

55. The Miami News had run a story the day before
describing certain aspects of the investigation. See "U.S.

Probes Reports of Smuggling for Nicaraguan Rebels," The
Miami News, 4/11/86, at 1; Feldman Dep., 4/30/87, at 70.

56. Meese Dep., 7/8/87, at 219-22.

57. Feldman Dep., 4/30/87, at 76-77.

58. Id., at 78-80, J 19450.

59. Gregorie Dep., 7/17/87, at 31-33.

60. Feldman Dep., 4/30/87, at 81-83; Kellner Dep., 4/30/
87, at 46.

61. Feldman Dep., 4/30/87; Kellner Dep., 4/30/87, at 47.

62. Feldman Dep., 4/30/87, at 92-95; Scharf Dep., 7/17/
87, at 53-58; Kellner Dep., 4/30/87, at 47-49. This last
version, including Scharfs changes, was ultimately leaked
to the news media. Feldman Dep., 4/30/87, at 96-98.

63. Feldman Dep., 4/30/87, at 102-03; Currier Dep., 5/5/
87, at 47-48; Kiszynski Dep., 5/5/87, at 31-33.

64. Feldman Dep., 4/30/87, at 104-09.

65. Feldman Dep., 4/30/87, at 104-09; Kellner Dep., 4/
30/87, at 57-70; Richard Dep., 8/19/87, at 87-90.

66. Gregorie Dep., 7/17/87, at 39; Feldman Dep., 4/30/
87, at 115. The Hasenfus crash took place on October 5,
1986.

67. Feldman Dep., 4/30/87, at 108-10; Currier Dep., 5/5/
87, at 49; Kellner Dep., 4/30/87, at 116-17; Gregorie Dep.,
7/17/87, at 44.

68. Feldman Dep., 4/30/87, at 1 10.

69. North PROF Note to Poindexter, 9/17/86, N 12602.

70. Memorandum from John L. Martin to William Weld,
9/30/86, J4627-28.

71. Id

11. Draft State Dept. cable from Deputy Assistant Secre-
tary James Michel to Legal Attache in a Central American
country, 9/24/86, J46 18-21.

73. North PROF Note to Poindexter, 9/17/86, N 12602.

74. Id

75. Id

76. Poindexter PROF Note to North, 9/17/86, N12604.

77. Richard Dep., 8/19/87, at 122, 126, 132.

78. Id. at 132.

79. Id, at 121-23.

80. Trott Dep., 7/2/87, at 78.

81. Richard Dep., 8/19/87, at 126-28.

82. Id. at 124.

83. Id., at 126-27. Gorman, however, testified that there
was discussion that the official may start to talk and reveal
sensitive matters the U.S. would prefer remain secret.
Gorman maintained he "was prepared to believe that the
official might engage in all kinds of outrageous representa-
tions." In Gorman's view, however, these sensitive matters
did not pertain to questionable Contra-support activities.
Memorandum (5/19/87) of Interview (4/16/87) with
Gorman, at 12-14.

84. Richard Dep., 8/19/87, at 127.

85. North PROF Note to Poindexter, 9/18/86, N12603.

86. Richard Dep., 8/19/87, at 129-30.

87. R. Miller Dep., 8/21/87, at 381-90.

88. North 's notes demonstrate the regularity with which
Miller spoke with North about the "prince." These notes
refer to the "prince" by his code name, "Jewell." (See e.g..
North Notebook, Q1798, Q1858, Q1930.) R. Miller Dep., 8/
20/87, at 98-99.

89. R. Miller Dep., 8/21/87, at 390-93.

90. Id., at 377-78.

91. Id, at 393-94; Agent 1 Dep., 8/12/87, at 102-03, 112.

92. Agent 1 Dep., 8/12/87, at 105-06.

115

Chapter 5

93. Id., at 106-10.

94. Id., at 114-16.

95. James Kramarsic Int.

96. McFarlane flatly denied that North had discussed the
"prince" with him. McFarlane Test., 5/11/87, at 95-96.

97. Kramarsic Int., Exhibit OLN264.

98. Kramarsic Int., Exhibit OLN264.

99. Kramarsic Int., Ex. OLN265. According to Miller, he
unsuccessfully had attempted to contact the FBI agent
when he learned of the investigation from North. R. Miller
Dep., 8/21/87, at 396-97.

100. Kramarsic Int.; FB27 15-20.

101. Revell Dep., 7/15/87, at 83-89; Nicholas Harbist Int.,
6/4/87.

102. A portion of these payments was used by DEA
agents with whom the "prince" was traveling. R. Miller
Dep., 8/21/87, at 378-79.

103. R. Miller Dep., 8/21/87, at 405-06.

104. Id., at 406-07; see Chapter 4.

105. Nicholas Harbist Int., 6/4/87.

106. Amended Complaint, Avirgan, et al. v. Hull, et al..
No. 86-1146 (S.D., Fla., filed Oct. 3, 1986),

107. Revell Dep., 7/15/87, at 36.

108. FBI Teletype, 5/16/86, from Washington Field
Office to Intelligence Division, FBI Headquarters, at 1-2,
FB2983-86.

109. FBI Teletype. June 11, 1986, from Washington Field
Office to Intelligence Division, FBI Headquarters, at 3-5,
FB 2977-82.

110. FBI teletype, June 11, 1986, from Washington Field
Office to Intelligence Division, FBI Headquarters, FB 2977-
82.

111. Robinette Dep., 1/17/87, at 5-7.

112. Terrell had been interviewed by Assistant United
States Attorney Jeffrey Feldman in connection with the
investigation being conducted into alleged violations of the
Neutrality Act and an alleged plot to assassinate Ambassa-
dor Lewis Tambs. FBI Form 302, Subj: interview of Ter-
rell, dated 7/16/86. Of Terrell's allegations about Posey and
the plot to assassinate Tambs, Posey said Terrell "is full of
bull." Posey Dep., 4/23/87, at 89.

113. Revell Dep., 7/15/87, at 25-28.

114. Revell Dep., 7/15/87, at 26.

115. Robinette Int., 6/15/87, at 13-14. FBI 302 Report, 7/
16/86. See also WFO 2 488-1 and 199C-4773.

116. FBI form 302, Subj: Interview of Oliver North,
dated 7/22/86, FB3256-58.

117. FBI form 302. Subj: Interview of Oliver North,
dated 7/22/86, FB3256-58.

118. Revell Dep., 7/15/86, at 27, 32.

116

Chapter 6

Keeping "USG Fingerprints"* Off The Contra

Operation: 1984-1985

In October 1984, the President signed into law a ver-
sion of the Boland Amendment barring the Central
Intelligence Agency, the Department of Defense, and
"any other agency or entity of the United States in-
volved in intelligence activities" from providing sup-
port to Contra military activities. Explaining the stat-
ute on the floor of the House of Representatives im-
mediately before its passage, Representative Edward
P. Boland, then Chairman of the House Permanent
Select Committee on Intelligence, was clear about the
legislation's intent: the provision "ends U.S. support
for the war in Nicaragua."' National Security Advis-
er Robert C. McFarlane acknowledged that intent:
"the Boland Amendment governed our actions," he
told these Committees.^ Although Congress eventual-
ly approved humanitarian aid for the Contras and
authorized intelligence sharing, the full prohibition on
lethal support remained in effect until October 1986.

Despite the Boland Amendment's prohibition, U.S.
support for the Nicaraguan Resistance continued. As
set forth fully in Chapters 2 and 3, members of the
National Security Council staff— with help from offi-
cials of other Government agencies — supervised a
covert operation supporting the Contras. They pro-
vided weapons and military intelligence to the Resist-
ance and resupplied troops inside Nicaragua, using
funds raised from foreign countries, private citizens,
and ultimately the Iranian arms sales. They did so
despite the unambiguous intent of Congress that the
U.S. Government, including the NSC staff, could not
aid the Contras' military effort.

Secrecy, therefore, was vital to the success of the
Contra operation. Disclosure of U.S. support, Oliver
North wrote to John Poindexter in May 1986, "could
well become a political embarrassment for the Presi-
dent and you." ^ Moreover, disclosure would surely
doom the project. Poindexter told these Committees:
"It was very likely if it became obvious what we
were doing that Members of Congress would have
maybe tightened it [the law] up. I didn't want that to
happen." *

* North's term used in two PROF notes to Poinde.xter dealing
with the possible disclosure of the US. Government link to the
Contra operation. [Exhibits OLN-131 and OLN-307, Hearings,
100-7, Part III.]

But just as secrecy was vital to the operation's
success, even limited success jeopardized that secrecy.
As the Contras continued to purchase supplies and
equipment despite the cut-off of aid. Congress and the
media inquired, inevitably, about the sources of Re-
sistance support and funding.

Officials involved in the Contra support operation
took every precaution to ensure that the project re-
mained secret. They withheld the facts from some
Administration officials who spoke out frequently on
U.S. policy in Central America, forcing them to mis-
lead Congress and the American people. They dis-
couraged reporters from pursuing the link between
the NSC staff and the Contras. And they responded
to direct inquiries with half truths and false state-
ments.

1983-1984: Suspicions, and the
"Casey Accords"

Even before the full-prohibition Boland Amendment
was enacted in October 1984, Members of Congress
were concerned that the Administration was not pro-
viding sufficient information about the covert pro-
gram in support of the Nicaraguan Resistance.

In April 1983, Senator Daniel Moynihan, Vice-
Chairman of the Senate Select Committee on Intelli-
gence, spoke of a "crisis of confidence" between Con-
gress and the intelligence agencies running the oper-
ation.^ A year later, Committee Chairman Barry
Goldwater rebuked the CIA in the wake of the rev-
elations related to Nicaragua harbor mining. He wrote
to CIA Director William Casey: "[W]e were not
given the information we were entitled to receive." ®
Expressing the sense of many in Congress, Goldwater
said at an Intelligence Committee hearing: "We
cannot play guessing games with the intelligence com-
munity if the relationship between legislative and ex-
ecutive branches is to work." '

After the mining incident became public in April
1984, Director Casey was called before an extraordi-
nary secret session of the Senate — 60 Members were
present — to explain the failure to consult adequately
ahead of time. The Director apologized at the session,
and promised a new spirit of cooperation.® The prom-
ise would soon be formalized in what became known

117

Chapter 6

as the "Casey Accords," an agreement between the
CIA and the Senate Intelligence Committee on con-
sultation guidelines for covert operations. Under the
agreement, the CIA would share explanatory material
outlining the exact nature, goals, and risks of the
covert operation. The CIA would also give prior
notice of any "significant, anticipated intelligence ac-
tivity," even if the planned activity was part of an
ongoing covert operation.^

The accords reflected the recognition that coopera-
tion and forthrightness on covert activities were es-
sential in the relationship between the Executive and
Congress. But the subsequent actions of Casey and
members of the NSC staff did not reflect that recogni-
tion.

1984: Testimony Before Congress
on Third-Country Assistance

In December 1983, the President signed into law leg-
islation limiting funding for the Contras in fiscal year
1984 to $24 million. ^° The limit was the result of a
compromise between the House, which hoped to cur-
tail support for the Contras, and the Senate, which
favored continuing the aid. Explaining the compro-
mise on the floor of the House, Representative Boland
said the $24 million, which would likely run out by
June 1984, represented a "cap on funding from what-
ever source."*^ Representative J. Kenneth Robinson,
the ranking Republican on the House Intelligence
Committee, said that the $24 million compromise
meant "no additional funding could be made avail-
able" for the Nicaraguan Resistance "unless additional
authorization and/or appropriations are approved by
both Houses."'^

The Administration, however, sought funding for
the Contras beyond the $24 million appropriation. On
several occasions in 1984, officials tried to obtain aid
for the Contras from third-country sources. Those
attempts occurred as early as February, when the
Administration began to suspect that Congress was
not likely to approve supplemental funding for the
Contras when the $24 million ran out.'^ Shortly
thereafter, McFarlane sought to obtain equipment,
materiel and training for the Contras from Coun-
try l.!*

In a March 27, 1984, memo, CIA Director Casey
urged McFarlane to proceed with his plans to obtain
aid from Country 1, and told him that the CIA was
working along a second track to obtain assistance
from that Country. Casey added in the memo that the
CIA also was exploring "the procurement of assist-
ance from [Country 6]." That country had "indicat-
ed" that it might make "some equipment and training
available" to the Contras.'^ Country 1 rejected
McFarlane's approach, and the advance to Country 6
was called off, in part because of the revelations in
April relating to the Nicaraguan harbor mining.'®

As McFarlane testified, those revelations left a
"zero probability" that Congress would provide sup-
plemental funding for the Contras, "and no amount of
wringing our hands was going to change that."'^ In
May or June, the National Security Adviser obtained
a $1 million-a-month donation from Country 2, and
informed the President, who expressed "satisfaction
and pleasure" with the gift. McFarlane testified that
he also shared the news with the Vice President.'*

McFarlane informed the President of the donation
using a notecard. He rejected the option of telling the
President about the gift at a morning briefing because
"there could be ... as many as ten people in the
room [and] I simply didn't know for sure who would
be there." '^

In order to further ensure that the new Contra
funding remained secret, McFarlane did not share de-
tails of the gift with the Secretaries of State or De-
fense. McFarlane, who acknowledged that he regard-
ed the Country 2 contribution as a secret to be closely
held, testified he told them in vague terms that the
Contras "had been provided for through the end of
the year. "20 Neither Secretary of State Shultz nor
Secretary of Defense Weinberger recall receiving any
information on third-country funding until later. ^^

McFarlane also instructed North not to share news
of the new funding with anyone; indeed, according to
North, McFarlane never told him which country had
contributed. 2 2 North, in turn, instructed Contra
leader Adolfo Calero: "never let agency [CIA] know
of amt, source, or even availability [of the funds]. . . .
No one in our govt, can be aware. . . . Your organiza-
tion must not be fully aware."^^

Stories about the third-country contacts soon began
appearing in the media. In mid- April 1984, The Wash-
ington Post quoted anonymous sources speculating
that third countries might be persuaded to provide
money for the Contras. ^^ Administration officials
were quoted in the story as flatly denying that the
United States would approach foreign countries for
assistance. 2^ In an article 4 days later discussing up-
coming U.S. -Israeli talks on Israeli assistance to Cen-
tral American countries. The Washington Post quoted
State Department spokesman John Hughes as saying,
"The United States has no intention of using third
countries to finance covert action in Central Amer-
ica."2® Although Hughes was not aware, his denial
came at a lime when the CIA and NSC staff were
continuing their attempts to obtain third-country sup-
port.

Prompted by the reports, the House Permanent
Select Committee on Intelligence requested an ap-
pearance on May 2 by CIA Director Casey and Ken-
neth W. Dam, then Deputy Secretary of State. The
testimony occurred about 5 weeks after Casey had
sent the memorandum to McFarlane outlining the
CIA's efforts to obtain lethal assistance for the Con-
tras from Country 1 and Country 6 and indicating

118

Chapter 6

Casey's awareness of McFarlane's attempt to obtain
assistance from Country 1. Coming only days after he
had pledged to be fully candid with Congress, Casey's
testimony was inconsistent with his memorandums:

STOKES: . . . There has been some talk in the
media with reference to [Country 1] or [Country
2] being alternative funding sources. What can
you tell us about that?

CASEY: Well, there has been a lot of discussion.
We have not been involved in that at all.

FOWLER: Who has?

CASEY: I do not know."

FOWLER: ... Is any element of our Govern-
ment approaching any element of another Gov-
ernment to obtain aid for the Contras?

CASEY: No, not to my knowledge.^*

Kenneth Dam acknowledged to the Committees
that "there have been conversations with [Country
1]" about aid to the Contras and explained that those
talks had led nowhere.^* He also said that there had
been no "high level" approach to Country 2.^° Asked
about Administration activities. Dam denied that the
U.S. Government was approaching other countries
for assistance:

FOWLER: ... Is the Administration actively
looking for help, either in funding or in tactical
aid to our [Contra] operation?

DAM: . . . We are not making approaches to
other Governments. So it is clear — you know,
when you say 'actively' I do not know what is
going on in terms of people's minds or conversa-
tions among people within the executive branch.
We do not have a program of approaching other
governments for support, and we are not doing
so.

FOWLER: . . . We want to know whether or
not in light of serious questions about the Con-
gress' willingness to continue this funding,
whether or not our Government in all of its
ramifications is looking for help, both in funding
and the possibility of some tactical or strategic or
geopolitical — whatever you want to call it — help
to our operations and policy in Nicaragua.

DAM: All I can do is answer precisely, and that
is what I am trying to do. We have no program
of approaching other Governments. We are not
currently approaching other Governments on this
subject. I am not going to tell you we will not
sometime in the future. We do not see this as a

realistic approach. We do not see this as a solu-
tion, and I think that is a very precise answer.^'

Dam's denials accurately reflected State Department
policy but not Administration activities. There is no
evidence that Dam was aware of the Casey and
McFarlane third-country efforts or that he did not
make his statements in good faith. However, Casey,
who knew at least about the approaches to Countries
1 and 6, did not correct Dam's statements.

With the help of the Country 2 donation, the Con-
tras survived beyond the summer of 1984, when their
Congressionally approved $24 million allotment had
been exhausted. The donated funds began to flow in
July, and by September 4 the Contras had received $3
million. ^^ By then, Oliver North also had called on
Richard Secord to purchase weapons for the Con-
tras. ^^

On September 9, two major newspapers. The New
York Times and the Miami Herald, published reports
suggesting that third countries and private U.S. citi-
zens had replaced the CIA in providing aid to the
Contras.^* The reports prompted another Congres-
sional inquiry. Three days after the stories appeared,
the House Intelligence Committee called officials
from the CIA and the State Department to appear
before it. Members assumed that these officials —
Dewey Clarridge, the CIA's Latin American Division
Chief, and Ambassador Anthony Langhorne Motley,
Assistant Secretary of State for Inter-American Af-
fairs— would know whether the reports were true or
false. ^^

Clarridge told the Members that the CIA believed
the Contras had been receiving about $1 million per
month^* — precisely what Country 2 had provided.
He added, however, "We know of no place or no
country that has supplied any funds in any real
amount."^' Motley, who had not been informed of
the contribution from Country 2, testified:

FOWLER: Are we, is the United States of
America, soliciting help for the Contras?

MOTLEY: No. No.

FOWLER: In other countries?

MOTLEY: No.

FOWLER; Are we encouraging other countries
to participate?

MOTLEY: No, no, and that's a very good point.

FOWLER: Are we under any negotiations or
discussions with any other countries to aid these
efforts?

MOTLEY: No.^s

Motley explained the "decision" made on this issue
by senior Administration officials. As the $24 million

119

Chapter 6

was running out, he said, the Administration decided
that even though third-country soUcitation was still
"technically" permitted, a "feeling of mistrust" exist-
ed, and "in that context it was decided that we would
not encourage and that we would not facilitate either
other governments or in private groups within the
United States. And to my knowledge, that has been
honored. "^^

Committee member Wyche Fowler, Jr., responded
that he had "a hard time believing . . . that our
government does not know" how the Contras were
surviving.*" Indeed, the President, the Vice Presi-
dent, and the National Security Adviser knew that
Country 2 had made a substantial donation to the
Contras.

Early 1985: The Second Country 2
Contribution

In February 1985, the Administration obtained an ad-
ditional donation from Country 2. A $5 million depos-
it was made on February 27, 1985; by the end of
March 1985, the amount totaled $24 million, bringing
the total donation from that country to about $32
million.*' Again, officials took steps to ensure that
the funding remained secret.

McFarlane withheld information about the new do-
nation from two likely recipients of Congressional
inquiries on the subject of U.S. support for the Con-
tras: Secretary of State Shultz and CIA Director
Casey. ■'^ The President did not tell Shultz either,
even though he briefed the Secretary on his meeting
with the donor country's head of state shortly after
that meeting.* 3 Shultz testified: "I don't think he [the
President] is out to deceive me."** (Secretary of De-
fense Weinberger, along with the Chairman of the
Joint Chiefs of Staff, found out about the donation
independently.*^)

About Shultz, McFarlane testified that he "shared
virtually everything — I think indeed everything — with
the Secretary of State that I would learn of rel-
evance."*^ Asked whether the reason he did not tell
Secretary Shultz was "for his benefit, not for yours,"
McFarlane said yes.*'' McFarlane further explained:
"I am guessing that it [not telling Shultz] was prob-
ably out of concern for further dissemination and
compromise of that relationship, and damage and em-
barrassment."** State Department and CIA officials
had been frequently questioned about the sources of
Contra funding in 1984. And McFarlane's decision
not to tell Secretary Shultz about the donation came
shortly after The Washington Post publicized corre-
spondence between Representative Joseph P. Addab-
bo, the former Chairman of the Defense Subcommit-
tee of the House Appropriations Committee, and the
State Department. In a December 11, 1984, letter,
Addabbo had asked Shultz whether some countries
receiving U.S. foreign assistance had diverted some of

those funds to the Contras. The State Department
replied negatively one month later, and the corre-
spondence was the subject of an article on Janu-
ary 23.*9

Like McFarlane, North took action in February
1985 to prevent disclosure of U.S. Government activi-
ties in support of the Contras. In a letter addressed to
Calero about the new large donation. North revealed
his intention to conceal facts from Congress:

Please do not in any way make anyone aware of
the deposit. Too much is becoming known by too
many people. We need to make sure that this
new financing does not become known. The
Congress must believe that there continues to be
an urgent need for funding.^"

Within weeks of the new donation. Assistant Secre-
tary Motley was called to testify before the Senate
Committee on Foreign Relations. On March 26, 1985,
Senator Christopher Dodd asked about "a number of
rumors or news reports around this town about how
the Administration might go about its funding of the
Contras in Nicaragua. There have been suggestions
that it would be done through private groups or
through funneling funds through friendly third na-
tions, or possibly through a new category of assist-
ance and asking the Congress to fund the program
openly." Motley replied that the Boland Amendment
prohibited "any U.S. assistance whether direct or in-
direct, which to us would infer also soliciting and/or
encouraging third countries; and we have refrained
from doing that because of the prohibition."^'

Senator Dodd pursued the matter further:

DODD: Well, that aside, looking at these resolu-
tions, there are always clever ways of discover-
ing something that may have been omitted. All I
am asking from you is, and from the Administra-
tion more directly, is whether or not we can
have an assurance that there will be no indirect
efforts made to finance the Contra operation
through third party nations or through other ve-
hicles within the foreign aid authorization to fi-
nance this operation, that you will proceed pursu-
ant to the resolution as adopted on the continuing
resolution.

MOTLEY: I think that was one thing that was
loud and clear with us when I started. I told you
that we understand what it means, direct and
indirect, including third party. We take it to the
letter of the law at its most liberal interpretation.
And I can assure you that we have done it in the
past. You want my assurances that we will con-
tinue to do it in the future, and if you feel that is
necessary, I will so give it to you.

DODD: We have that assurance, then.

120

Chapter 6

MOTLEY: That is right. ^ 2

After Senator Dodd referred to the availability of
possible loopholes, Ambassador Motley responded:

We are going to continue to comply with the
law. I am not looking for any loopholes. . . .
Nobody is trying to play games with you or any
other Member of Congress. That resolution [the
Boland Amendment] stands, and it will continue
to stand; and it says no direct or indirect. And
that is pretty plain English; it does not have to be
written by any bright, young lawyers. And we
are going to continue to comply with that.^^

Again, Motley was not informed that the Adminis-
tration had obtained the donation from Country 2,
that the National Security Adviser and the CIA had
sought assistance from other countries, or that the
NSC staff had begun to supervise the covert Contra
operation out of its offices.

Casey Briefing of Senate
Intelligence Committee

In late 1984 and early 1985, North sent CIA intelli-
gence information to the Contras through Robert
Owen. 54 The CIA Chief of the Central American
Task Force (C/CATF), who ordinarily passed that
information to North, denied to these Committees
that he knew intelligence was being transmitted by
North via Owen to the Contras. ^^ On April 17, 1985,
CIA Director Casey, accompanied by Deputy Secre-
tary of State Dam, briefed the Senate Intelligence
Committee on intelligence operations in Nicaragua.
Casey told Committee members that, apart from intel-
ligence which might jeopardize the lives of Ameri-
cans, "we've kept out of any intelligence exchange
.... We haven't been providing intelligence. "^^

Prior to the date of the briefing, North had ob-
tained Richard Secord's assistance to purchase weap-
ons for the Contras with the funds donated from
Country 2. North testified that Casey suggested
Secord for this purpose. ^'^ However, Casey assured
the Members that "over the past year, we strictly
honored in practice and in spirit the Congressionally
mandated restrictions on military aid to the Con-
tras."^* He testified:

CASEY: [W]e have carefully kept away from
anything which would suggest involvement in
their activities which have been carried on quite
effectively and with considerable success in get-
ting support and getting weapons and getting am-
munition on their own. They've gone into the
international arms markets. We know that from
lots of sources that they were buying things from
other countries and bringing in ammunition and
been raising money. But we don't have any idea

as to the quantity, what they got in the pipeline
or —

CHAIRMAN: That's all I wanted to establish.^s

Deflecting Media Inquiries

By June 1985, reporters were close to establishing a
link between the NSC staff and Contra support. A
June 3 memo from North to Poindexter illustrates
North's efforts to discourage reporters from pursuing
the story. North boasted in the memo that at his
request, Adolfo Calero told Alfonso Chardy of the
Miami Herald "that if he (Chardi) [sic] printed any
derogatory comments about the FDN or its funding
sources that Chardi [sic] would never again be al-
lowed to visit FDN bases or travel with their units."
North added: "At no time did my name or an NSC
connection arise during their discussion."^"

North and retired Major General John K. Singlaub
had already devised a plan to divert press attention
away from the NSC staffs Contra operation, which
by then was being coordinated under North by Rich-
ard Secord, Richard Gadd, and their employees.
North encouraged Singlaub to court the media, realiz-
ing that, as Singlaub put it, "If I [Singlaub] had high
visibility, I might be the lightening rod and take the
attention away from himself [North] and others who
were involved in the covert side of support."^*

The plan seems to have had some success. Shortly
after his discussion with North, Singlaub was the sub-
ject of a long article in The Washington Post con-
necting him to support for the Contras,*^ and in the
coming months, he would be featured in virtually all
the major newspapers. Although North himself soon
would be the subject of press reports, Secord was not
mentioned in the media until mid- 1986, and details of
North's resupply operation were not revealed until
the plane carrying Eugene Hasenfus was shot down
in October 1986.

June-August 1985: Press Reports on
NSC Staff and Contra Support

By April, third-country funding had not only sus-
tained the Contras but had "allowed the growth of
the Resistance from 9,500 personnel in June 1984 to
over 16,000 today — all with arms," according to an
April 11, 1985, memo from North to McFarlane.*^
During May, according to a May 31 memo, "the
Nicaraguan Resistance recorded significant advances
in their struggle against the Sandinistas."^*

In June, reporters first linked the Contras' success
with North. By mid-August, most major news organi-
zations had published or broadcast reports on this
"influential and occasionally controversial character
in the implementation of the Reagan Administration's
foreign policy."*^

121

Chapter 6

News stories in June 1985 explored the sources of
Contra funding. On June 10, the Associated Press
distributed an article by Robert Parry suggesting that
the White House had lent support to private fundrais-
ing efforts. The article named North as the White
House contact for such efforts, which according to
the report, revolved around John Singlaub.^^

Two weeks later, the Miami Herald reported that
the Administration "helped organize" and continued
to support "supposedly spontaneous" private fundrais-
ing efforts. The article quoted extensively from ousted
Nicaraguan Democratic Force (FDN) leader Edgar
Chamorro, who described a trip by North and a CIA
officer to a Contra base in the spring of 1984. North
and the CIA officer assured the rebels, according to
the article, that the White House would "find a way"
to keep the movement alive. Neither North nor the
CIA officer specifically promised private aid, al-
though "it was clear that was their intent," Chamorro
was quoted as saying.^'

In August, reports in The New York Times, The
Washington Post, and other major newspapers assert-
ed that White House support for the Contras involved
more than fundraising. Oliver North had given the
Contras "direct military advice" on rebel attacks, ex-
ercising "tactical influence" on military operations.
The New York Times reported. The newspaper re-
ported that North had also "facilitated the supplying
of logistical help" to the Contras, filling in where the
CIA could no longer help. The information was at-
tributed to anonymous "administration officials. "^^

Denials

The day after this story appeared. President Reagan
responded to the allegations. "[W]e're not violating
any laws," the President said as he signed legislation
providing $27 million in humanitarian aid for the
Contras and authorizing the exchange of inteUi-
gence.^8 In a statement released later that day, the
President added that he would "continue to work
with Congress to carry out the program as effectively
as possible and take care that the law be faithfully
executed."'"

The National Security Adviser made his first com-
ments on the allegations about North in an interview
with The Washington Post. In an August 11 article,
McFarlane said he had told his staff to comply with
the Boland Amendment. "We could not provide any
support," he said, but he also stated that the NSC
staff could and did maintain contact with the Con-
tras.''

Summer and Fall August 1985:
Congressional Inquiries

In the third week of August, Representative Michael
Barnes, Chairman of the Subcommittee on Western
Hemisphere Affairs of the House Committee on For-

eign Affairs, and Representative Lee H. Hamilton,
Chairman of the House Permanent Select Committee
on Intelligence, separately wrote the President's Na-
tional Security Adviser, inquiring into NSC support
for the Contras.'^ Representative Barnes' letter, dated
August 16, cited press accounts as the cause of con-
cern about NSC staff support for the Contras. The
reports, Barnes wrote, "raise serious questions regard-
ing the violation of the letter and spirit of U.S. law."
The letter summarized the focus of his inquiry:
Whether the NSC staff provided "tactical influence
on rebel military operations;" whether the NSC staff
was engaged in "facilitating contacts for prospective
financial donors;" and whether the NSC staff was
involved in "otherwise organizing and coordinating
rebel efforts."

Barnes made clear his view that such activities
would violate the intent, if not the letter, of Congres-
sional restrictions on aid to the Contras: "Congres-
sional intent in passing the Boland Amendment was to
distance the United States from the Nicaraguan rebel
movement, while the Congress and the nation debated
the appropriateness of our involvement in Nicaragua."
The letter continued, "The press reports suggest that,
despite congressional intent, during this period the
U.S. provided direct support to the Nicaraguan
rebels." Barnes' letter concluded with a request for all
information and documents "pertaining to any contact
between Lt. Col. North and Nicaraguan rebel leaders
as of enactment of the Boland Amendment in Octo-
ber, 1984."

Representative Hamilton's letter also cited press ac-
counts and expressed a concern about "actions that
supported the military activity of the contras." He
requested "a full report on the kinds of activities
regarding the contras that the NSC carried out and
what the legal justification is for such actions given
the legislative prohibitions that existed last year and
earlier this year."

In addition to the requests from Representatives
Hamilton and Barnes, two other inquiries were sent to
McFarlane. On October 1, Senators David Duren-
berger and Patrick J. Leahy, Chairman and Vice
Chairman of the Senate Select Committee on Intelli-
gence, sent a letter with specific questions, following
up on a meeting with McFarlane.'^ And on Octo-
ber 21, Representative Richard J. Durbin wrote
McFarlane asking him to respond to charges made in
the media. '^

Responses to Congress: The
McFarlane Letters

As described fully in Chapter 3, the covert Contra
support operation expanded substantially in the
summer and fall of 1985. Until that point. North had
arranged for funding, coordinated the purchase of
arms, and passed military intelligence to the Contras.

122

Chapter 6

Beginning with the July meeting at the Miami Airport
hotel, North sought to broaden the project, attempt-
ing to replicate the earlier CIA covert operation. The
Enterprise took control of third-country funds and
other money obtained with the help of the NSC staff,
and began to set up its own air resupply operation to
provide weapons and material to Resistance troops
inside Nicaragua.

On September 5, McFarlane sent the first of his
responses to Congress. He wrote to Representative
Hamilton: "I can state with deep personal conviction
that at no time did I or any member of the National
Security Council staff violate the letter or spirit" of
Congressional restrictions on aid to the Contras. In
denying allegations about NSC staff activities, the
letter echoed the language of the Boland Amendment:

I am most concerned . . . there be no misgivings
as to the existence of any parallel efforts to pro-
vide, directly or indirectly, support for military
or paramilitary activities in Nicaragua. There has
not been, nor will there be, any such activities by
the NSC staff."

This letter, drafted by McFarlane himself, served as
the model for five additional letters prepared by
North, signed by McFarlane, and sent in September
and October in response to Congressional inquiries.'^
In testimony before these Committees, McFarlane
called these responses "too categorical."'" He said: "I
did not give as full an answer as I should have."''^
North went further, acknowledging that statements in
the letters were "false," and summarizing the re-
sponses as "erroneous, misleading, evasive, and
wrong. "''^

McFarlane wrote to Hamilton that he made his
categorical denials only after he "thoroughly exam-
ined the facts and all matters which in any remote
fashion could bear upon these charges."^" A review
by the NSC staff did take place, but the actions taken
in conjunction with that review leave it open to ques-
tion.

First Reaction: Conceal the Facts

When the Barnes letter arrived, Poindexter, who
was then the Deputy National Security Adviser, as-
signed North to draft the response, noting on a memo
he had received from a subordinate: "Barnes is really
a trouble maker. We have good answers to all of
this."*' The "good answers," Poindexter acknowl-
edged in testimony, involved concealing NSC staff
activities supporting the Contras:

Q: And when you suggested that he prepare the
first draft of the response, was it your intention
that Colonel North be able to answer that letter
with finessing a description of his activities?

A: That is exactly right.

Q: That is why you designated him as the action
officer?

A: That is right, because my objective here again
would have been to withhold information.*^

McFarlane, meanwhile, had decided to draft the
initial response himself In preparation, he instructed
Poindexter to assemble "records, files of all memoran-
dums, papers, travel vouchers, and so forth" relating
to the Congressional inquiries.*^ The Committees un-
covered no evidence to suggest that the officers who
conducted the document search were aware of or
attempted to conceal the full extent of NSC staff
activities. The search, however, was conducted nar-
rowly. The information policy officer assigned by
Poindexter to conduct the search wrote the following
in a memo presenting plans for the document search:

[T]he search should be as narrowly focused as
was the request. In this case. Congressman
Barnes has focused on '. . . documents, pertaining
to any contact between Lt. Col. North and Nica-
raguan rebel leaders as of . . . October, 1984.' . . .
Fishing expeditions in all files relating to Central
America and/or Nicaragua are NOT necesssary
to respond to the request.**

The officer ruled out a search of the files in North's
office, explaining, "they are 'convenience files' gener-
ally made up of drafts, and/or copies of documenta-
tion in the institutional and Presidential Advisory
files. "*^ North's files, in fact, included nonlog memos,
many PROF notes, his notebooks, and letters to
Calero, Owen, and others.

Finally, the officer noted that appointment and tele-
phone logs had become "favorite targets" of such
Congressional inquiries, and suggested "[i]t may be in
our interest to be terribly forthcoming and bury Mr.
Barnes in logs of dates and/or names re meetings and
telecons or perhaps to offer to do so putting him on
notice that the logs give times and dates but no sub-
stance." She recommended, however, "that for now
we limit the search of appointment and telephone logs
to OUie," thus leaving the search to the main target of
the inquiry. Under the recommendation, North would
be asked to sample the logs and "give us a sense of
what they consist of and of the potential relevance to
the request."*®

Poindexter approved that recommendation, along
with the other recommendation to begin a search of
all Presidential and official NSC files. He also did not
indicate any disagreement with the officer's statement
that North's office files ought not be searched.*'
Within a few days, some 50 relevant documents were
identified, and 10 to 20 were deemed worthy of
review. They were given to Commander Paul
Thompson, the NSC's General Counsel. On or about
August 26, Thompson gave the documents to McFar-

123

Chapter 6

lane, warning him that some warranted concern and
raising the possibihty of asserting executive privilege
in response to the Barnes inquiry.*^

The Six "Troubling" l\1emos

McFarlane reviewed the documents and selected
six memorandums which, despite the narrow focus of
the search, "seemed to me to raise legitimate ques-
tions about compliance with the law." He added:
"[A]n objective reading would have taken passages in
each of these memorandums to be either reflective of
a past act that was not within the law or a recommen-
dation that a future act be carried out that wouldn't
be."«='

A summary of the six documents, all memos from
North to McFarlane, follows:

Memo of December 4, 1984: "Assistance for the
Nicaraguan Resistance."

The memo ^° described a meeting between North
and an official of Country 4, a totalitarian country, a
meeting undertaken "in accord with prior understand-
ing." ^'

At the meeting, according to the memo. North at-
tempted to convince the official to permit a sale of
antiaircraft missiles and launchers to the Contras. The
official had mistakenly believed that the weapons
were intended for the Central American country
listed on the end-user certificate. The memo shows
North's efforts, only months after the most restrictive
Boland Amendment went into effect, to obtain sophis-
ticated weapons for the Contras.

The memo also recounted a meeting with Singlaub,
who described his efforts to solicit aid for the Contras
from two other countries located in the Far East.
North wrote, "If it is necessary for a USG official to
verify Calero's bona fides, this can be arranged. "^^
Such an arrangement would constitute facilitation of a
contribution to the Contras. Finally, the memo dis-
cussed David Walker, a former British Special Air
Services officer who, in a meeting with North, of-
fered to conduct sabotage operations for the Resist-
ance. "Unless otherwise directed," North wrote,
"Walker will be introduced to Calero and efforts will
be made to defray the cost of Walker's operations
from other than Calero's limited assets."*^

McFarlane testified that upon receiving this memo
he believed that he asked Poindexter to investigate
and "find out from Colonel North what had happened
and how his actions squared with the law."** The
memo contains the notation: "Noted JF" in Poin-
dexter's handwriting.®^

Memo of February 6, 1985: "Nicaraguan Arms
Shipment."

The memo ®* noted that the Nicaraguan merchant
ship, Monimbo. was about to pick up a load of arms
for delivery to Nicaragua, a delivery that North

urged should be stopped. North noted, "if asked,
Calero would be willing to finance the operation" to
seize or sink the ship but does not have the personnel
to do so. North suggested that foreign countries
might be able to help.®''

North added that if time did not permit a "special
operation" to seize the ship, "Calero can quickly be
provided with the maritime assets required to sink the
vessel before it can reach port of Corinto." ®* North
recommended "that you authorize Calero to be pro-
vided with the information on Monimbo and ap-
proached on the matter of seizing or sinking the
ship." National Security Council records indicate that
McFarlane saw this memo and did not approve or
disapprove. McFarlane testified that he did not ap-
prove.®® Admiral Poindexter wrote on the memo,
"We need to take action to make sure ship does not
arrive in Nicaragua." He attached a note saying,
"Except for the prohibition of the intelligence com-
munity doing anything to assist the Freedom Fighters
I would readily recommend I bring this up at CPPG
[Crisis Pre-Planning Group meeting] at 2:00 today. Of
course we could discuss it from the standpoint of
keeping the arms away from Nicaragua without any
involvement of Calero and Freedom Fighters." ""'

Memo of March 5, 1985: "[A Central American
Country's] Aid to the Nicaraguan Resistance."

The memo "" requested McFarlane's signature on
memorandums to senior Cabinet officers asking their
views on increased U.S. aid to a Central American
country. "The real purpose of your memo," North
wrote, "is to find a way by which we can compensate
[the country] for the extraordinary assistance they are
providing to the Nicaraguan freedom fighters."'°^
The attached memo did not include a reference to
such a purpose. North attached to the memo for
McFarlane false end-user certificates provided by the
Central American country to cover nearly $8 million
of munitions that were soon to be delivered to the
FDN. The certificates. North wrote, "are a direct
consequence of the informal liaison we have estab-
lished with [an official of the Central American coun-
try] and your meeting with him and [the country's]
President." '°^ The certificates were made out to
Energy Resources International, a company owned
by Albert Hakim and Secord.

North added in the memo, "Once we have approv-
al for at least some of what they have asked for, we
can ensure that the right people in [the Central Amer-
ican country] understand that we are able to provide
results from their cooperation on the resistance
issue." ^°*

North recommended that McFarlane sign and
transmit the attached memo to the other Cabinet offi-
cers. NSC records reflect that McFarlane approved
the recommendation. However, McFarlane testified
that aid was sought on its merits, and not to reward

124

Chapter 6

the Central American country for helping the Con-
tras.i°5

Memo of March 16, 1985: "Fallback Plan for the
NIcaraguan Resistance."

The memo '°^ set out a plan to aid the Contras in
the event that Congress did not do so. It included
several recommendations. Among them:

- The President publicly urge Americans to con-
tribute funds for humanitarian aid to the Contras.
McFarlane wrote in the margin, "Not yet."'°'

- Creation of a tax-exempt corporation for dona-
tions. McFarlane wrote "Yes."'"*

- "The current donors ... be apprised of the plan
and agree to provide additional $25-30M to the
resistance for the purchase of arms and muni-
tions." McFarlane wrote "doubtful." '"^

According to McFarlane, the term "current
donors" referred to Country 2.'*°

Memo of April 11, 1985: "FDN Military
Operations."

In the memo,"' North described how the Contras
spent the $24.5 million "made available since USG
funding expired," making clear that the funds ob-
tained by McFarlane went mostly for "arms, ammuni-
tion, and other ordnance items." "^

North also wrote:

Despite the lack of any internal staff organization
. . . when the USG withdrew, the FDN has
responded well to guidance on how to build a
staff Although there was a basic lack of familiar-
ity with how to conduct guerrilla-type oper-
ations, since July, all FDN commanders have
been schooled in these techniques and all new
recruits are now initiated in guerrilla warfare tac-
tics before being committed to combat. In short,
the FDN has well used the funds provided and
has become an effective guerrilla army in less
than a year. ' ' ^

North described Contra plans for "future oper-
ations," including a further increase in troops, a spe-
cial operations attack against the Sandinista Air
Force, a ground military operation against a mine
complex and, "the opening of a southern front . . .
which will distract EPS units currently committed to
the northern front.""'' He continued:

It is apparent that the $7M remaining will be
insufficient to allow the resistance to advance
beyond these limited objectives, unless there is a
commitment for additional funds. The $14M
which the USG may be able to provide will help
to defray base camp, training, and support ex-

penses but will not significantly affect combat
operations until early Autumn due to lead-time
requirements. Efforts should, therefore, be made
to seek additional funds from the current donors
($15-20M) which will allow the force to grow to
30-35,000."^

North recommended "that the current donors be
approached to provide $15-20M additional between
now and June 1, 1985." "^ NSC records showed that
McFarlane indicated no decision and returned the
memo to the System IV files. McFarlane testified that
he rejected North's recommendation and sought no
further aid from Country 2.

Memo of May 31, 1985: "The NIcaraguan
Resistance's Near-Term Outlook."

In the memo,'" North provided an update of
Contra political and military activities. Among other
things, he listed several important FDN military suc-
cesses and concluded: "These operations were con-
ducted in response to guidance that the resistance
must cut Sandinista supply lines and reduce the effec-
tiveness of the Sandinista forces on the northern fron-
tier.""* North concluded by noting, "[P]lans are un-
derway to transition from current arrangements to a
consultative capacity by the CIA for all political mat-
ters and intelligence, once Congressional approval is
granted on lifting Section 8066 restrictions [the
Boland Amendment].""^ He added: "The only por-
tion of current activity which will be sustained as it
has since last June, will be the delivery of lethal
supplies."'^''

North recommended that McFarlane brief the
President on these matters.'^' NSC records do not
indicate whether McFarlane approved this recommen-
dation.

Undiscovered Documents

The memos Thompson presented to McFarlane in
late August 1985 did not represent all the memos
written by North to McFarlane demonstrating
North's involvement in supporting the Contras. Be-
cause it was limited by the information policy officer
to official NSC and Presidential Advisory files, the
search would not uncover "nonlog" memorandums.
In one such memo, dated November 7, 1984, North
made clear that he was attempting to pass intelligence

information about Sandinista HIND helicopters to
Calero.'22

Nor did the search turn up relevant logged memo-
randums in which North indicated that he and Contra
leaders had planned the timing of rebel military oper-
ations. For example, a March 20, 1985, memo stated:

In addition to the events depicted on the internal
chronology at Tab A, other activities in the
region continue as planned — including military

125

Chapter 6

operations and political action. Like the chronol-
ogy, these events are also timed to influence the
vote:

- planned travel by Calero, Cruz and Robelo;

- various military resupply efforts timed to sup-
port significantly increased military operations
immediately after the vote (we expect major San-
dinista crossborder attacks in this time frame —
today's resupply . . . went well); and

- special operations attacks against highly visible
military targets in Nicaragua. '^^

McFarlane-North Alteration
Discussions

On August 28, McFarlane and North began a series
of lengthy meetings to fashion a response to the Con-
gressional inquiries. According to a chronology pre-
pared by McFarlane, they met six times and spoke by
phone four times between August 28 and September
12, the date of the response to Representative
Barnes. '2* Although both McFarlane and North ac-
knowledged to the Committees that they discussed
altering the documents, the two dispute the purpose
of the meetings.

McFarlane maintained that the meetings, together
with the document review, constituted his investiga-
tion into North's activities, an investigation, he said,
that turned up no proof of illegal activities. '^^ For
example, he asked North about allegations relating to
fundraising. According to McFarlane, North respond-
ed that he had not solicited or encouraged donations,
that he merely told potential donors, "if you want to
be helpful to the Contras, go to Miami, they're in the
phone book they have an office, and do it your-
selves."'^®

The two reviewed the documents and, according to
McFarlane, North explained that his memos were
being misinterpreted. For example, in one memo
North wrote that the FDN "has responded well to
guidance on how to build a staff," and that "all FDN
commanders have been schooled" in guerrilla warfare
tactics. '2' McFarlane said North told him, contrary
to any implication in the document, that the guidance
came not from him but from retired military officers
hired by the Contras. '^s as McFarlane related the
events. North offered to alter the documents and
McFarlane gave him a tentative go-ahead. McFarlane
testified:

Well, as we went through them, he pointed out
where my own interpretation was just not accu-
rate . . . and he just said, you are misreading my
intent, and I can make it reflect what I have said

if this is ambiguous to you, and I said all right,
do that. '29

North shortly returned with a sample alteration.
McFarlane's testimony indicates that the document
North had altered was "FDN Military Operations,"
dated April 11, 1985. The recommendation in the
document, "that the current donors be approached to
provide $15-20M additional between now and June 1,
1985" was replaced with a recommendation that "an
effort must be made to persuade the Congress to
support the Contras."'^" North had asserted, accord-
ing to McFarlane, that the problem with the docu-
ments was one of interpretation and that the changes
would be slight. McFarlane acknowledged that this
alteration left the document "grossly at variance with
the original text."'^'

McFarlane testified that he did not replace any
original NSC documents with altered documents and
did not instruct North to do so. He said he took with
him when he resigned the pages North had altered
and eventually destroyed them. '^^

North's version of events is substantially different.
McFarlane, North testified, brought the selected doc-
uments to his attention, "indicated that there were
problems with them, and told me to fix them." This
meant, he testified, that he was to "remove references
to certain activities, certain undertakings on my behalf
or his, and basically clean up the record." '^^ The
documents. North acknowledged, "clearly indicated
that there was a covert operation being conducted in
support of the Nicaraguan Resistance."'^'' That is
why. North testified, McFarlane instructed him to
alter them:

The documents, after all, demonstrated his
[McFarlane's] knowledge and cognizance over
what I was doing, and he didn't want that. He
was cleaning up the historical record. He was
trying to preserve the President from political
damage. I don't blame him for that. '^^

North testified that he did not abide by McFarlane's
instruction until shortly before his dismissal: "I saw
towards the end of my tenure that this list still had
not been cleaned up, and so I went and got the
documents out of the system and started revising the
documents."'^®

Although the record is inconclusive on what exact-
ly McFarlane and North discussed at their meetings,
it is undisputed that both the National Security Advis-
er and one of his principal staff members considered
altering NSC documents. They discussed this course
after receiving requests from several Members of
Congress for access to precisely those types of docu-
ments.

126

Chapter 6

Responses to Congress: The
Denials

Within days of his document review and discussions
with North, McFarlane sent the first of his responses
to Congress. In addition to the broad assurance that
the NSC staff was complying with the "letter and the
spirit" of the Boland Amendment, the responses con-
tain specific denials of allegations that the NSC staff
had provided fundraising or military support to the
Nicaraguan resistance.

Fundraising

McFarlane's September 12 response to Representa-
tive Barnes stated: "None of us has solicited funds,
[or] facilitated contacts for prospective potential do-
nors. . . ."13''

In his October 7 letter, McFarlane replied as fol-
lows to a written question from Representative Ham-
ilton:

Mr. Hamilton: The Nicaraguan freedom fighters,
in the last two months, are reported by the U.S.
Embassy, Tegucigalpa, to have received a large
influx of funds and equipment with some esti-
mates of their value reaching as high as $10 mil-
lion or more. Do you know where they have
obtained this assistance?

Mr. McFarlane: No.'^*

In fact, according to his own testimony, McFarlane
not only knew how the Contras obtained financial
assistance, he personally facilitated the main donation
to the Contras:

Q: . . . I was referring to Country Two and the
fact that the actual donors had, as I understand it,
Country Two was the actual donors —

A: Yes.

Q: And that you had not only facilitated con-
tacts, but you had facilitated the actual contribu-
tion.

A: I will accept that, yes. '^^

Furthermore, according to Assistant Secretary of
State Gaston Sigur and North, McFarlane was aware
of Sigur's efforts to obtain a donation from a Far
Eastern country — efforts that took place while the
responses to Congress were being prepared. North, of
course, was aware of that approach. Indeed, on
August 28, the day he and McFarlane had their first
lengthy meeting to discuss the Congressional inquir-
ies. North reassured an official from that country that
the United States would be grateful if his country
made a contribution to the Contras.'*" The country
responded with a $1 million gift.''"

Also, in his letter of September 12, Representative
Hamilton asked:

Has Colonel North been the focal point within
the NSC staff for handling contacts with private
fundraising groups, such as the World Anti-Com-
munist League and the Council for World Free-
dom headed by retired Major General John K.
Singlaub?

McFarlane replied, "No."'*^ In fact, however.
North had been dealing with Singlaub on fundraising,
as the December 4, 1984, North-to-McFarlane memo
showed. As North told the Committees, he "certainly
saw General Singlaub a lot related to support for the
Nicaraguan Resistance. "'''^

l\/lilitary Assistance

In his September 5 letter, McFarlane stated:

At no time did we encourage mihtary activities.
Our emphasis on a political rather than a military
solution to the situation was as close as we ever
came to influencing the military aspect of their
struggle.'''*

North was heavily involved in the military aspect
of the Contra struggle. He testified that this statement
was false. '''^ In addition to helping arm the Contras,
and to providing intelligence and cash to Contra lead-
ers, North also, beginning in the summer of 1985,
coordinated the efforts to set up a resupply operation
to provide lethal and nonlethal supplies to troops
inside Nicaragua. Several weeks before the letters
were drafted, North asked Secord to set up the oper-
ation, and he called on Ambassador Lewis Tambs to
facilitate the construction of an airfield for refueling
resupply aircraft.''*^ Yet, McFarlane wrote to Repre-
sentative Hamilton on October 7:

Lieutenant Colonel North did not use his influ-
ence to facilitate the movement of supplies to the
resistance.'*'

North acknowledged that this statement was false.'**
It is unclear whether McFarlane was fully aware of
North's activities. McFarlane testified he was not.'*^
But the documents McFarlane reviewed and about
which he was concerned shortly before drafting the
first response to Congress showed that North repeat-
edly attempted to influence the military aspect of the
Contras' struggle.

Furthermore, McFarlane specifically denied in his
October 7 letter to Representative Hamilton that
North had provided the Contras "tactical advice":

The allegation that Lieutenant Colonel North of-
fered the resistance tactical advice and direction
is, as I indicated in my briefing, patently
untrue. '^°

127

Chapter 6

North acknowledged to the Committees that ahhough
he never "sat down in the battlefield and offered
direct tactical advice ... I certainly did have a
number of discussions with the Resistance about mili-
tary activities, yes, to include the broader strategy for
the Southern front and an Atlantic front and an inter-
nal front."' ^' And McFarlane testified: "I felt it was
likely that an officer of the qualifications and excel-
lence of Col. North, when he was down visiting in
Central America, probably did extend advice." '^^
Indeed, McFarlane admitted in his testimony that he
felt in 1985 that "it was likely" that North had gone
"beyond the law" on giving military advice to the
Contras. '^^ He testified: "But without certain evi-
dence of it, not being able to disapprove it, I accepted
that [the denials McFarlane said North gave him] as
sufficient grounds for saying it as truth, and I believe
that I was wrong to do so. But that is why I sent

it."154

McFarlane maintained that he believed at the time
that such advice was not the "central concern" of
Congress. "It seemed to me that that was inconse-
quential to the outcome of the conflict, and probably
not in the eyes of Congress a serious matter," he
said.'** Representative Barnes' letter, however,
shows that one of his main concerns was about re-
ports that North had provided " 'tactical influence' on
rebel military operations."'*® In addition, Representa-
tive Hamilton, in his first letter, expressed an interest
"in actions that supported the military activity of the
contras."'*'' Each of the other letters from Congress
asks McFarlane to respond to specific allegations
about NSC military support for the Contras. In any
case, McFarlane in his letters offered no such explana-
tion, merely a flat denial.

Finally, despite his assertion in his letters to Con-
gress, McFarlane himself influenced the Contras' mili-
tary struggle. The $32 million obtained with his help
from Country 2 enabled the Resistance to purchase
weapons to continue fighting. The April 11, 1985,
memo from North describing how the funds were
expended stated clearly that the donation was being
used to purchase lethal supplies.'**

McFarlane's Meetings with l\1embers

The denials McFarlane made in his letters were
repeated in face-to-face meetings with Members of
Congress. On September 5, Senate Select Committee
on Intelligence Chairman Durenberger and Vice
Chairman Leahy questioned McFarlane in an hour-
long private briefing. At the start of their meeting,
McFarlane showed the two Senators a copy of the
letter he would send to Representative Hamilton that
day. McFarlane assured Senators Durenberger and
Leahy that "no law had been broken," and that
"there was no intent to circumvent restrictions Con-

gress placed on aid to the Nicaraguan Resistance."
Asserting that he had grilled North on his involve-
ment with supporters of the Resistance, McFarlane
said he was confident that "[N]o NSC staff member
either personally assisted the Resistance or solicited
outside assistance on their behalf" Senator Leahy de-
scribed the meeting in a letter written shortly thereaf-
ter:

Mr. McFarlane said that the officer [North] had
frequently received calls from persons wishing to
donate funds, and that he referred them to the
Contra leaders themselves. He insisted that the
officer never solicited funds, encouraged dona-
tions or initiated contacts with potential donors.
He further denied that the officer, in several per-
sonal meetings with Contra leaders, both in
Washington and in Central America, ever offered
military advice. The officer's authorized role, Mr.
McFarlane said, was to assure the Contras during
the time of the Congressional aid cutoff of the
President's continued moral support. . . .'*^

McFarlane concluded by telling the Senators, "I can't
believe everything everyone says, but I do believe
Ollie." '60

After the session. Senator Durenberger told a re-
porter that he felt McFarlane was candid about his
knowledge, but that questions about U.S. Government
support for the Contras remained:

So we came away from the meeting feeling that
from Bud McFarlane we're getting what he be-
lieves to be the situation with regard to his staff
Are we satisfied that this sort of concludes the
matter and that no one in any way involved was
directing the effort? No, you can't be satisfied. ' * '

On September 10, McFarlane met with Representa-
tive Hamilton and other Members of the House Intel-
ligence Committee. As Representative Hamilton later
summarized the meeting in a letter to a colleague,
McFarlane told the Committee Members that Presi-
dent Reagan had made clear that the entire executive
branch had to comply with the Boland Amendment.
McFarlane said he had conducted a thorough investi-
gation into allegations made about the NSC staff and
concluded that North had not "given military advice
of any kind to the Contras," nor had he "solicited,
accepted, transmitted or in any other way been in-
volved with funds for the Contras." '^^

The House Intelligence Committee Chairman ac-
cepted the denials of the National Security Adviser.
At the close of the session, Mr. Hamilton told McFar-
lane, "I for one am willing to take you at your
word."'®^

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Chapter 6

McFarlane-Barnes Document
Dispute

In his first response to Representative Barnes on Sep-
tember 12, McFarlane ignored the Congressman's re-
quest for documents. A PROF note to Paul Thomp-
son on September 20 indicated that McFarlane be-
lieved he had successfully sidestepped the document
issue: "Now that we have the Barnes letter behind us
you can return the Contra papers to Ollie please."'^''
Ten days later, however, Representative Barnes re-
newed his document request. In a letter to McFarlane
dated September 30, 1985, the Congressman wrote:

I am sure you understand that the pertinent docu-
ments must be provided if the Committee is to be
able to fulfill its obligation to adopt legislation
governing the conduct of United States foreign
policy and to oversee the implementation of that
policy under the law."®*

Congressman Barnes went on to explain why he felt
strongly about his Committee's need to review the
documents:

It may be helpful if I spell out more clearly the
interest of the Committee. The Committee retains
its concern about possible violations of federal
law by members of the NSC staff. However, that
is not the Committee's only — or even primary —
concern, given that the enforcement of the law is
an Executive Branch function. It is the Commit-
tee's responsibility, however, to conduct over-
sight of laws that limit the activities of the Exec-
utive Branch under the Committee's jursidiction,
and to reach judgments as to whether changes in
the law are indicated by those activities. Even if
the Committee determined that the activities of
the NSC staff on this matter were entirely legal,
the Committee might still determine that changes
in the law were necessary. I am sure it is obvious
to you that the Committee cannot make those
judgments unless it has in its possession all infor-
mation, including memorandums and other docu-
ments, pertaining to any contact between the
NSC staff and Nicaraguan rebel leaders. I would
hereby renew my request for such information,
both oral and documentary. '^^

Thus, the Barnes letter of September 30 emphasized
that Congress was entitled to know about the NSC's
efforts to support the Contras, even if those efforts
were legal. Once apprised of the facts, Congress
would determine whether additional legislation was
required, including closing any loophole in the
Boland Amendment that the NSC staff might have
claimed.

Representative Barnes and McFarlane met at the
White House on October 17. The day before the
meeting, NSC General Counsel Paul Thompson pre-

pared a memo for McFarlane suggesting that Repre-
sentative Barnes should be told that the National Se-
curity Adviser had no legal authority to turn over the
documents. North's actions, Thompson wrote, were at
the National Security Adviser's direction "in further-
ance of the President's initiatives." Documents per-
taining to North's actions in carrying out the Presi-
dent's instructions "are internal and deliberative in
nature and are furthermore not NSC agency docu-
ments. As Presidential advisory papers, they fall
under the dominion of the President and are no
longer subject to your disposition."'®'

At the meeting with Congressman Barnes, McFar-
lane, referring to a stack of documents on his desk,
explained that a document search had been made and
that McFarlane had selected documents relevant to
Congressional inquiries. He told Congressman Barnes
he would not permit the documents to leave his office
but would allow the Congressman to read them there.
McFarlane acknowledged that he made the offer
knowing Representative Barnes would likely refuse it:

Q: And I take it — it was part of your thinking
that if a busy Congressman came down to your
office and saw a substantial stack of documents,
and you were having a short meeting [McFarlane
had budgeted one hour for the session], it was
very unlikely that he would ask to read through
the documents from one end to the other?

A: I think that is true, yes.'®*

Indeed, Representative Barnes deemed the offer not
to be serious. He understood McFarlane to imply that
the documents on the desk were not all the docu-
ments but only the ones McFarlane had concluded
were "relevant." This, Barnes felt, "was not an ade-
quate way to ascertain the truth of the allegations."
Furthermore, Representative Barnes believed that
prohibiting staff from reviewing the documents would
result in an incomplete investigation: "[I]n my experi-
ence the only way you can do a good investigation is
to compare documents — one to another — and to ana-
lyze these with staff who have the time and back-
ground to work at putting them in context." McFar-
lane's offer, therefore, "didn't seem like a serious pro-
posal."'®^

On October 29, Representative Barnes wrote
McFarlane again expressing his view that the proce-
dures mandated by McFarlane were "inadequate."''"'
He requested that McFarlane turn the documents
over to the House Intelligence Committee, thereby
assuring that the classified materials would be appro-
priately handled. Representative Barnes wrote: "I be-
lieve that this proposal would surely resolve any con-
cerns that the Administration might have about the
security of the information, while at the same time
fulfilling the responsibilities of the House.""' This

129

Chapter 6

was the last correspondence between McFarlane and
Representative Barnes on this issue.

North, however, tried unsuccessfully to convince
McFarlane to send one more letter — a response North
maintained he would have preferred to send at the
start. ''^ In the draft letter, McFarlane refused out-
right to turn over documents claiming that they were
"internal Presidential documents regarding sensitive
relations with other governments."^''^ The executive
branch, the letter said, "must abide by its commit-
ments to other governments not to compromise sensi-
tive information." ''■» The letter stated that disclosure
of the documents sought by Barnes would "adversely
effect the national security of the United States and
endanger our citizens." "''^

McFarlane's 1986 Testimony

In the wake of the November 1986 relevations and a
full year after he left office, McFarlane testified
before several panels investigating the Iran-Contra
Affair; the Senate and House Intelligence Committees,
the Senate and House Foreign Affairs Committees,
and the President's Special Review Board (The
Tower Board). Again, Members of Congress — and
this time officials on the Tower Board staff as well —
were unable to learn the crucial facts about the Gov-
ernment's actions in support of the Nicaraguan Resist-
ance.

The former National Security Adviser acknowl-
edged to the panels that North had told him in May
1986 about the diversion of Iranian arms sales funds
to the Contras. That aspect of Administration support
for the Resistance, by the time of McFarlane's De-
cember 1986 testimony, had been revealed by the
Attorney General. Beyond that, McFarlane withheld
virtually all other relevant information in his posses-
sion about U.S. support for the Contras during the
period of Congressional restrictions. He concealed
new information he learned of North's activities in

1986, and he repeated many of the inaccurate state-
ments that he had made orally and in writing to
Members of Congress while he was National Security
Adviser.

In his testimony before the Select Committees,
McFarlane acknowledged that his remarks to investi-
gating panels between December 1986 and February

1987, like his statements about U.S. support of the
Resistance in 1984 and 1985, had been "clearly too
categorical."'''^

McFarlane's Testimony on North's
Activities in 1986

On December 1, 1986, while he was testifying
before the Senate Select Committee on Intelligence,
McFarlane was asked whether, after his resignation,
there were "any indications" about "North's involve-

ment in the funding [of the Contras] either directly or
indirectly." McFarlane responded:

Well, since leaving Government my only basis
for knowing anything more about the issue is
what I read in the press and the events that I
described this morning about what I was told
about the diversion of Iranian money in May of
this year. So I have no personal basis for cor-
roborating the press stories that I've seen that
have alleged that Col. North has done various
things to channel money and to advise and done
business with arms merchants. I have no inde-
pendent knowledge of that and I guess the only
thing that I do know first hand from Col. North
was what he told me about diversion of Iranian
monies. I've described that this morning.''"

In fact, despite his assertion that he had "no person-
al basis for corroborating" allegations about North,
and that "the only thing" he knew "first hand from
Col. North" was the diversion, McFarlane had
learned directly from North in 1986 about efforts to
provide funds and weapons to the Resistance. Indeed,
McFarlane had offered to assist. After his resignation,
McFarlane communicated regularly with the NSC
staff via a PROF machine he was permitted to keep
in his home. PROF messages in 1986 show that North
freely shared with McFarlane details of the NSC-
coordinated Contra operation, despite North's strong
desire to hold close information about the project.
The following exchange between North and McFar-
lane about efforts to obtain sophisticated Blowpipe
missiles for the Resistance is illustrative. In late
March, North wrote to McFarlane about efforts to
obtain sophisticated surface-to-air missiles for the
Contras:

After the House vote on aid to the resistance, I
plan to take a few days just to get re-acquainted
w/ the family. Meanwhile, we are trying to find
a way to get 10 BLOWPIPE launchers and 20
missiles from . . . thru the Short Bros. Rep. The
V.P. from Short Bros, sought me out several
mos. ago and I met w/ him ... a few weeks ago
.... Short Bros., the mfgr. of the BLOWPIPE,
is willing to arrange the deal, conduct the train-
ing and even send U.K. "tech reps" fwd if we
can close the arrangement. Dick Secord has al-
ready paid 10% down on the delivery and we
have a [Central American country] EUC [end
user certificate] which is acceptable to. . . .'''*

McFarlane replied about one week later:

I've been thinking about the blowpipe problem
and the Contras. Could you ask the CIA to iden-
tify which countries the . . . have sold them to. I
ought to have a contact in at least one of them.
How are you coming on the loose ends for the

130

Chapter 6

material transfer? Anything I can do? If for any
reason, you need some mortars or other artil-
lery— which I doubt — please let me know.'''^

In another message to McFarlane, dated April 21,
1986, North provided details on the resupply oper-
ation. "So far," he wrote, "we have seven A/C [air-
craft] working, having delivered over $37M in sup-
plies and ordnance . . . ." In the message. North also
discussed the need to obtain new funding for the
Contras. "The resistance support acct is darned near
broke," he wrote. "Any thoughts where we can put
our hands on a quick $3-5M? Gaston [Sigur] is going
back to his friends who have given $2M so far in
hopes that we can bridge things again, but time is
running out along w/ the money." Sigur recalled
making no such approach in 1986.'*° Demonstrating
to McFarlane his operational control of the resupply
program. North added that he had told Secord to sell
"the ship first and then the a/c [aircraft] as a means of
sustaining the effort." He then proposed to McFarlane
that U.S. businessman Ross Perot be approached for
funds. "As you know, we've never asked him for help
in this regard, believing that he wd be inclined to talk
about it," North wrote, an indication that he and
McFarlane had discussed funding alternatives. "It
may now be time to take that risk. Any thoughts?"'*'

The reference in the PROF to Richard Secord's
involvement in the Contra operation is not the only
such reference. In February 1986, North sent a PROF
message to McFarlane in which he said that he had
"asked JMP [Poindexter] for a session w/ you and
Dick Secord as soon as possible after Dick returns
tomorrow night from Eur[ope] where he is setting up
an arms delivery for the Nic[araguan] resistance. A
man of many talents ol' Secord is."'*^ In his testimo-
ny before the Select Committees, McFarlane specifi-
cally acknowledged that he was aware in 1986 that
"Secord was involved in helping the Contras."'*^
But on December 10, 1986, testifying before the
House Intelligence Committee, McFarlane denied any
such knowledge. Representative Brown asked: "Let
me ask about Gen. Secord .... Were you aware of
the fact that he had a role in the Contra supply
operation?" McFarlane replied, "No sir."'**

Testimony on Fundraising Activities

As described above, McFarlane arranged for two
large donations totalling about $32 million from
Country 2, telling a high official of that country about
U.S. concerns and the Contras' needs, and then pro-
viding the bank account number when the country
decided to donate funds. The first gift came in 1984
and the second in February and March 1985.

In his testimony before Congress following the No-
vember 1986 disclosures, McFarlane denied personal
knowledge of the donations by Country 2. During
McFarlane's testimony on December 8, 1986, before
the House Foreign Affairs Committee, Representative

Mel Levine asked: "There have been also press re-
ports that" Country 2 has been "indirectly involved in
financing the Contras. Are you aware of any such
activities?" McFarlane replied: "I have seen the re-
ports and I have heard that" Country 2 has contribut-
ed. However, he said, "The concrete character of that
is beyond my ken."'*^

Similarly, McFarlane testified at that session in re-
sponse to a question from Representative Edward F.
Feighan that he had "seen the reports that various
countries have" donated funds to the Contras, includ-
ing Country 2. He testified: "I have no idea of the
extent of that or anything else."'*"

Acknowledging before the Select Committees that
his testimony was "not as full an account as I could
have given," McFarlane maintained nevertheless that
his earlier testimony was "technically accurate."'*''
He told the Committees that even though he had
facilitated the donations, he did not precisely know
the extent of the contribution or the exact total of the
deposits. However, such precision was scarcely the
focus of the questions from the Members of Congress.
Moreover, the April 11, 1985, North memo which
McFarlane reviewed in connection with the summer
1985 Congressional inquiries, described in great detail
the extent of the donation.'**

Members of both the House and Senate Intelligence
Committees specifically asked McFarlane if he still
stood by his 1985 statement that there was no "official
or unofficial" relationship involving any member of
the NSC staff and fund-raising for the Nicaraguan
Resistance.'*^ Despite his role in the two contribu-
tions from Country 2, and despite the knowledge that
North and Sigur said he had of Sigur's discussions
with Country 3 about a possible donation — all of
which occurred during his tenure as National Securi-
ty Adviser — McFarlane stood by his statement: "I
believe as I did then that that was true throughout my
time and association with the NSC."'^°

On December 18, in his second appearance before
the Senate Intelligence Committee following the No-
vember disclosures, McFarlane acknowledged for the
first time that he "believe[d]" Country 2 had donated
funds. He knew of the donation, he testified, only
because Secretary Weinberger told him: "I think that
is the only one I ever heard about but I was told by
the Secretary of Defense that there had been a contri-
bution by [Country 2], and I don't know that I could
put a date on it."'^'

Six weeks after this testimony, McFarlane wrote
the Chairman and Vice Chairman of the Senate Intel-
ligence Committee to correct his statements. In his
letter, he described the 1984 donation, maintaining, as
he did before the Select Committees, that he had not
solicited the gift. McFarlane did not mention the
second contribution from Country 2. He wrote: "At
no time from that moment [spring 1984] to this date,

131

Chapter 6

have I ever sought, brokered or otherwise managed
donations from anyone." '^^

Testimony on 1985 Activities

As McFarlane acknowledged before these Commit-
tees, the documents he gathered in response to the
summer 1985 Congressional inquiries, "raise[d] legiti-
mate questions about compliance with the law."'*^ In
his testimony following the diversion disclosure,
McFarlane not only withheld his concerns about the
documents, but asserted that they proved that North
had fully complied with the Boland Amendment.

For example, on December 10, 1986, before the
House Intelligence Committee, responding to ques-
tions from Representative Dick Cheney, McFarlane
testified that in the summer of 1985 he "went to
considerable length to determine whether" North had
violated the Boland Amendment. A document search,
he said, "turned up two or three inches of paper, that
reported on contacts that did occur between Colonel
North and myself, indeed the President and Contra
leaders." He continued:

[F]rom the sum total of these documents, it was
clear that the activities were to meet with Contra
officials, civilian officials, tell them in so many
words where we were, that we did not have
Congressional support for military help, that we
would try to get it, continue working with the
Congress, that we couldn't provide it in the short
term but we hoped that they would use the time
until we could get it, to strengthen their political
organization, bring in people like Cruz and others
to develop a political program . . . but we
couldn't do anything to help them'®"*

McFarlane also told the Tower Board that "neither
the documentary record nor interviews with Colonel
North showed any evidence" that North had provid-
ed military or fundraising support to the Contras. '^^
As noted above, the documents about which McFar-
lane was concerned in August 1985 were not so in-
nocuous.

Summer 1985: Inquiry of the
Intelligence Oversight Board

The flood of press allegations about possible NSC
violations of the Boland Amendment prompted no
investigations by executive branch law enforcement
agencies. Only one small executive oversight organi-
zation, the Intelligence Oversight Board, responded to
the widespread charges. In late August 1985, the
Board conducted an inquiry into NSC staff activities.
After a brief investigation by its counsel, Bretton G.
Sciaroni, the Board concluded that Oliver North had
not provided military or fundraising assistance to the
Nicaraguan Resistance.'®®

Sciaroni began his inquiry with a 30 to 40 minute
interview of Paul Thompson. Shortly before that
interview, Thompson turned over to McFarlane the
NSC file documents on North's activities. Those doc-
uments included the six "troubling" memorandums
that indicated, as Thompson later put it, that "if he
[North] was in effect doing what was reflected in the
documents, he was perhaps not aware of the con-
straints of the . . . Boland Amendment."'®' In his
interview with Sciaroni, Thompson made no mention
of North's activities as depicted in the memorandums.
Indeed, he denied that North had provided "military
support" to the Contras and asserted that North had
limited himself to providing political encouragement
and "moral support" while funds were unavailable.'®*
Although the Committees cannot be certain what
Thompson knew directly of North's activities, it is
clear that his denials cannot be squared with the
memorandums he had given McFarlane.

Furthermore, Thompson withheld from Sciaroni
the six "troubling" memorandums included in the
batch he gave McFarlane. During their meeting,
Thompson provided Sciaroni an inch-thick pile of
documents and told him he was producing "the rele-
vant documents for my review," according to Sciar-
oni. The only documents to which Sciaroni would not
be permitted access, Thompson told him, were
North's personal working files. Thompson also told
Sciaroni that the pile of documents he was turning
over were the same as those that had been "shown to
the Hill."'®® Missing from the pile were many of the
documents Thompson himself acknowledged raised
questions about North's activities. 2°°

Sciaroni's next investigative step was to talk with
North. During a 5-minute discussion. North gave
Sciaroni a "blanket denial" of charges that he was
actively involved in aiding the Contras.^"' Although
North did not recall the conversation with Sciaroni,
he was clear in his testimony that he had no intention
of being candid with the Intelligence Oversight Board
Counsel: "I am sure if he asked me" about supporting
the Contras, "I denied it, because after all we viewed
this to be a covert operation and he had absolutely no
need to know the details of what I was doing."^°^

Still, Sciaroni stressed in his testimony that he was
justified in expecting cooperation from NSC staff offi-
cers. Both Thompson and North, he said, "understood
who I represented, the mandate of the Board to look
into matters of legality, and the seriousness of the
allegations that had been raised. "^"^ His investigation
was "an anomaly" in that he had no legal authority
over the NSC staff, and therefore, Sciaroni said, he
"was relying upon the good will of other officers at
the White House. "^°'' Once again, however, North
chose to conceal. This time, the object of his decep-
tion was a board established by and operating within
the executive branch, an entity privy to intelligence
information and programs of the highest sensitivity.

132

Chapter 6

Summary

While exercising its responsibility to oversee the im-
plementation of the law cutting off aid to the Nicara-
guan Resistance, Congress tried repeatedly through
1984 and 1985 to learn how the Resistance was stay-
ing alive and whether the U.S. Government was in-
volved with the Contras' survival. The President, the
Vice President, the National Security Adviser, and
officials on the NSC staff were aware that a multimil-
lion dollar donation from Country 2, facilitated by
McFarlane, was largely responsible for the Contras'
survival. North, Poindexter, and perhaps other high
Administration officials, were aware that the NSC
staff was directly providing lethal support to the Nic-
araguan Resistance. McFarlane denied knowledge of
North's activities, but documents he reviewed follow-
ing Congressional inquiries show that North actively
assisted the Contras' military effort.

Yet Congressional inquiries on U.S. support for the
Contras were invariably met with categorical denials.
So too were inquiries made by the media. In both
cases, the information sought related not to sensitive
operational details, but to a controversial foreign
policy issue. The question repeatedly asked was
whether it was the policy and practice of the U.S.
Government during this period to provide lethal sup-
port to the rebels fighting in Nicaragua. It was to that

question that Administration officials repeatedly re-
sponded with denials.

The record leaves no doubt that some of the offi-
cials making these denials did so as part of a deliber-
ate attempt to deceive Congress and the public.
North, who testified, "I didn't want to show Congress
a single word on this whole thing," admitted that the
letters sent to Congress over McFarlane's signature
were "false." In meetings with Members of Congress,
McFarlane repeated the statements in the letters. He
acknowledged in testimony before these Committees
that he had been "too categorical." Poindexter testi-
fied that his intent during this period was to "with-
hold information." And it is difficult to reconcile CIA
Director Casey's testimony in this period with his
knowledge of the facts as demonstrated by the docu-
mentary evidence, and with his pledge to the Senate
Intelligence Committee that he would abide by a new
spirit of cooperation.

Other officials who denied the existence of U.S.
support, including the State Department officials who
testified before Congress in 1984 and 1985, and the
press liaison of the NSC staff, were unaware of the
truth, themselves victims of concealed information.

As 1986 began, a new National Security Adviser
was supervising the NSC staff, promoted from within.
But the covert Contra operation continued, as did the
overriding concern to keep the fact that the United
States was providing lethal aid to the Contras secret
from Congress and the American people.

133

Chapter 6

Chapter 6

1. Congressional Record, 10/10/84 at HI 1974.

2. McFarlane Test., Hearings, 100-7 Part II, at 203; see
also 100-2 at 6, 20-22.

3. Ex. OLN-10, Hearings, 100-7, Part III.

4. Poindexter Test., Hearings, 100-8, at 61.

5. Congressional Record, 4/5/83 at S4109-S4110.

6. Letter of April 9, 1984, from Chairman Goldwater to
Director Casey.

7. Transcript of 4/26/84 hearing, at 3.

8. U.S. Senate Report, 98-665, at 9-10.

9. C0619-C0621.

10. Public Law 212, 98th Cong., and Public Law 215,
98th Cong. Fiscal year 1984 runs from October 1, 1983
through September 30, 1984.

11. Congressional Record, 11/18/83, at H10544.

12. Id.

13. Oliver North and Alton Keel wrote McFarlane in a
February 7 memo that "Congressional resistance on this
issue is formidable, to the degree that prospects for success
are bleak even with a concerted effort." ("Additional Re-
sources for Our Anti-Sandinista Program".)

14. See Ch. 1.

15. Ex. 29, Hearings, 100-2, at 456-57.
16 See Chapter 2.

17. McFarlane Test., Hearings, 100-2, at 14.

18. McFarlane Test., Hearings, 100-2, at 18. See also
Chapter 2.

19. McFarlane Test., Hearings, 100-2, at 18.

20. McFarlane Test., Hearings, 100-2, at 18, 24.

21. Shultz Test., Hearings, 100-9, at 4; Weinberger, Test.,
Hearings, 100-10, at 148-49. A second possible reason for the
decison not to tell Shultz could be related to the opposition
to third-country approach Shultz expressed at a June 24
NSPG meeting and on other occasions. See Shultz Test., Id.
at 13-17.

22. North Test., Hearings, 100-7, Part I, at 75-76.

23. North Notebook, June 25, 1984, Q 0340. According to
the notebook entry, North gave Calero at this time the code
name "Barnaby."

24. Congress Due for Latin Pointers at Home, 4/17/84, The
Washington Post, p. A 16.

25. Id.

26. Israeli Technical Aid to El Salvador Part of Meetings
Here. 4/21/84, The Washington Post p. A8.

27. HPSCI Hearings. 5/2/84, at 69-70.

28. Id at 98.

29. Id at 70.

30. Id at 70.

31. W. at 70-72.

32. Ex. APC-2, Hearings, 100-3.

33. See Chapter 3.

Nicaragua Rebels Reported to Raise Millions in Gifts. 9/9/
84, New York Times, Al; Private Aid Fuels Contras in
Nicaragua, Miami Herald, 9/9/84, p lA.

35. HPSCI Hearings. 9/12/84, at 17-18. Rep. Fowler
asked Clarridge: "I assume that you would know" whether
foreign governments had provided substantial financial as-
sistance. Clarridge responded: "That's true." Motley said
that if other countries had donated, "they would come to us
and say, hey, you know, we might be able to help, but what
do you think?"

36. Id at 13.

37. Id at 14.

38. Id at 18-19.

39. Id at 20.

40. Id at 23.

41. Ex. APC-2, Hearings, 100-3.

42. McFarlane Test., Hearings, 100-2, at 24.

43. Shultz Test., Hearings, 100-10, at 147-48.

44. Id

45. McFarlane Test., Hearings. 100-2, at 23-24.

46. Id. at 24.

47. Id., at 37. Adm. Poindexter displayed similar prior-
ities. He tried to ensure that CIA Director Casey would not
learn about North's Contra-support activities because, he
testified, Casey was vulnerable to direct questions at Con-
gressional hearings.

48. McFarlane Test., Hearings, 100-2, at 150.

49. Addabbo Letter to Shultz, December 11, 1984. Reply
from W. Tapley Bennett, Assistant Secretary of State for
Legislative and Inter Governmental Affairs, January 15,
1985. Contra Aid Disavowal Questioned: Addabbo Unsatisfied
with Shultz Reply. The Washington Post, 1/23/85, p. A19.

50. Ex. RWO-3, Hearings, 100-2, at 780-82. A copy of this
letter was found in North's safe; it appears to be a draft.
Calero did not recall receiving it. North's request of Calero
seems to have worked. Calero remained tight-lipped about
the Contras' funding. On August 11, 1985, for example. The
Washington Post reported that Calero "declined to reveal
the sources of his funding since CIA financing dried up a
year ago." Calero also denied that North had been involved
in Contra weapon purchases. Rebel Leader Tells of Talks
with U.S. 8/11/85 p. Al.

51. Senate Committee on Foreign Relations Hearing at
908.

52. Id at 909-910.

53. Id. at 910. The following month. Ambassador Motley
repeated his assurances to the Defense Subcommittee of the
House Committee on Appropriations. {Hearings at 1092)

54. See Chapter 2.

55. C/CATF Test., Hearings, 100-11, at 86-90.

56. SSCI Full Committee Hearing on the President's
Report on Nicaragua, 4/17/85 at 18.

57. North Test., Hearings. 100-7, Part I, at 116.

58. Hearing Transcript at 1 1.

59. Hearing Transcript at 18.

60. Memorandum from North to Poindexter, Press Revela-
tions regarding North's Rule with Nicaraguan Resistance, (t/li/
85. Chardy published his story in June, 2 weeks after the
first report on Oliver North. In the memo North also ex-
pressed his fear that NSC staffers were talking to reporters
about the matter and recommended that Poindexter require
NSC staff to take periodic polygraph examinations. [Ex.
OLN-186, Hearings, 100-7, Vol. 3.

61. Singlaub Test., Hearings, 100-3, at 84.

62. Private Groups Step Up Aid to Contras. Washington
Post, 5/3/85, p. A22.

63. Ex. 37, Hearings, 100-2. at 519.

64. Ex. 38, Hearings, 100-2. at 529.

65. Marine Plays Key Role on Foreign Policy, Washington
Post. 8/11/85, p. 1. North had appeared once before in the
press in connection with the Contras. On January 18, the
Miami Herald reported that North had indirectly helped the

134

Chapter 6

rebels obtain SAM-7 missiles, one of which shot down a
Sandinista helicopter the month before. North, according to
the article, "suggested to private contra fund-raisers," in-
cluding Jack Singlaub, "the possibility of steering the guer-
rillas toward an arms market source" where they could
purchase missiles and arrange for training. (U.S. Helped
Contras Get Missiles, 1/18/85, Miami Herald, p. 1 A.)

66. White House Reportedly Gave Advice to Contra Fund
Raisers. AP Wire, 6/10/85.

67. U.S. Found to Skirt Ban on Aid to Contras. Miami
Herald, 6/24/85, p. lA.

68. Nicaraguan Rebels Getting Advice from White House on
Operations. New York Times, 8/8/85, p. Al.

69. Weekly Compilation of Presidential Documents, 8/
12/85, Vol. 21, No. 32 at 972.

70. Rebels Move Back Into Nicaragua. 8/9/85, The Wash-
ington Post, p. Al.

71. McFarlane Aide Facilitates Policy. The Washington
Post, 8/11/85, p. Al.

72. Ex. 40A, Hearings, 100-2, at 546 (Barnes letter); Ex.
41, Hearings, 100-2, at 559 (Hamilton letter).

73. Ex. 41D, Hearings, 100-2, at 581 (letter from Duren-
berger and Leahy).

74. N3371. See also Ex. 41B, Hearings, 100-2, (2nd letter
from Hamilton with specific questions).

75. Ex. 41A, Hearings, 100-2, at 560.

76. In a PROF message to North and Poindexter on
September 3, McFarlane wrote: "I have sent you both sepa-
rately a draft letter I have composed to answer Lee Hamil-
ton's letter on Ollie's activities." [N3265] With minor
changes, that draft became the letter sent to Hamilton 2
days later. McFarlane's PROF note also appears to indicate
that he wanted to keep discussion of the responses to Con-
gress limited. McFarlane wrote to North: "Please do not
share either this note or the separate draft with anyone. . . .
Please bring me any edits you have. Ollie, don't send me
any PROF notes about H." PROF notes from North to
McFarlane were routed through other NSC staff officers.
Under Poindexter, North would be able to send PROF
messages directly.

77. McFarlane Test., Hearings, 100-2, at 127.

78. McFarlane Test., Hearings, 100-2, at 215.

79. North Test., Hearings, 100-7, Part \, at 176-77.

80. Ex. 41A, Hearings, 100-2, at 560.

81. Ex. JMP-7a, Hearings, 100-8.

82. Poindexter Test., Hearings, 100-8, at 82-83.

83. McFarlane Test., Hearings. 100-2, at 73.

84. Memo to Poindexter, 8/20/85, subj: "Barnes Re-
quest." N29803-4.

85. Id

86. Id

87. Id

88. McFarlane Test.. Hearings, 100-2, at 73. Thompson
Deposition 3/9/87 at 36, 4/28/87 at 3, 10.

89. McFarlane Test., Hearings, 100-2, at 73.

90. Ex. 32, Hearings. 100-2, at 466.

91. Id., at 468.

92. Id., at 469.

93. Id., at 470.

94. McFarlane Test., Hearings, 100-2, at 30.

95. See version of memo numbered N44994-N44999.

96. Ex. 33, Hearings, 100-2, at 471.

97. Id., at 472.

98. Id

99. McFarlane Test., Hearings. 100-2, at 31.

100. Ex. 33, Hearings, 100-2, at 475.

101. Ex. 35, Hearings, 100-2, at 492.

102. Id., at 494.

103. Id

104. Id. at 495.

105. McFarlane Test., Hearings, 100-2, at 109-11.

106. Ex. 36, Hearings, 100-2, at 510,

107. Id. at 512.

108. Id

109. Id., at 513.

110. McFarlane Test., Hearings, 100-2, at 35.

111. Ex. 37, Hearings, 100-2, at 519.

112. Id. at 520.

113. Id. at 521.

1 14. Id

115. Id

\\6. Id, at 522.

117. Ex. 38, Hearings, 100-2, at 529.

118. Id. at 530.

119. W.. at 532.

120. Id

121. Id

122. Ex. 31, Hearings, 100-2, at 463.

123. North Memo to McFarlane, "Timing and the Nicara-
guan Resistance Vote," N40301.

124. Ex. 71, Hearings, 100-2, at 753.

125. McFarlane Test., Hearings, 100-2, at 73-76, 117-18.

126. Id., at 74.

127. Ex. 37, Hearings, 100-2, at 521.

128. McFarlane Test., Hearings, 100-2, at 74.

129. Id., at 75.

130. Id

131. McFarlane Test., Hearings, 100-7, Part U, at 204.

132. McFarlane Test., Hearings, 100-2, at 75-76. Evidence
indicates that another document was altered in 1985. An
altered version of the document, "The Nicaraguan Resist-
ance: Near-Term Outlook," dated May 31, 1985 (Ex. 38,
Hearings, 100-2 at 529), was found by investigators. The
altered version was also typed on stationery available only
in 1985, indicating that it had been altered in 1985. In the
major change, the following paragraph is deleted:

In short, the political and military situation for the resist-
ance now appears better than at any point in the last 12
months. Plans are underway to transition from current ar-
rangements to a consultative capacity by the CIA for all
political matters and intelligence, once Congressional ap-
proval is granted on lifting Section 8066 restrictions. The
only portion of current activity which will be sustained as it
has since last June, will be the delivery of lethal supplies.

It was replaced with:

In short, the political and military situation for the resist-
ance now appears better than at any point in the last 12
months. Plans are underway to transition from ad hoc ar-
rangements to a consultative capacity by the CIA for all
political matters and intelligence, once Congressional ap-
proval is granted on lifting Section 8066 restrictions. (Ex.
FH-6A, Hearings, 100-5).

133. North Test., Hearings, 100-7, Part I at 172.

134. Id, at 173.

135. Id., at 174.

136. Id

137. Ex. 40B, Hearings, 100-2, at 549.

135

Chapter 6

138. Ex. 41C, Hearings, 100-2, at 579.

139. McFarlane Test., Hearings, 100-2, at 115-16.

140. North Test., Hearings, 100-7, Part I, at 79; Ex. 71,
Hearings, 100-2, at 753; North's calendar.

141. For more detail, see Chapter 2.

142. Ex. 41C, Hearings, 100-2, at 576.

143. North Test., Hearings, 100-7, Part I, at 167.

144. Ex. 41 A, Hearings, 100-2, at 561.

145. North Test., Hearings, 100-7, Part I, at 166. North
also acknowledged that the following statement, in the Sep-
tember 5 letter to Hamilton, was false: "We did not solicit
funds or other support for military or paramilitary activities,
either from Americans or other parties."

146. See Chapter 3.

147. Ex. 41C, Hearings, 100-2, at 572.

148. North Test., Hearings, 100-7, Part I, at 167.

149. McFarlane Test., Hearings, 100-7, Part II, at 203-05;
100-2 at 157-58.

150. Ex. 41C, Hearings, 100-2, at 572.

151. North Test., Hearings, 100-7, vol. 1 at 167.

152. McFarlane Test., Hearings, 100-2, at 75.

153. Id., at 165.

154. Id.

155. Id., at 75.

156. Ex. 40A, Hearings, 100-2, at 546.

157. Ex. 41, Hearings, 100-2, at 559.

158. Ex. 37, Hearings, 100-2, at 519.

159. Leahy, letter, "Dear Fellow Vermonter" (September
9, 1985), S0O1286.

160. Recollection of meeting in notes Durenberger shared
with Independent Counsel investigators during interview,
see: file with Senate Office (Doug Telly). Senate Intelli-
gence Committee News Release, 9/5/85.

161. McFarlane Denies Illegal Ties to Contras, New York
Times, 9/6/85.

162. Hamilton letter to Representative Leon Panetta,
9/18/85.

163. Memorandum of Interview with Steve Berry, then
Associate Counsel, HPSCI, dated 10/15/87.

164. PROF, 9/20/85, "Subject: Contra Papers".

165. Ex. 40C. Hearings, 100-2, at 551.

166. W., at 551-52.

167. Ex. 70, Hearings, 100-2, at 752. Around this time,
McFarlane discussed the Barnes request with White House
Counsel Fred Fielding. In addition to discussing executive
privilege issues, McFarlane testified that he took the docu-
ments gathered by the NSC staff to Fielding and told him
that the documents were "extremely troubling in terms of
interpretation of law." Fielding does not recall such a state-
ment by McFarlane. [Fielding Interview]

168. McFarlane Test., Hearings, 100-2, at 119.

169. Memorandum of Interview of Barnes, dated 5/16/87.

170. Ex. 40D, Hearings, 100-2, Part I, at 553.

171. Id.

172. North Test., Hearings, 100-7, Part I, at 170-71.

173. Ex. 40E, Hearings, 100-2, at 558.

174. Id.

175. Id

176. McFarlane Test., Hearings, 100-2, at 127.

177. SSCI Hearings. 12/1/86, at 148-49.

178. Ex. 45H, Hearings, 100-2, at 617-18.

179. Ex. 451, Hearings, 100-2, at 619.

180. Sigur Test., Hearings. 100-2, at 293.

181. Ex. 46, Hearings, 100-2, at 620.

182. Ex. 45F, Hearings. 100-2, at 614.

183. McFarlane Test.. Hearings, 100-2, at 122.

184. HPSCI Hearing. 12/10/86, at 139.

185. Ex. 63, Hearings, 100-2, at 686-87.

186. Id. at 689.

187. McFarlane Test., Hearings, 100-2, at 86.

188. Ex. 37, Hearings, 100-2, at 519-25.

189. McFarlane made the statements in his 1985 letters to
the Intelligence Committees. He wrote Hamilton on Octo-
ber 7, 1985: "There is no official or unofficial relationship
with any member of the NSC staff regarding fundraising for
the Nicaraguan democratic opposition." (Ex. 41C, 100-2 at
576) "No one has been designated by the NSC or any other
White House entity as official or unofficial contact for pri-
vate or public or any other kind of fundraising for the
Nicaraguan democratic resistance." (Ex. 41E, 100-2 at 584)

190. HPSCI, 12/10/86, at 111-112. At SSCI, 12/1/86 at
143 McFarlane testified that his earlier statement "remains
the case." See also SSI 12/1 at 195.

191. SSCI 12/18/86, at 122-23. See also 139-40. The day
before. Secretary Weinberger testified before the Senate
Intelligence Committee that he had no recollection of dis-
cussing with anyone third-country funding of the Con-
tras. [SSCI, 12/17/86 at 67-71.]

192. Ex. 60, Hearings. 100-2, at 678.

193. McFarlane Test., Hearings, 100-2, at 73.

194. Ex. 75, Hearings, 100-2, at 762-63. See also SSI 12/1,
at 146-47.

195. Tower 2/21/87, at 62-63. See also House Foreign
Affairs Committee, December 8, 1986, at 10-11.

196. Ex. BGS 9, Hearings. 100-5.

197. Thompson Dep.. 7/24/87 at 3.

198. Sciaroni Test., Hearings, 100-5, at 8-9. Sciaroni's
notes of the interview are at Ex. 3, Hearings, 100-5.

199. Sciaroni Test., Hearings, 100-5, at 17.

200. Sciaroni Test., Hearings. 100-5, at 9-11. Thompson
told the Committee that he did not recall precisely which
document he gave Sciaroni. He maintained that it would
have been inappropriate to turn over the documents he
gave to McFarlane without a written request from the Intel-
ligence Oversight Board. Although he acknowledged that
the documents raised questions about North's activities,
Thompson maintained that those questions were answered
when North personally assured him that he was not in-
volved in supporting Contra military activities or in solicit-
ing funds. Thompson Dep., 7/24/87. at 38-41.

201. Sciaroni Test., Hearings. 100-5. at 11.

202. North Test., Hearings. 100-7, Part I, at 158.

203. Sciaroni Test., Hearings. 100-5. at 11.

204. Id. at 41.

136

Chapter 7

Keeping ''USG Fingerprints"* Off the Contra

Operation: 1986

In 1986, the Contra support project finally achieved a
degree of operational success. By mid-year, weapons
and other material were being dropped to Resistance
troops inside northern Nicaragua; by fall, similar air-
drops were being made in the South. Congress had
appropriated funds for the humanitarian needs of the
Contras, it had authorized third-country solicitation
for humanitarian aid, and it had allowed the CIA to
provide intelligence to the Resistance. But Congress
had maintained the prohibition on lethal support. Fol-
lowing the pattern of 1984-1985, allegations in the
media and independently obtained information
prompted Congressional inquiries, which in turn were
met with categorical denials by Administration offi-
cials, some of whom knew the statements to be mis-
leading and false.

The expansion of the covert operation's activities in
1986 also created new problems for officials still seek-
ing to maintain secrecy. In September, a new Costa
Rican Government threatened to reveal the existence
of the Santa Elena airfield, exposing the involvement
of U.S. citizens and Government officials in providing
support to the Contras. Administration officials mobi-
lized quickly to squelch the threatened press confer-
ence. Successful at first, the officials were unable to
prevent disclosure by the Costa Rican Government
three weeks later. Concerned that reporters might
discover the link between the airfield and U.S. offi-
cials, North immediately took steps to ensure that no
"USG fingerprints" would be found on Santa Elena.'

In October, the Sandinistas shot down an Enter-
prise plane on a resupply mission (the Hasenfus
night). Administration officials, not all of whom knew
the true facts, denied before Congress and to the
media that the U.S. Government was involved in the
Hasenfus flight. Even the President spoke out. With
no protest from his National Security Adviser or
others aware of the facts, the President told the
American people: "[T]here is no government connec-
tion with that at all."^

For most of 1986, efforts to determine whether the
U.S. Government was providing lethal support to the

•North's term, used in two PROF Notes to Poindexter dealing
with the possible disclosure of the U.S. Government link to the
Contra Operation. (Exhibits OLN-131 and OLN-307. Hearings. 100-
7, vol, -V)

Contras despite the legal restrictions were thwarted
by the same techniques used in 1985.

January to June 1986: Press
Reports

Through the first quarter of 1986, Congressional and
media attention on the NSC staffs involvement with
the Contras abated. In Washington, Congressional
Committees had accepted the categorical denials the
previous fall by the National Security Adviser. In
Central America, the resupply project was not fully
operational and Resistance activities slowed. A New
York Times reporter in the region in January found
the "Nicaraguan guerrillas . . . back in their camps;"
in early March, the correspondent described the Re-
sistance as being "in its worst military condition since
its formation in 1982."^

By the end of March, the Contras' fortunes began
to shift, and articles again appeared discussing the
sources of Resistance funds and supplies.* Some fo-
cused on charges that the Contras had received lethal
support from American mercenaries and funds from
drug trafficking; others explored how the Contras
were spending the $27 million appropriated by Con-
gress in August, 1985, for humanitarian aid.^ By the
end of April, North had reemerged as the focus of
attention. The allegations in the new series of articles
were almost always attributed to anonymous officials,
and some of the details were incorrect. But the main
charge — that U.S. Government officials had contin-
ued to provide lethal aid to the Contras despite the
Boland Amendment — was accurate. The renewed re-
porting provided the context for a new round of
Congressional inquiries that would begin at the end of
June.

Focus on North

In an April 30, 1986, article headlined, "Colonel's
Actions May Have Broken Contra Aid Ban," the
Miami Herald provided what it called "the first
glimpses at the inner workings of the well-oiled pri-
vate contra support machine that — with White House
encouragement — developed after Congress suspended
contra aid." The article asserted that Oliver North

137

Chapter 7

had arranged a meeting between a potential donor
and a Contra fundraiser. It quoted "administration
officials" as saying that "North acted repeatedly on
behalf of the contras, especially in channelling poten-
tial donors to the rebels." John Singlaub and Robert
Owen were cited in the article as two "conservatives
closely associated with the contras" who had frequent
meetings with North. In the article, "[a]n administra-
tion official authorized to reply to queries" was
quoted as saying that "Oliver North has not been
involved in illegal activities."^

On June 8, the Miami Herald ran on page one the
headline, "Despite Ban, U.S. Helping Contras." Quot-
ing anonymous Administration and Resistance offi-
cials, the article reported that the Reagan Administra-
tion "continued secretly to assist anti-Sandinista rebels
in finding weapons and plotting military strategy
through a network of private operatives overseen by
the National Security Council (NSC) and the CIA."
According to the article, the system was supervised
by North with "advice from" officers in the CIA
Central American division. After enactment of the
Boland Amendment, "private individuals were used as
bridges between the administration and the rebels."
The Administration "feels it has honored" Congres-
sional restrictions "by channeling its involvement
through private citizens." This belief was attributed to
"two administration officials and a knowledgeable
rebel leader."''

On June 22, the Miami Herald reported that the
"controversial program to coordinate private aid to
anti-Sandinista rebels through the National Security
Council was approved by officials in the White
House." This was attributed to "several current and
former administration officials." The article went on
to quote "one source," unidentified, as saying that
McFarlane briefed Reagan on the proposal to aid the
Contras and that the President verbally approved the
plan. The Herald reported that McFarlane denied
knowledge of any such plan to aid the Contras."

Concern for Secrecy

As the Contra support operation expanded during
1986, the task of maintaining secrecy became more
challenging. National Security Adviser John Poin-
dexter, who admitted to the Committees, "I wanted
to withhold information on the NSC operational ac-
tivities in support of the Contras from most every-
body,"" did what he could to conceal the NSC con-
nection.

North oversaw two of the most important NSC
"accounts," but Poindexter kept North's title artifi-
cially low because "we wanted to provide a signifi-
cant amount of cover for Colonel North and his ac-
tivities."'" According to Poindexter, North's respon-
sibilities warranted the title Special Assistant to the
President, the Ihird-level rank in the White House.
Instead, he kept North as Deputy Director of Politi-

cal Military Affairs." "We didn't want to call public
attention to Colonel North," Poindexter testified.'^

In July, shortly after the renewal of Congressional
inquiries, Poindexter tried further to downplay
North's responsibilities. He apparently leaked to the
Washington Times the story that North's position at
the NSC staff was "precarious" and that "NSC soft
liners" were maneuvering "to edge him out."'^ In a
PROF Note sent the day the article appeared, Poin-
dexter reassured North about his intentions: "I do not
want you to leave and to be honest cannot afford to
let you go."'"* He told North to call two reporters at
the Washington Times and "tell them to call off the
dogs." Poindexter wrote: "Tell them on deep back-
ground, off the record, not be published, that I just
wanted to lower your visibility so you wouldn't be
such a good target for the Libs [Liberals]."'^

Poindexter directed North not to put "things in
writing about his operational activities, especially
with regard to the support for the Contras."'* North
had stopped writing "logged" memorandums — docu-
ments stored in the official NSC files — after Repre-
sentative Barnes had sought access to such documents
in the summer of 1985. North testified: "[W]e had . . .
decided to take those kinds of documents out of the
system altogether ... so that outside knowledge
would not necessarily be derived from having seen
them."''' Subsequent to the 1985 Congressional in-
quiries, written communications about the Contra op-
eration between North and his superiors were done
exclusively using "non-logged" memorandums and
the PROF system. North had assumed that PROF
notes, after their use, were erased from computer
memory and irretrievable.'*

Poindexter arranged for North to communicate
with him directly, thereby preventing other NSC stafT
members from learning details of the Contra oper-
ation. Ordinarily, PROF messages to the National Se-
curity Adviser were channeled through other staff
members. On August 31, 1985, two weeks after he
had assigned North to draft the response to Repre-
sentative Barnes, Poindexter sent North a message
with the subject heading "Private Blank Check." '^
When North wanted to communicate with Poindexter
directly, he sent a message in reply to the "Private
Blank Check" note. Poindexter testified: "Otherwise
. . . those messages were intercepted by the [NSC
staff] Executive Secretary."^"

Poindexter also stressed to North the need to avoid
speaking of his secret operational activities with
anyone, including other Administration officials. In
May 1986, Poindexter learned that North had dis-
cussed his plan to offer the Erria to the CIA for use
in a covert activity with Ken deGraffenreid, Senior
Director of Intelligence Programs at the NSC, the
officer who maintained NSC documents of the high-
est sensitivity. The Erria was a ship under North's
control, purchased by the Enterprise for use in vari-

138

Chapter 7

ous covert operations. In a PROF he titled "Be Cau-
tious," Poindexter directed North to maintain absolute
silence about his activities:

I am afraid you are letting your operational role
become too public. From now on I don't want
you to talk to anybody else, including [CIA Di-
rector] Casey, except me about any of your oper-
ational roles. In fact you need to quietly generate
a cover story that I have insisted that you stop.^'

Poindexter testified that he was particularly con-
cerned about keeping Casey ignorant of the operation
because the CIA Director could be called to testify
before Congressional Committees. ^^

Poindexter also kept the existence of the covert
operation hidden from officials who did not ordinarily
testify before Congress, such as former Chief of Staff
Donald Regan. Poindexter explained: "Based on my
feeling that if we were going to keep this up and
avoid more restrictive legislation, that we simply had
to limit the knowledge of the details to those that had
absolutely the need to know. I simply didn't think
that he [Regan] had an absolute need to know."^^ In
addition, Poindexter testified that he felt Regan
"talked to the press too much. I was afraid he'd make
a slip."^"' Despite Poindexter's directive. North kept
the CIA Director apprised of everything, according
to his testimony. But North shared Poindexter's desire
to conceal U.S. Government coordination of Contra
support activities from Congress and the American
public. He told these Committees: "I didn't want to
show Congress a single word on this whole thing. "2''
In May, as Robert Dutton was brought in and the
project became operational, North became concerned
that the likelihood of disclosure was increasing. He
described in a PROF to Poindexter "the urgent need
to get the CIA back into the management of this
program." He explained:

The more money there is (and we will have a
considerable amount in a few more days) the
more visible the program becomes (airplanes,
pilots, weapons, deliveries, etc.) and the more
inquisitive will become people like Kerry,
Barnes, Harkins, [sic] et al. While I care not a
whit what they say about me, it could well
become a political embarrassment for the Presi-
dent and you. Some of this can be avoided
simply by covering it with an authorized CIA
program undertaken with the $15M.^^

The next month, as airdrops became more frequent,
North tried to ensure that resupply activities in Cen-
tral America could not be traced back to him or other
U.S. officials. On June 16, he informed Tomas Cas-
tillo, a CIA Station Chief in Central America, that he
had sent Rafael Quintero to Central America to facili-
tate a supply drop to the FDN. "I do not think we
ought to contemplate these operations without him

being on the scene," North wrote via KL-43. "Too
many things go wrong that then directly involve you
and me in what should be deniable for both of us."^'

Shortly after this message to Castillo, Kama Small,
the press liaison for the NSC staff, asked North to
comment on allegations that would be broadcast in a
CBS News program, "West 57th Street." Small sent a
note to North saying she had declined the show's
request to speak with North, but that since it would
include interviews with people making charges about
North, she should call back with a comment. She
remarked, "I can't just give them the 'bullshit' re-
sponse."^*

The segment aired on June 25. It charged that "the
White House secretly directed a private aid network
to arm the Contras when it was illegal for the White
House to do that." The show focused on John Hull,
suggesting that he played an important role in helping
the Contras from his ranch in Costa Rica. It also
alleged that Robert Owen acted as "the NSC repre-
sentative" to the Contras and their supporters in
Costa Rica. Describing Owen as "the bag man for
Ollie North," the report charged that he carried
$10,000 a month from the NSC to John Hull for use
in purchasing lethal and nonlethal supplies for the
Nicaraguan Resistance. The segment also reported:
"The White House today quoted Colonel Oliver
North as calling the private aid network 'nonsense.'
The White House also said, quote, 'The President
never approved any such plan' [to aid the Con-
tras]".^*

Two days after the show aired. North sent a PROF
to Kama Small:

I have just had a chance to watch the W57th
piece. As far as I am concerned, it is the single
most distorted piece of 'reporting' I have ever
seen. . . . The only charges made about the NSC
are made by people who are in jail, on their way
to jail or just out of jail. If this is supposed to be
credible, then I'll eat my shirt. ^°

North acknowledged in the PROF that he knew
Robert Owen, but denied the inaccurate charge that
Owen was "paid off' $50,000. North did not com-
ment on the charge, the substance of which was accu-
rate, that Owen delivered to Central America money
provided by North. Nor did he comment on the gen-
eral allegation that he was aiding the Contras.

June 1986: New Congressional
Inquiry

On June 4, Representative Ron Coleman of Texas
introduced a Resolution of Inquiry (H. Res. 485),
directing the President to provide documents and in-
formation about support for the Contras. In a public
statement, the Resolution's author explained the need

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"to get at the truth" behind the widely pubhcized
allegations: "[D]isturbing new reports that our own
government officials may have deliberately violated
the law that prohibited any open or hidden U.S. as-
sistance for military operations inside Nicaragua [sug-
gest that there] may have been an intentional disre-
gard for our own democratic process."^'

In a statement inserted into the Congressional
Record, the author of the Resolution explained the
information sought from the Administration:

My resolution of inquiry seeks answers and infor-
mation on two central questions. Did Lieutenant
Colonel North develop and implement a plan for
Contra funding in the event that Congress did
adopt the Boland Amendment? . . . Second, what
was the degree of Lieutenant Colonel North's
involvement with the Contra high command
before, during, and after the Boland Amendment
became the law of this land. Did he assure the
Contra generals that the administration would
find a way to ensure continued funding and as-
sistance even in the event of a congressional ban?
Did he, as alleged, provide regular tactical and
logistical assistance to the Contra high command
on a regular basis? Did Lieutenant Colonel North
then implement a sham network of intermediaries
to filter his continued advice to the Contra gener-
als in direct violation of at least the spirit of the
Boland language?^ ^

Representative Coleman said he introduced his Reso-
lution "very reluctantly," adding: "No one can be
allowed to operate above the law of this great coun-
try— least of all those officials obligated to defend our
Constitution." He concluded by stating that the Reso-
lution "touches upon areas of concern that go far
beyond the question of one's position relative to
Contra aid. Rather, this course of action goes to ac-
countability and ensuring that one branch of our Gov-
ernment [does not] disregard . . . the other two."^''
The Resolution of Inquiry directed the President to
provide to the House information and documents in
three areas:

1. Funds and Supplies: Information and documents
on contacts between any NSC staff member and pri-
vate individuals or representatives of foreign govern-
ments relating to the provision of funds and supplies
to the Contras.^''

2. Military Activities: Information and documents
on contacts between any NSC staff member and any
member of the Nicaraguan Resistance relating to
Contra military activities. ^^

3. Singlaub, Owen & Hull: Information and docu-
ments on contacts between any NSC staff member
and Robert W. Owen, Maj. Gen. John K. Singlaub,
and John Hunt's

The Resolution was referred to the House Commit-
tees on Intelligence, Foreign Affairs and Armed Serv-

ices. On June 25 and July 1, the Chairmen of the
Foreign Affairs Committee and the Intelligence Com-
mittee requested comments from the President on the
Resolution.

The Executive's Response

On July 21, Poindexter wrote the Chairmen of the
three Committees "in reply to your letter to the Presi-
dent.""' Poindexter testified that he "probably" did
not show the letter to the President, but discussed the
issue with him "in general terms .... I probably told
him about the Resolution of inquiry and told him that
we were opposed to it. He agreed.""*

In the one-page letter, Poindexter first stated the
Administration's opposition to the resolution of in-
quiry. He continued:

Last fall, in an effort to cooperate with Chairman
Barnes, my predecessor, Robert C. McFarlane,
met with members of your committee and the
House Foreign Affairs Committee. While I did
not participate in these discussions, I understand
that information on the specific issues raised in H.
Res. 485, was provided to your Committee and
that this information made it clear that the ac-
tions of the National Security Council staff were
in compliance with both the spirit and letter of
the law regarding support of the Nicaraguan re-
sistance.

Thank you for the opportunity to comment on H.
Res. 485. I have forwarded similar letters to
Chairman Fascell and Chairman Aspin and sin-
cerely hope that this matter can finally be put to
rest. 3 9

Insisting that the letter was technically accurate,
Poindexter acknowledged to the Select Committees
that the letter "clearly withholds information.'""'

By any standard the response was misleading. First,
the National Security Adviser implied in the letter
that he accepted the view that the Boland Amend-
ment applied to the NSC staff, and that the NSC staff
under his tenure was not providing covert lethal sup-
port to the Contras. Poindexter referred explicitly to
the information McFarlane had provided Congress
that "made it clear that the actions of the National
Security Council staff were in compliance with both
the spirit and the letter" of the Boland Amendment.
He did not disclose that he had authorized North to
provide to the Contras precisely the kind of covert
aid the Boland Amendment was intended to prohibit
or that, as he put it, "We had been running this
[Contra] operation on our own for a long period of
time.'""

Asked how he could reconcile the statement that
the NSC staff was complying with the "letter and
spirit" of the Boland Amendment with the actions

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Chapter 7

North had taken and that he had approved, Poin-
dexter testified:

I felt that the Boland Amendment did not apply
to the NSC staff and I feh that indeed we were
complying with the letter and spirit of the
Boland Amendment. Now, it doesn't say that we
are not helping the Contras. We were.*^

In addition, Poindexter's letter implied that he had
no dispute in 1985 with the categorical denials
McFarlane gave Congress on allegations about
North's activities. In fact, however, Poindexter was
aware that North had taken over coordination of
Contra-support activities after enactment of the
Boland Amendment. ''^ Moreoever, when the Barnes
letter arrived at the NSC on August 17, 1985, it was
Deputy National Security Adviser Poindexter who
assigned North to draft the response, intending that
North would conceal his true activities from Con-
gress.** As Poindexter himself put it before these
Committees, he intended with his letter to say "that
the questions had been addressed by Mr. McFarlane
in the previous year." ''^ But McFarlane's denials had
misled Congress the previous year, as Poindexter's
letter misled Congress in 1986.

August 1986: North's Meeting with
Members of Congress

In response to the Resolution of Inquiry, the House
Intelligence Committee sought to meet with North. ''^
On August 6, North met with 1 1 members of the
House Intelligence Committee in the White House
Situation Room.*'' North began the session with a
presentation about his activities. The description
echoed closely McFarlane's letters the year before to
Representatives Hamilton and Barnes: North's princi-
pal mission was to coordinate contacts with the Con-
tras; a main purpose of his job was to assess the
viability of the Nicaraguan Resistance as a democratic
organization; and he explained to Contra leaders the
limitations on U.S. support as imposed by the Boland
Amendment. According to a memorandum based on
notes taken at the meeting. North said "that he did
not in any way, nor at any time violate the spirit,
principles or legal requirements of the Boland
Amendment."*®

In response to specific questions, North denied that
he had raised funds for the Contras or offered them
military advice. North told the Members that his rela-
tionship with Robert Owen was "casual," that Owen
never took guidance from him. He stated that he had
not been in contact with John Singlaub at all in 1985
or 1986.*s

By his own testimony. North lied to the Members
of the Intelligence Committee at this meeting:

A: ... I will tell you right now, counsel, and all
the Members here gathered, that I misled the
Congress. I misled —

Q: At that meeting?

A: At that meeting.

Q: Face to face?

A: Face to face.

Q: You made false statements to them about your
activities in support of the Contras?

A: I did.50

At the conclusion of the meeting, according to an
observer, Representative Hamilton "expressed his ap-
preciation for the good-faith effort that Admiral Poin-
dexter had shown in arranging a meeting and indicat-
ed his satisfaction in the responses received."^' On
August 12, Hamilton wrote Representative Coleman
that the House Intelligence Committee would not
move forward with the Resolution: "Based on our
discussions and review of the evidence provided, it is
my belief that the published press allegations cannot
be proven.""^

Authority to Lie

North conceded in his testimony that Poindexter
did not give him specific prior authority to make false
statements. ^^ Before meeting with the Members of
the House Intelligence Committee, North expressed to
his aide Robert Earl "concern . . . [about] what he
was authorized to say" at the session.^* According to
Earl, North tried to obtain guidance from Poindexter
but could not reach him.^^ Poindexter "was on leave,
yes, out of the office" during this period, according to
Earl, who testified: "My impression was that the
leave was not accidental. The timing of the leave was
just not a coincidence."^^ In his testimony. Earl char-
acterized his observation as follows:

Q: So that your impression of it, your observa-
tion of it, was that Colonel North had some in-
formation to protect and that he was being left to
figure out how to protect it on his own?

A: I think that's a fair statement.^'

North and Poindexter differ on whether North had
general authority from the National Security Adviser
to lie at the session. North testified that he was acting
under such authority: "I went down to that oral meet-
ing with the same kind of understanding that I had
prepared those memos in 1985 and other communica-
tions."^* North added: "[Poindexter] did not specifi-
cally go down and say, 'OUie, lie to the Committee.' I
told him what I had said afterwards, and he sent me a
note saying, "Well done." ^^

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Chapter 7

While Poindexter did send such a note, he claimed
it did not indicate approval of North's lies. Poindexter
acknowledged that North and he had a "general un-
derstanding that he [North] was to withhold informa-
tion about our involvement." But Poindexter told
these Committees that he did not know North had
lied at his meeting with the Intelligence Committee,
and that he had not expected North would do so.^°

The evidence is clear, however, that Poindexter
knew North had misled the Members of Congress.
Poindexter attached his "well done" message to a
PROF Note summarizing the meeting. The summary
was written by Bob Pearson, one of two NSC staffers
besides North who had attended the August 8 meet-
ing in the Situation Room, and sent to Poindexter
who forwarded the PROF note to North. The mes-
sage began by declaring, "Session was success," and
went on to describe North's presentation as "thor-
ough and convincing." Pearson wrote:

In response to specific questions, Ollie covered
the following points:

— contact with FDN and UNO aimed to foster
viable, democratic political strategy for Nicara-
guan opposition, gave no military advice, knew
of no specific military operations.

— Singlaub — gave no advice, has had no contact
in 20 months: Owen — never worked from OLN
office, OLN had casual contact, never provided
Owen guidance.*'

Poindexter testified that "by reading the summary
in this note, I didn't attach any great significance to it
because I knew that the questions and answers would
be very carefully crafted."®^ Yet Pearson's PROF is
clear that North told the Members he "gave no mili-
tary advice" to the Resistance, that he had only
"casual" contact with Owen and never "provided . . .
guidance," and that he had "no contact" with Sing-
laub for 20 months.

Thus, even if Poindexter did not expressly author-
ize North to lie, he was aware of North's misleading
statements and made no effort to correct them. Nor
did he reprimand North. On the contrary, Poindexter
congratulated North on his performance and on his
success at deflecting the inquiry.

In his testimony, Poindexter acknowledged that he
did not expect North to disclose the truth:

I did think that he would withhold information
and be evasive, frankly, in answering questions.
My objective all along was to withhold from the
Congress exactly what the NSC staff was doing
in carrying out the President's policy .... I
thought that Colonel North would withhold in-
formation. There was no doubt about that in my
mind.*^

September 1986: The Santa Elena
Airfield

Soon after North had turned aside the Congressional
inquiry, he learned of a new threat of exposure, this
one involving the Santa Elena airfield in Costa Rica.
It came just as Congress was taking steps to fund the
Contras again.

The airfield at Santa Elena had been built with the
covert assistance of several U.S. Government offi-
cials, including North, Tambs, and Castillo. Complet-
ed in early 1986, the airfield was originally intended
to serve as an abort base and refueling site for resup-
ply aircraft, but never became a crucial element in the
operation. The new Costa Rican Government that
took office in May 1986, requested that the field not
be used to aid the Contras. Ambassador Tambs
agreed, and the operation relied on alternative means
to drop supplies to Resistance troops inside Nicara-
gua.®*

North learned late Friday, September 5, that the
Costa Rican Government planned a press conference
about the airfield the next morning. Officials at the
press conference. North was told, would reveal that
Santa Elena had been used as part of an operation to
resupply the Contras and that U.S. Government offi-
cials were involved with the airfield. In response.
North mobilized several government officials to pres-
sure high Costa Rican officials to call off the press
conference.

North told a good deal of the story in a PROF sent
the next day to Poindexter: "Last night at 2330 our
Project Democracy rep. in Costa Rica called to
advise" that the Arias Government would hold a
press conference the next morning "announcing that
an illegal support operation for the Contras had been
taking place from an airfield in Costa Rica for over a
year."®^ North wrote that Secord and CIA Station
Chief Tomas Castillo would be "predominantly men-
tioned." From North's notebook it appears that he too
was in danger of being mentioned at the press confer-
ence. The first entry relating to the incident reads:
"0005 — call from [Castillo] — Security Minister plans
to make public Udall role w/ Base West [Santa Elena
airfield] and allege violation of C[osta] R[ican] law by
Udall, Bacon, North, Secord, et al."®*

North immediately arranged a conference call with
Elliott Abrams and Louis Tambs. North claimed in
his PROF note to Poindexter that the three officials
agreed that North would call President Arias and
make two threats: if the press conference proceeded
as scheduled Arias would not be permitted to meet
with President Reagan and he "w[ould] never see a
nickel of the $80M that [Agency for International
Development Director M. Peter] McPherson had
promised him" the day before.®'' North's notebook
also reflected his intention to threaten a foreign gov-

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Chapter 7

ernment if necessary to maintain secrecy. The entry
reads:

0008 - Conf.
Lew Tambs

Call to Elliott Abrams and Amb

- Tell Arias:

- Never set foot in W.H.

- Never get 5 [cents] of $80M promised by
McPherson.^*

According to North's PROF Note to Poindexter,
Abrams and another Government official passed "the
same word" to President Arias.®® However, accord-
ing to their testimony, neither North, Abrams, nor the
other official called Arias.'"' North testified that he
falsified the facts in his PROF note to "protect" the
other officials involved.'" He did not offer any expla-
nation why he felt it necesary to hide the facts from
Poindexter, who knew details of the resupply oper-
ation, including the existence of the airfield.

Ambassador Tambs did call President Arias. The
purpose, he testified, was to "dissuade him from this
press conference."''^ Abrams recalled instructing
Tambs before the call to President Arias that revela-
tion of the airfield would put at risk Arias' upcoming
meeting with President Reagan. ''^ Tambs testified that
he merely told President Arias that it would not be
prudent to hold the planned press conference in light
of the pending case before the International Court of
Justice.''*

In his PROF note. North assured Poindexter that
steps had been taken to ensure that the NSC-coordi-
nated Contra operation would not be linked to the
airfield: "As a precaution the Project a/c [aircraft]
were flown to [another base] last night and no project
personnel remain on site at the field."''* The next day,
Poindexter indicated his approval of North's actions.
He wrote in a PROF: "Thanks, Ollie. You did the
right thing, but let's try to keep it quiet."''®

Airfield Revealed: Damage Control

Although the initial news conference was cancelled,
the Costa Rican Government announced the existence
of the airfield three weeks later. On September 26, the
Costa Rican Interior Minister told reporters that his
government had discovered and shut down an airfield
that had been used for resupplying the Contras, for
trafficking drugs, or both. Secord and North were not
mentioned, although the name of the Enterprise Pana-
manian company that built the airfield, Udall Re-
sources, Inc., was revealed, as was the pseudonym
(Robert Olmstead) of William Haskell, the man who
purchased the land."

The airfield had not been used in the resupply oper-
ation for several months, and the press conference
had compromised its location and purpose. Nonethe-
less, action was taken to ensure that the roles of U.S.

officials and the Enterprise remained concealed. In a
PROF note. North told Poindexter: "There are no
USG fingerprints on any of the operation." Udall
Resources, which North described as "a proprietary
of Project Democracy," will "cease to exist by noon
today." The company's resources — $48,000 — were
moved to another Panamanian account. And Udall's
office in Panama "is now gone as are all files and
paperwork." Olmstead, North added, "is not the name
of the agent — Olmstead does not exist."'*

In a second PROF note to Poindexter written that
day. North blamed the failure to head off the press
conference in part on the absence of Ambassador
Tambs, who was on leave. North wrote that Tambs
"put this thing back in its box two weeks ago when I
called you in the middle of the night to threaten that
Arias would not get in the door of the oval office if
this came out."'® North's PROF continued with a
lengthy slur directed against Costa Rican officials
who exposed activities in their own country.

North concluded the message:

Believe we have taken all appropriate damage
control measures to keep any USG fingerprints
off this and with Elliott and [CIA Chief Castillo],
have worked up appropriate "if asked" press
guidance.*"

The press guidance went to Poindexter for approv-
al on September 30.*^ The guidance, which according
to the cover memo had been coordinated with Elliott
Abrams, the CIA Chief of the Central American Task
Force (C/CATF) and Richard Armitage, Assistant
Secretary of Defense for International Security Af-
fairs, consisted of answers to two likely questions.

The first potential question and suggested answer
were:

[Question:] Did U.S. personnel supervise con-
struction of the airstrip in Northern Costa Rica?

[Answer:] The U.S. Embassy in San Jose, Costa
Rica, has reported that during the Administration
of Former President Monge the Ministry of
Public Security was offered the use of a site on
the Santa Elena Peninsula which could be used as
an extension of the civil guard training center at
Murcielago. The site included a serviceable air-
strip which could have supplemented the small
one which is located near the training center.
The offer was reportedly made by the owners of
the property who had apparently decided to
abandon plans for a tourism project. The Embas-
sy has no information on the Ministry's decision
concerning the offer. *^

The answer concluded: "No U.S. Government funds
were allocated or used in connection with this site
nor were any U.S. Government personnel involved in
its construction."*^ The press guidance thus con-

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Chapter 7

cealed the involvement in the airfield's construction
of North, Tambs, and Castillo.

The suggested answer in the press guidance to the
second possible question was also misleading:

[Question:] Was the airstrip intended for use by
the Contras?

[Answer:] The Government of Costa Rica has
made clear its position that it will not permit the
use of its territory for military action against
neighboring states. The U.S. Government re-
spects that position.

In fact, the airfield had been used to help the Con-
tras. The Costa Rican Government had already re-
vealed that the airfield's purpose had been to help the
Contras, to traffic drugs, or both. Among the officials
who had helped prepare the guidance, Abrams and
CIA Central American Task Force Chief acknowl-
edged knowing that the airfield was intended to help
the Contras and that U.S. citizens — if not Govern-
ment officials — were involved.®* North and Poin-
dexter, to whom the press guidance was sent for
approval, knew the airfield was part of the covert
operation to help the Resistance.®^

The steps taken to keep reporters from finding
"USG fingerprints" on the airfield were successful for
the time being. Not until October 24 did evidence
emerge suggesting ties between the airfield and the
U.S. Government. That revelation would come from
Eugene Hasenfus after he was shot down and cap-
tured by the Sandinistas.®^

The Hasenfus Downing

On the morning of October 5, 1986, one of the air-
craft belonging to the Enterprise left its operational
base with 10,000 pounds of ammunition and gear for
FDN forces inside northern Nicaragua. William
Cooper was in command, Wallace "Buzz" Sawyer
was the co-pilot, and a 17-year-old FDN fighter was
handling radio communication with the troops on the
ground. Also on board, as the "kicker" who would
actually drop the supplies to forces waiting below,
was Eugene Hasenfus.

Within a few hours, the aircraft was reported miss-
ing. Officials later learned that the plane had been hit
by a Sandinista SAM-7 missile over Nicaraguan terri-
tory. Three crew members were killed. Hasenfus sur-
vived and was captured by the Sandinistas.

The Sandinistas found in the wreckage, and showed
reporters, an identification card issued to Hasenfus by
the air force in the operational base's host country
identifying him as an "adviser" in the "Grupo
U.S.A." group at the base, and a business card be-
longing to an official at the NHAO office in Washing-
ton. They also found and displayed an ID card issued
to Cooper by Southern Air Transport.®''

The U.S. Government Connection

The Hasenfus flight was part of the resupply oper-
ation coordinated by North with the support and ap-
proval of the President's National Security Adviser.
North acknowledged in testimony about the flight: "I
was the U.S. Government connection."®® James
Steele, a U.S. Military Group Commander in Central
America; Lewis Tambs, the U.S. Ambassador to
Costa Rica; and Tomas Castillo, a CIA Station Chief
in Central America, all provided assistance to the
secret operation to support the Contras. Yet, virtually
every newspaper article on the incident in the days
after the downing would quote senior Government
officials, including the President himself denying any
U.S. Government connection with the flight. And
within a week, high Government officials would offer
the same categorical denials before Congressional
Committees.

The Initial Response

When the Sandinistas shot down the Hasenfus
plane. North was in West Germany negotiating with
the Second Channel. He returned to Washington
within 48 hours of the downing to help deflect inquir-
ies about the flight, leaving Albert Hakim behind to
complete his negotiations.

Castillo, however, recognized immediately that the
Hasenfus crash could lead to disclosure of the oper-
ation. Before the downing was even confirmed, he
wrote to Robert Dutton via KL-43:

Situation requires we do necessary damage con-
trol. Did this A/C [aircraft] have tail number? If
so, is it the same one which refueled several
times at . . . Please advise ASAP. If so, we will
have to try to cover quickly as record of tail
number could lead to very serious implication.®*

Two days later, plans were made at a Restricted
Interagency Group (RIG) meeting in which Abrams
and CIA Central American Task Force Chief (C/
CATF) participated to ensure that the U.S. Govern-
ment would not be implicated by the flight.'" A
PROF from NSC staff member Vincent Cannistraro
to Adm. Poindexter described decisions made at the
meeting. Among them, Cannistraro wrote, "UNO to
be asked to assume responsibility for flights and to
assist families of Americans involved." Also, the
group decided that press guidance would be prepared
"which states no U.S.G. involvement or connection,
but that we are generally aware of such support con-
tracted by the Contras.""

A few days later The New York Times reported:
"Nicaraguan rebels took full responsibility today for
the flight of a military cargo plane that was downed
over Nicaragua last week." A "senior Administration
official" was quoted in the story as saying that the
U.S. Government had asked the rebels to take respon-

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Chapter 7

sibility. While denying that any such request was
made, Bosco Matamoros, UNO's Washington-based
spokesman, told the reporter, "There was no United
States government connection. "^^ Similar denials by
Administration officials would soon follow. North
was not at the RIG meeting, but he testified that the
guidance stating no U.S. Government connection was
"not inconsistent with what we had prepared as the
press line if such, if such an eventuality occurred."®^

The Denials

The President: There is no evidence the President
knew of U.S. involvement in the Hasenfus flight. But
the National Security Adviser and officials on the
NSC staff did know. Also, the day of the downing,
Felix Rodriguez called Col. Sam Watson in Vice
President Bush's office, suggesting to him that North
was involved with the flight.'* Donald Gregg, Assist-
ant to Vice President Bush, earlier had been alerted to
the possibility that North was linked to the resupply
operation.

Nevertheless, the President was permitted to deny
any U.S. Government connection with the flight. In
an exchange with reporters on October 8, the Presi-
dent praised the efforts to keep the Contras armed,
comparing resupply efforts to those of the "Abraham
Lincoln Brigade in the Spanish Civil War." But when
asked whether the Hasenfus plane had any connection
with the American Government, the President re-
plied, "Absolutely none." He told reporters:

There is no government connection with that at
all . . . We've been aware that there are private
groups and private citizens that have been trying
to help the Contras — to that extent — but we did
not know the exact particulars of what they're
doing. '^

The Secretary of State: On October 7, Secretary
Shultz told reporters that the Hasenfus aircraft was
"hired by private people" who "had no connection
with the U.S. Government at all."'® He was quoted
on two national network news programs that evening
as saying, "The people involved were not from our
military, not from any U.S. Government agency, CIA
included."''' On October 10, Shultz reiterated this
denial while at the Reykjavik Summit with the Presi-
dent. Asked during a Today Show interview about
Hasenfus' statements that he worked with CIA em-
ployees on the resupply operation, Shultz said:

[D]on't forget that this man is under arrest and is
saying things under those conditions. I have said,
on the basis of checking with both the Defense
Department and the CIA, that I am informed by
both those agencies that he is not an employee of
theirs and they are not connected with this oper-
ation.'*

Secretary Shultz testified that the U.S. Government
involvement with the Hasenfus flight was a "surprise"
to him," and the record shows that two National
Security Advisers frequently failed to confide in him
or give him accurate information. Shultz said he
based his denials on a "general understanding" that
"there was no problem" with North's activities, be-
cause Congressional inquiries into North's activities
came up empty. Moreover, Abrams testified that he
gave categorical assurances to Shultz that there was
no U.S. Government involvement in the Hasenfus
flight, and that neither North nor anybody else on the
NSC staff was involved in the provision of lethal
assistance to the Contras. ^"^

North claimed in testimony that Shultz "knew what
I was doing" to support the Contras, citing a single
instance where the Secretary at a reception "put his
arm around my shoulder, and told me what a remark-
able job I had done keeping the Nicaraguan Resist-
ance alive."*°' Shultz testified, however, that he
merely told North that he appreciated North's work
"to keep up the morale of these [the Contra] leaders.
. . . But that was the sum and substance of it. To
build on that remark this superstructure of implication
is entirely unwarranted." '°^

Assistant Secretary of State for Inter-American Af-
fairs: Elliott Abrams was the primary spokesman for
the Administration about the Hasenfus flight. His cat-
egorical denials of U.S. involvement were not limited
to the State Department; he did not hesitate to tell
reporters that no Government agency was tied to the
Hasenfus flight, including the NSC staff Typical of
his statements during this period were the following,
made on the CNN Evans & Novak show which aired
October 11:

EVANS: "Mr. Secretary, can you give me cate-
gorical assurance that Hasenfus was not under
the control, the guidance, the direction, or what
have you, of anybody connected with the Ameri-
can government?"

ABRAMS: "Absolutely. That would be illegal.
We are barred from doing that, and we are not
doing it. This was not in any sense a U.S. gov-
ernment operation. None."'°^

NOVAK: "Now, when you say gave categorical
assurance, we're not playing word games that are
so common in Washington. You're not talking
about the NCS [sic], or something else?"

ABRAMS: "I am not playing games."

NOVAK: "National Security Council?"

ABRAMS: "No government agencies, none."^°*

Abrams was no less categorical in denials to Con-
gressional Committees. He testified three times during
this period. On October 15, Abrams testified alone

145

77-026 0 - 87 -

Chapter 7

before the House Foreign Affairs Subcommittee on
Western Hemisphere Affairs. On October 10, he testi-
fied before the Senate Foreign Relations Committee,
and on October 14, before the House Intelligence
Committee. On these two occasions, he was accompa-
nied by Clair George, the CIA's Deputy Director for
Operations; and the Chief of the CIA's Central Amer-
ican Task Force.

During the House Intelligence Committee appear-
ance, the following exchange occurred:

HAMILTON: ". . . Just to be clear, the United
States Government has not done anything to fa-
cilitate the activities of these private groups, is
that a fair statement? We have not furnished
money. We have not furnished arms. We have
not furnished advice. We have not furnished lo-
gistics."

GEORGE: "Mr. Chairman, I cannot speak for
the entire United States Government."

HAMILTON: "Can you, Mr. Abrams?"

ABRAMS: "Yes, to the extent of my knowledge
that I feel to be complete, other than the general
public encouragement that we like this kind of
activity."'"^

As Abrams later acknowledged to these Commit-
tees, this statement was "completely wrong." '°*^
Abrams testified that he was unaware that North was
involved with the Hasenfus flight, insisting that he
was just another person deceived by North. 1°''

North, on the other hand, included Abrams with
other officials who, he said, had tried to keep the
Contra operation secret. He testified: "I am sure that
others like Mr. McFarlane and Admiral Poindexter
and Director Casey and Elliott Abrams and the Chief
of the Central American Task Force and others were
trying to weigh in their souls what would happen to
those [involved in or assisting the operation] ... if the
American Government stood up and announced
i( "108 Noting that Abrams had asked North to help
raise money to retrieve the bodies of the dead crew-
members. North said, "Why would he turn to me if
he didn't know I was doing it?""'^

Abrams testified that he did not specifically call
North to ask for such assistance, but that those issues
merely "came up in the conversation.""" Moreover,
Abrams maintained he had sufficient reason to believe
North was not involved in the Hasenfus flight. He
noted first that McFarlane had categorically denied to
Congress that North was providing military support
to the Contras. Abrams conceded that those denials
were made a full year before the Hasenfus shoot-
down, but said that based on his work with North in
the Restricted Interagency Group (RIG) throughout
1986, he "had no reason whatsoever to believe that he
was violating the law."' ' '

North claimed, however, that his Contra-related ac-
tivities were discussed at some RIG meetings."^ In
his testimony. North specifically mentioned only one
RIG meeting, initially asserting that Abrams attend-
ed.''^ North's notebook entry of that meeting, how-
ever, indicates Abrams was not present. Nonetheless,
North maintained that Abrams knew details of his
Contra-support activities. An entry in North's note-
book for April 25, 1986, suggests that North and
Abrams discussed "support for S. front," the fact that
the "air base [was] open in C[osta] R[ica]," and "100
BP's [Blowpipe missiles].""* North testified that he
did not specifically recall that conversation, "but do
not deny that I discussed those [items listed in North's
notebook] at various points in time with Mr. Abrams
and others.""^ (Abrams was not asked about this
notebook entry.)

Moreover, the third key member of the RIG, the
CIA Chief of the Central American Task Force (C/
CATF), testified that he was "taken aback" by
Abrams' categorical denials of North's involve-
ment."^ While he insisted that he did not want "to
impeach" Abrams' testimony, C/CATF told these
Committees: "I thought he [Abrams] would have a
broad brush understanding, as did a lot of other
people, Ollie was in and around those things."'"

Abrams argued in defense of his statements that he
or someone on his staff had checked with other key
agencies — the Central Intelligence Agency (CIA) and
the Department of Defense (DOD) — and verified that
no U.S. officials were involved with the Hasenfus
flight."* In their testimonies, two key CIA offi-
cials— the C/CATF and the Deputy Director for Op-
erations— mentioned no call from Abrams' office, and
testified they were surprised by Abrams' categorical
denials.' '®

Similarly, Abrams noted that soon after the crash,
while North was out of the country, he called an
NSC staff officer and received assurances that the
NSC staff was not involved in the Hasenfus flight. '^°
Abrams said the official "may have been Mr.
Earl."'^' Earl, however, was aware that the fiight
was part of "Democracy, Inc." and that North played
an important role in that organization.'^^ (Earl was
not asked about a call from Abrams.)

During the period he was making his denials,
Abrams spoke with North. But Abrams did not ask
whether North was involved with the Hasenfus flight,
despite the fact that Abrams, in his words, "knew that
he [North] was monitoring" the private Contra sup-
port network.'^''' Abrams said he did not ask North
because "it was very clear that [confirming his in-
volvement in the fiight] would have been completely
contradictory to what he had previously told me."'^*
North had a different explanation: "He didn't have to
ask me. . . He knew."'-^

Finally, while testifying before the House Foreign
Affairs Subcommittee on Western Hemisphere Affairs

146

Chapter 7

on October 15, 1986, Abrams said that he did not
believe anyone in the Government would know de-
tails about the flight:

KOSTMAYER: "You have not been told by our
Government, if indeed our Government knows,
who organized and who paid for this particular
flight?"

ABRAMS: "I wouldn't separate myself from the
Government. We don't know."

KOSTMAYER: "Do you think there is anyone
in the Government who does know?"

ABRAMS: "No, because we don't track this kind
of activity."'^®

Asked to reconcile this response with the fact that
he knew North monitored the Contra aid network,
Abrams told these Committees: "To say that Col.
North was the person who knew the most about the
private benefactors — which I thought, and think to be
the case — is not to say that he could tell you the
name of every one of them and could tell you every-
thing that every one of them was doing each day."*^''

CIA Deputy Director For Operations: Clair
George, appearing with Abrams at two sessions
before Congressional Committees, limited his denials
to the Central Intelligence Agency. Typical of his
remarks was the following from his opening statement
before the House Intelligence Committee on October
14:

First I would like to state categorically that the
Central Intelligence Agency was not involved
directly or indirectly in arranging, directing or
facilitating resupply missions conducted by pri-
vate individuals in support of the Nicarguan
democratic resistance. ' ^ *

In fact, at least one CIA official was directly involved
in providing lethal supplies to the Contras in 1986.
George testified before these Committees that he was
unaware of this fact when he testified at the Hasenfus
hearing. Nonetheless, in his testimony before these
Committees, George admitted that his earlier state-
ment was "wrong", and he offered an apology. ^^^
George acknowledged that he knew in October
1986, that the NSC staff was "participating in some
way in supplying the Contras" '^° but he allowed
Abrams' categorical denials about the involvement of
any U.S. officials to pass without comment. He ex-
plained:

I was surprised Abrams made that statement. It
was so categorical. The question is, should I leap
up and say, 'hold it, Elliott, what about — excuse
me, all you members of HPSCI, but Elliott and I
are now going to discuss what we know about' —
and I didn't have the guts to do it."'

Saying he was "overly taken with trying to protect
the Central Intelligence Agency," George expressed
regret that he had not responded in some way to
Abrams' categorical denials. '^^

CIA Central American Task Force Chief: The
C/CATF told these Committees he was aware that
the categorical denials about any U.S. involvement in
the Hasenfus flight were wrong. Asked whether he
had "any doubt" who ran the Hasenfus flight, he said,
"No."'^'' However, testifying before the House Intel-
ligence Committee on October 14, the C/CATF said:
"We know what the airplanes are by type. We knew,
for example there were two C-123s and C-7 cargos . .
. . We knew in some cases much less frequently that
they were flying down . . . into southern Nicaragua
for the purposes of resupply, but as to who was flying
the flights and who was behind them, we do not
know."i='*

The C/CATF maintained before these Committees
that his statement was not false because he did not
know exactly who was behind the flights:

A: "I want to make one thing very, very clear. I
don't lie and I don't provide false answers, and if
I'm put in a situation that is undeniable, I will
find some way to avoid lying .... I didn't know
who was flying those flights."

Q: "Or who was behind them, is what you said?"

A: "You could have put me on a rack and I
couldn't have told you who the pilots were, who
was managing them. I at that time suspected, but
didn't know that General Secord was involved
with them. I had no idea where the money was
coming from. ... It is not a lie."'^^

Generally, the C/CATF remained "uniquely
silent," as he put it, during the hearings on the Hasen-
fus flight where he was a supporting witness: "I spoke
when spoken to."*^* He told these Committees that
he had decided that, as the junior official on a panel
with Abrams and George, he would not speak up
first:

I could have been more forthcoming, but I frank-
ly was not going to be the first person to step up
and do that .... So long as others who knew the
details, as much as I, who knew more than I,
were keeping their silence on this, I was going to
keep my silence. ... I was a member of the
administration team. I wasn't going to break
ranks with the team. . . . My frame of mind was
to protect, was to be a member of the team.'^''

The C/CATF told the Committees that he was "trou-
bled" by his failure to speak out, but added, "There is
not a lot I can do about it."'^*

147

Chapter 7

Abrams' Brunei Testimony

In addition to denying any U.S. role in the Hasenfus
flight, Elliott Abrams denied on several occasions that
the U.S. Government actions had sought third-coun-
try funding for the Contras. His statements were
made despite his previous involvement in soliciting
funds from the Government of Brunei. In testimony
before Congressional Committees in late 1986,
Abrams repeatedly deflected questions about the Con-
tras' funding, giving responses which were, in his
word, "misleading." '^^

In an October 10 open hearing of the Senate For-
eign Relations Committee, Senator Kerry asked
Abrams whether Country 2 had provided assistance
to the Resistance. Abrams replied: "I think I can say
that while I have been Assistant Secretary, which is
about 15 months, we have not received a dime from a
foreign government, not a dime, from any foreign
government." Asked whether the Contras had re-
ceived funds, Abrams said: "I don't know. But not
that I am aware of and not through us." He added at
the hearing that if the Contras had approached a
foreign government, "I think I would know about

it"140

Appearing before the House Intelligence Commit-
tee on October 14, 1986, together with Clair George,
Abrams again denied that third countries had aided
the Contras:

ABRAMS: "I can only speak on that question for
the last fifteen months when I have been in this
job, and that story about [Country 2], to my
knowledge is false. I personally cannot tell you
about pre-1985, but in 1985-1986, when I have
been around, no."

CHAIRMAN; "Is it also false with respect to
other governments as well?"

ABRAMS: "Yes, it is also false." i*'

Before these Committees, Abrams testified that he
did not know about the Country 2 or Country 3
contributions. Although he had personally solicited
Brunei, that country's donation had not been received
at the time of his testimony, and therefore he ex-
plained it was technically true that the Contras had
not received assistance from Brunei. Furthermore,
Abrams testified that Brunei had been promised confi-
dentiality, and "I did not believe I was authorized to .
. . reveal that solicitation." '■'^

On November 25, 1986, Abrams testified together
with the CIA's C/CATF before the Senate Select
Committee on Intelligence shortly after Attorney
General Meese's press conference disclosing the di-
version of funds from the Iran arms sales to the Con-
tras. He was again asked about reports of third-coun-
try funding:

BRADLEY: ". . . Did either one of you have
any knowledge or indication that the contras
were receiving funds from . . . Mid-Eastern

sources.'

ABRAMS: "No."

C/CATF: "No."

BRADLEY: "Did either one of you ever discuss
the problems of fundraising — "

ABRAMS: "Let me add to that, Senator. I spoke
to Dick Murphy, Assistant Secretary of State for
Near Eastern Affairs, probably in the course of
the summer, to ask him if he thought I could
raise any money from Middle Eastern sources.
He was rather discouraging as to whether we
would be able to do it, and so we never
tried. . . ."

BRADLEY: "Now, you did not discuss with
anyone else in the Executive Branch the possibili-
ty of receiving funds from . . . any . . . Middle
Eastern source?"

ABRAMS: "That's correct. I never — once I had
that conversation with him, that was the end of

it..'143

Again, Abrams maintained that this testimony was
literally correct because Brunei was not a Mid-East-
ern country.'** In his Senate Intelligence Committee
appearance, Abrams was also asked whether he dis-
cussed third-country funding with members of the
NSC staff:

BRADLEY: "Did either one of you ever discuss
the problems of fund raising by the Contras with
members of the NSC staff?"

ABRAMS: "Well, yes. I mean, I think— I can't
remember a specific day, but certainly the ques-
tion— the fact, which now appears to be slightly
mysterious, that they never had any money, we
discussed — you know, it came up all the time,
because they were always running out of every-
thing. So the question came up, sure."

BRADLEY: ". . , So let me ask it again. Did
either one of you ever discuss the problems of
fund raising by the Contras with members of the
NSC staff?"

ABRAMS: "No, I can't remember."

BRADLEY: "Well, you would say gee, they got
a lot of problems, they don't have any money.
Then you would just sit there and say, what are
we going to do? They don't have any money.
You never said, you know, maybe we could get
the money this way?"

148

Chapter 7

ABRAMS: "No. Other than the conversation I
have — other than the Middle Eastern thing
which I recounted to you. We're not — you know,
we're not in the fundraising business. . . ."

BRADLEY: "Were you completely ignorant of
all fundraising activities by the Contras?"

ABRAMS: "No. Certainly not in the — I knew
for — I mean — I don't think I knew anything that
wasn't — I am trying to think if I knew anything
that wasn't in the newspaper, that is, I knew
certainly that Singlaub was raising money for the
Contras. I knew that others were raising money
for the Contras. I mean, using the Contras in a
very general sense. For example, Friends of the
Americas raises money for medical relief and
things like that. I knew that was happening. I
didn't know what Singlaub was raising or how or
what he did with it when he got it. I was, until
today, fairly confident that there was no foreign
government contributing to this. But I knew
nothing, still don't know anything about the
mechanisms by which money was transferred
from private groups that have been raising it, to
the Contras." i* 5

Abrams maintained before the Select Committees
that these statements were "technically correct" be-
cause he was asked about "fundraising by the Con-
tras" and the Brunei solicitation was fundraising by
the United States for the Contras.**® However, in his
exchange with Senator Bradley, when asked whether
he was ignorant of all fundraising "by the Contras,"
Abrams did not limit his responses to his knowledge
of fundraising by the Contras. He specifically men-
tioned fundraising for the Contras by John Singlaub
and by the group. Friends of the Americas.

Finally, in his Senate Select Committee testimony,
Abrams distanced the State Department from Contra-
related fundraising. He stated: "We don't engage — I
mean the State Department's function in this has not
been to raise money, other than to try to raise it from
Congress."'*''

In his testimony before these Committees, Abrams
acknowledged that he intended to prevent the Mem-
bers of Congress from learning about the solicitation
of Brunei:

Q: In fact, your approach on November 25 . . .
was that unless the Senators asked you exactly
the right question, using exactly the right words,
they weren't going to get the right answers.
Wasn't that the approach?

A: That is exactly the correct description of what
I did on that date . . .

Q: And, as you have said ... it would have been
a very easy thing to have stopped the whole
shooting match by simply saying Senators you

are now getting into an area that I am not au-
thorized to discuss?

A: It would have been relatively easy. It would
have been the right thing to do. . . .

Q: And so unless the Senators knew the facts in
advance so they could frame their question in
exactly the right words, they wouldn't find out
and they didn't find out. Isn't that what hap-
pened?

A: Correct. That is exactly what happened.'**

Abrams testified that after his November 25 testi-
mony, he realized that he had "failed to disclose the
solicitation of Brunei," and asked for permission to
"go back and tell the Committee there had indeed
been another solicitation." Abrams attempted to reach
Senator Bradley, who had posed the question, to ex-
plain that there had, in fact, been a solicitation which
he had failed to mention in this testimony. Failing to
reach Bradley, he conveyed the message to a member
of the Senator's staff. When Abrams appeared again
before the Senate Intelligence Committee on Decem-
ber 8, he was asked to explain his answers to the
Committee as a whole. Shown a transcript of his
earlier statements, Abrams admitted they were mis-
leading but attempted to defend them as technically
accurate. After a recess, Abrams apologized to the
Members, having been advised by Senator Boren to
do so.'*^

He made no similar effort to correct his testimony
in October before the Senate Foreign Relations Com-
mittee or the House Intelligence Committee.

Conclusion

Throughout the period of Congressional restrictions
on lethal aid to the Contras, Administration officials
were asked repeatedly whether the U.S. Government
was in any way providing such support. In every
instance, officials responded to the inquiries with eva-
sive answers or categorical denials. Some of these
officials made their statements as part of a deliberate
attempt to conceal what they knew about U.S. Gov-
ernment support for the Nicaraguan Resistance.

These Committees found no direct evidence sug-
gesting that the President was a knowing participant
in the effort to deceive Congress and the American
public. But the President's actions and statements con-
tributed to the deception.

Congressional Committees overseeing the imple-
mentation of the Boland Amendment repeatedly
sought to determine how the Contras were being
funded. The President knew that Country 2 had pro-
vided substantial sums of money to the Resistance; he
had personally discussed such a contribution with the
leader of that country. But knowledge of this contri-

149

Chapter 7

bution was not widely shared within the Administra-
tion. Indeed, high-ranking State Department officials
were permitted on several occasions to testify to Con-
gress that it was not the policy of the United States to
facilitate or encourage third-country donations, and
that the Administration had not in fact done so. In
one instance, following the enactment of the full pro-
hibition Boland Amendment in October 1984, Ambas-
sador Motley testified that "soliciting" or "encourag-
ing" third country donations would violate the law.
In October 1986, the President denied that the U.S.
Government had any connection with the Hasenfus
flight, depicting it as part of a "private" operation.
According to Poindexter the President "understood
that the Contras were being supported and that we
were involved in — generally involved in coordinating
the effort." '^° These Committees found no evidence
suggesting that the President knew his statements
about the flight were false. He merely echoed the
denials made the day before by State Department
officials.'''' The National Security Adviser and others
who knew the President's remarks were false appear
to have made no effort to ensure that the President's
statements were accurate and his knowledge com-
plete. Poindexter testified he was too busy with the
Reykjavik summit to correct the public record. '^^

Reasons for the Deception

North endeavored to explain the need for the decep-
tion by arguing that he was forced to weigh "the
differences between lives and lies." He told the Com-
mittees:

[t]he revelations of the actual details of this activ-
ity .. . would have cost the lives of those with
whom I was working, would have jeopardized
the governments which had assisted us, would
have jeopardized the lives of the Americans who
in some cases were flying flights over Nicaragua,
would have put at great risk those inside Nicara-
gua and in Eastern Europe and other places
where people were working hard to keep them
alive. . . .'^^

North's justification for his decision to deceive does
not withstand analysis. Congress is routinely briefed
on covert operations where lives are at risk. Beyond
that, Congress publicly debated and then approved

the support of the Contras prior to enactment of the
Boland prohibition. Operational details that would
have put at risk the personnel conducting those oper-
ations were not publicly revealed. The same is true
for the Congressionally approved operation in support
of the Contras currently underway.

Even in 1985 and 1986, Congress was not asking
about operational details such as drop-zone coordi-
nates or flight paths. Members of Congress simply
wanted to know whether it was true that the U.S.
Government was providing lethal support to the Nic-
araguan Resistance.

Indeed, North testified that his efforts were known
widely outside the United States, even by this Coun-
try's enemies: "Izvestia knew it ... . My name had
been in the newspapers in Moscow, all over Daniel
Ortega's newscasts. Radio Havana was broadcasting
it "154 Moreover, it was important to the success of
the resupply operation that friendly countries in Cen-
tral America knew that the U.S. Government support
for the Contras was continuing so that they would
not drive the Contras out of their countries.

Only the American people and the Congress were
kept in the dark. Had they known, it would not have
been lives at risk but the NSC staffs secret operation
itself. Poindexter told these Committees he believed
during his tenure in the White House that disclosure
of the NSC staff operation would have almost surely
triggered tighter restrictions on aid to the Contras.'**
McFarlane testified that disclosure of the "troubling"
documents on North's activities which he had gath-
ered in response to a Congressional inquiry "would be
an extremely torturous, conflicting, disagreeable out-
come and that I hoped we didn't come to that."'*®

North's contemporaneous actions and words pro-
vide clear evidence that the reasons for the deception
had more to do with the political risk to the operation
than to the physical risk to operation personnel. The
record is clear that North's actions after the revela-
tion of the Santa Elena airfield were motivated by a
desire to prevent the discovery of "USG finger-
prints," in his words, on the airfield.

In addition, in a May 1986, PROF note to Poin-
dexter, North warned that Members of Congress were
bound to become "more inquisitive" as the Contra
operation's level of activity increased. He wrote:
"While I care not a whit what they say about me, it
could well become a political embarassment for the
President and you."'*'

150

Chapter 7

Chapter 7

1. Exhibits OLN-131 and OLN-307, Hearings, 100-7, Part
III.

2. Weekly Compilation of Presidential Documents, No. 41
at 1349.

3. Most Contras Reported to Pull Out of Nicaragua.
1/30/86, New York Times, Nicaragua Rebels. In Retreat.
Viewed as a Reduced Threat. 3/6/86, New York Times Al.

4. On March 20, for example, the Washington Post re-
ported that the Contras had "mounted a series of raids
against mostly economic targets in the northern Nicaraguan
mountains in the past 10 days as debate quickened in Wash-
ington over military aid for their sagging guerilla war."
[Washington Post, 3/20/86, Contras Step Up Raids As U.S.
Debate Waxes, p. 6].

5. See Group's Aid to Contras Probed. The Boston Globe,
4/11/86, p 1; Cocaine, Gun Charges Probed, by the Associat-
ed Press in Washington Post, 4/11/86, p. A6; Inquiry Re-
ported Into Contra Arms. AP story, the New York Times,
p A3; Top 'Contras' Under Scrutiny For Corruption. Chris-
tian Science Monitor, 4/11/86; Reagan Asked About Allega-
tions, The Washington Post, 4/13/86 p. A38; 11 Miami
Banks Ordered to Open Files in Probe of Contra Spending. 5/
9/86, Miami Herald, p. 1; Similar articles on May 9 in The
New York Times, The Baltimore Sun and other papers.

6. Colonel's Actions May Have Broken Contra Aid Ban.
Miami Herald, 4/30/86, p. 8.

7. Despite Ban. U.S. Helping Contras. 6/8/86, Miami
Herald, p. lA; the charges were echoed in an Associated
Press story which ran on June 1 1 in The Washington Post
under the headline, U.S. Abetted Contra Aid During Ban.

8. White House OKd Contra Aid Plan, Sources Say, Miami
Herald, 6/22/86 p. 26A.

9. Poindexter Test., Hearings, 100-8, at 95.

10. Poindexter Test., Hearings. 100-8, at 42.

11. Poindexter Test., Hearings, 100-8, at 42.

12. Poindexter Test., Hearings, 100-8, at 42.

13. Going After North, Washington Times, 7/15/86. A
PROF Note sent that day to North strongly suggests that
Poindexter leaked the story. Poindexter wrote in the PROF:
"I just wanted to lower your visibility." And he gave North
the name of two Washington Times reporters, suggesting
that North call them to straighten the matter out. N 1 2568.
See also Ex. OLN- 295 and N12569.

14. PROF Note, 7/15/86 [N12568]. On July 19, 1986, the
Miami Herald quoted a "senior administration official"
saying that North would be reassigned and would no longer
handle Contra matters.

15. PROF Note 7/15/86 [N12568].

16. Poindexter Test., Hearings, 100-8, at 48.

17. North Test., Hearings, 100-7, Part I, at 174. McFar-
lane denied that he gave such instructions to North. McFar-
lane Test., Hearings, 100-7, Part I, at 204.

18. North Test., Hearings, 100-7, Part I, at 27.

19. Ex. JMP-7, Hearings, 100-8.

20. Poindexter, Hearings, 100-8, at 196. McFarlane had
not arranged for North to communicate with him directly
using the PROF system.

21. Ex. OLN- 191, Hearings, 100-7, Part III.

22. Poindexter Test., Hearings, 100-8, at 43, 48, 60.

23. Poindexter Dep., 5/2/87, at 208.

24. Id

25. North Test., Hearings, 100-7, Part I, at 87.

26. Ex. OLN-10. Hearings, 100-7, Part III. "Kerry,
Barnes, Harkins" referred to Senator John Kerry, Repre-
sentative Barnes and Representative (now Senator), Tom
Harkin.

27. Ex. OLN-89, Hearings. 100-7, Part III.

28. PROF Note from Small to North, date unknown
[N17526].

29. Transcript of Broadcast.

30. PROF Note, 6/27/86 [N4951].

31. Text of statement. On June 21, Coleman gave the
weekly Democratic radio address.

32. Congressional Record, June 25, 1986, p. E2264.

33. Id

34. The resolution reads: "A complete list and description
of any contact or other communication between Lieutenant
Colonel Oliver L. North or any other member of the staff
of the National Security Council and any private individual
or any representative of a foreign government concerning
the provision to the Nicaraguan resistance of any funding or
other assistance from any source other than the United
States Government (including assistance by any private
group or individual or by any foreign government); and any
document prepared by or in the possession of any member
of the staff of the National Security Council concerning the
provision of any such assistance, specifically including any
document concerning any discussion of or involvement in
private fund-raising activities on behalf of the Nicaraguan
resistance by any member of the staff of the National Secu-
rity Council."

35. The resolution reads: "A complete list and discription
[sic] of and any document concerning any contact or other
communication, directly or through intermediaries, since
July 28, 1983, between Lieutenant Colonel Oliver L. North
or any other member of the staff of the National Security
Council and any member or representative of the Nicara-
guan resistance, including any communications concerning
the military strategy or tactics, coordination of the activi-
ties, or the military equipment or training needs of the
Nicaraguan resistance."

36. The resolution reads: "A complete list and discription
[sic] of and any document concerning any contacts or other
communication since July 28, 1983, between Lieutenant
Colonel Oliver L. North or any other member of the staff
of the National Security Council and Robert W. Owen
(who has served as a consultant to the Nicaraguan Humani-
tarian Assistance Office), Major General John K. Singlaub
(United States Army, retired), John Hull (a United States
citizen operating a ranch in northern Costa Rica)."

37. Ex. JMP-14, Hearings, 100-8.

38. Poindexter Test., Hearings, 100-8 at 102.

39. Ex. JMP-14, Hearings, 100-8 .

40. Poindexter Test., Hearings, 100-8 at 96.

41. Poindexter Test., Hearings, 100-8 at 53.

42. Poindexter Test., Hearings, 100-8 at 88.

43. Poindexter Test., Hearings, 100-8 at 73-70. See also
Chapters 2 and 3.

44. Poindexter Test., Hearings, 100-8 at 83.

45. Poindexter Test., Hearings, 100-8 at 94.

46. On July 30, the House Armed Services Committee
reported H. Res. 485 unfavorably. "Unlike the usual prac-
tice of the House in a resolution of inquiry," the report

151

Chapter 7

explained "rather than requesting him [the President] to
produce the specified materials, this resolution directs the
production of information." This, the report said, "could
place the President in an untenable position concerning
compliance if the resolution were agreed to in its present
form " (Rept. 99-724) As a result, the other two Committees
to which it had been referred — Foreign Affairs and Intelli-
gence— were no longer compelled to report the measure
within 14 days. Nevertheless, the resolution was still pend-
ing under the rules of ordinary legislation, and Committee
members wanted to give it full consideration. They deemed
it necessary to meet with Oliver North.

47. In attendance at the 8:30 a.m. meeting with North
were Chairman Hamilton, Representatives McCurdy, Kas-
tenmeier, Daniel, Roe, Stump, Ireland, Hyde, Cheney, Liv-
ingston, and McEwen; Bob Pearson and Ron Sable of the
NSC staff; and Tom Latimer and Steve Berry of Committee
staff

48. Ex. OLN-127, Hearings, 100-7.

49. Ex. OLN-126 and OLN-127, Hearings, 100-7. The
Committee members came to the meeting believing that
official Administration policy held that the NSC staff was
covered by the Boland Amendment. The former National
Security Adviser had told the House Intelligence Commit-
tee as much the year before, and the current National Secu-
rity Adviser had indicated by his letter that the interpreta-
tion stood. North, in his statements to the Members, said
nothing to the contrary. He stated that he had always acted
in compliance with the letter and the spirit of the Boland
Amendment. During the session, he admitted undertaking
only those actions clearly permitted by all officials of the
Executive Branch. He denied activities that Members who
believed the Boland Amendment applied to the NSC would
have interpreted as illegal.

50. North Test., Hearings, 100-7, at 176.

51. Ex. OLN-127, Hearings, 100-7.

52. Letter from Hamilton to Coleman, 8/12/86.

53. North Test., Hearings. 100-7, at 177-178.

54. Earl Dep., 5/22/87 at 102.

55. Earl Dep., 5/22/87, at 105-08.

56. Earl Dep., 5/22/87 at 106-07.

57. Earl Dep., 5/22/87 at 107. Poindexter testified: "Obvi-
ously with hindsight, it would have been prudent to have
sat down and talked to him about that [the meeting with the
Members of Congress] before he did it to provide more
detailed guidance, but that was not the manner in which I
was manning and directing Colonel North at the time."
Poindexter Test., Hearings, 100-8 at 152.

58. North Test., Hearings, 100-7, at 178.

59. North Test., Hearings, 100-7, at 178.

60. Poindexter Test., Hearings, 100-8 at 152-156.

61. Ex. OLN-128, Hearings, 100-7.

62. Poindexter Test., Hearings, 100-8 at 104.

63. Poindexter Test., Hearings, 100-8 at 152.

64. See Chapter 2.

65. Ex. LAT-6, Hearings, 100-3.

66. Q2392.

67. Ex. LAT-6, Hearings.

68. North Notebooks, 9/6/86 [Q2392]. North's notebook
also indicates that the C/CATF was aware of the threat-
ened press conference.

69. Ex. LAT-6, Hearings, 100-3.

70. North Test., Hearings, 100-7, at 86-87; Abrams Test.,
Hearings, 100-5 at 24-26.

71. North Test., Hearings, 100-7, at 86-87.

72. Tambs Test., Hearings. 100-3, at 383.

73. Abrams Test., Hearings, 100-5 at 25.

74. Tambs Test., Hearings, 100-3 at 383.

75. Ex. LAT-6, Hearings, 100-3.

76. PROF Note, 9/7/86 [N12159].

77. Costa Rica Closes Airstrip Near Nicaragua Border, The
New York Times, 9/25/86, p. 13.

78. Ex. OLN-307, Hearings, 100-7.

79. Ex. OLN-131, Hearings, 100-7.

80. Id.

81. Ex. OLN-132, Hearings, 100-7, Part III. The memo-
randum was "nonlog," meaning it had not been entered into
the official NSC filing system. Poindexter had earlier direct-
ed North not to put in writing matters relating to the
Contra operation.

82. Ex. OLN-132, Hearings. 100-7, Part III.

83. Id

84. Abrams Test., Hearings, 100-5, at 20, 24-26; C/CATF
Test., Hearings, lOO-U at 95-98.

85. See Chapter 2.

86. Hasenfus Refers to Secret Airstrip, The New York
Times 10/24/86 p. 7; Downed Airman Tells Predicament, Los
Angeles Times, 10/25/86 p. 1.

87. Crash Survivor Described as Adviser in El Salvador, The
Washington Post, 10/8/86.

88. North Test., Hearings, 100-7, at 179.

89. KL-43 Message, RD00492.

90. The meeting was described in a PROF from Cannis-
traro to Poindexter: Ex. OLN-133, Hearings, 100-7.

91. Ex. OLN-133. Hearings, 100-7. On October 9 the
following entry appears in North's notebook: "Call C/
CATF, Cruz, Calero [about] press release. The A/C was
providing humanitarian supplies to UNO fighters."

92. Contras Take Responsibility for the Support Flight. The
New York Times, 10/14/86, P. A9.

93. North Test., Hearings, 100-7 at 179.

94. Ex. OLN-99, Hearings, 100-7.

95. Weekly Compilation of Presidential Documents, Vol.
22, #41, at 1348-9; See also Elaborate System Supplies Con-
tras, Los Angeles Times, 10/9/86 p. 1; Reagan on Downed
Plane: Like Lincoln Brigade. New York Times, 10/9/86, p.
A8

96. Reagan Administration Denies U.S. Link to Plane.
Washington Post, 10/8/86, p. Al; Downed Plane Not Ours,
ShultzSays. Los Angeles Times, 10/8/86, P. 1.

97. Transcripts of news shows in "Radio-TV Defense
Dialog."

98. Id.

99. Shultz Test., Hearings, 100-9 at 204.

100. Abrams Test., Hearings. 100-5 at 65-67.

101. North Test., Hearings. 100-7, at 149.

102. Shultz Test., Hearings, 100-9 at 202.

103. Ex. EA-25, Hearings, 100-5.

104. Id

105. Ex. EA-28, Hearings, 100-5.

106. Abrams Test., Hearings, 100-5 at 65.

107. Abrams Test., Hearings, 100-5 at 63-69.

108. North Test., Hearings, 100-7, at 180-181.

109. North Test., Hearings. 100-7, at 165.

1 10. Abrams Test., Hearings, 100-5 at 64-65.

111. Abrams Test,, Hearings, 100-5 at 65-68.

112. North Test., Hearings, 100-7, at 88.

113. North Test., Hearings, 100-7, at 88.

152

Chapter 7

114. Ex. OLN-94, Hearings, 100-7.

115. North Test., Hearings, 100-7, at 156.

116. C/CATF Test., Hearings, 100-11 at 157.

117. C/CATF Test., Hearings, 100-11, at 156-157.

1 18. Abrams Test., Hearings, 100-5 at 63.

119. C/CATF Test., Hearings, 100-11 at 156-157; George
Test., Hearings, 100-11 at 165.

120. Abrams Test.. Hearings, 100-5 at 63-64.

121. Abrams Test., Hearings, 100-5 at 64.

122. Earl Dep., Sm/il, at 149-50, 169-70.

123. Abrams Test., Hearings, 100-5 at 64.

124. Abrams Test., Hearings, 100-5 at 65.

125. North Test., Hearings, 100-7, at 179-80.

126. Transcript at 33.

127. Abrams Test., Hearings, 100-5 at 66.

128. Transcript at p. 4. Similar denials were issued by
CIA spokeswoman Kathy Pherson to reporters. For exam-
ple, on October 10 the Los Angeles Times quoted her as
saying, "We didn't have anything to do with the guy [Ha-
senfus]. We didn't have anything to do with the plane. And
we can say that, instead of our usual "No comment," be-
cause a plane that flies in and drops supplies would violate
congressional restrictions. We have not and will not violate
congressional restrictions." Downed Flier Claims CIA Ties,
Los Angeles Times, 10/10/86.

129. George Test., Hearings, 100-11 at 216.

130. George Test., Hearings, 100-11 at 217.

131. George Test., Hearings, 100-11 at 217.

132. George Test., Hearings, 100-11 at 219-221.

133. C/CATF Test., Hearings, 100-11 at 120.

134. Transcript at 20-21.

135. C/CATF Test., Hearings, 100-11 at 121-122.

136. C/CATF Test., Hearings, 100-11 at 120.

137. C/CATF Test., Hearings, 100-11 at 122.

138. C/CATF Test., Hearings, 100-11 at 121, 132-133.

139. Abrams Test., Hearings, 100-5 at 74.

140. Ex. EA-29, Hearings. 100-5.

141. Ex. EA-28, Hearings, 100-5.

142. Abrams Test., Hearings, 100-5 at 85-86.

143. Ex. EA-30, Hearings, 100-5.

144. Abrams Test., Hearings, 100-5 at 72.

145. Ex. EA-30, Hearings, 100-5.

146. Abrams Test., Hearings, 100-5 at 73.

147. Ex. EA-30, Hearings, 100-5.

148. Abrams Test., Hearings, 100-5 at 74-75.

149. Abrams Test., Hearings. 100-5 at 77-79, 94, 146-149.

150. Poindexter Test., Hearings, 100-8 at 89.

151. Assistant Secretary Abrams testified that he had given
Secretary Shultz categorical assurances of no U.S. Govern-
ment involvement in the Hasenfus flight. (See fn. 100.)
Abrams' explanation for his denials is discussed above.

152. Poindexter Test., at 160-61.

153. Norih Test., Hearings, 100-7, at 335.

154. North Test., Hearings, 100-7 at 119.

155. Poindexter Test., Hearings, 100-8 at 61.

156. McFariane Test'., Hearings, 100-2 at 118.

157. Ex. OLN-10, Hearings, 100-7.

153

Part
The Arms Sales to Iran

Chapter 8

U.S.-lran Relations and the Hostages in

Lebanon

For many Americans, the most surprising and alarm-
ing aspect of the Iran-Contra Affair was President
Reagan's decision to sell arms to Iran. Only a few
years before, that nation had humiliated the United
States. From November 1979 to January 1981, Iran
held American diplomats hostage, while Iranian mobs
in the streets of Tehran chanted slogans calling for
the death of President Carter and the destruction of
U.S. interests throughout the Middle East.

Since November 14, 1979, first in response to the
hostage crisis and then because of the Iran-Iraq war,
the United States had embargoed the sale of arms to
Iran. Moreover, it had been the policy of the United
States since December 1983 to pressure other govern-
ments, through "Operation Staunch," to stop the sale
of arms to Iran in order to help bring an early end to
the Iran-Iraq war.

The United States also opposed the transfer of arms
to Iran because of its involvement in terrorist activi-
ties. Following repeated attacks against Americans
and U.S. interests in Lebanon, the Secretary of State
officially placed Iran on a list of countries supporting
terrorism. Reagan Administration policy on terrorism
was well known and was clearly stated by the Presi-
dent: "We make no concessions. We make no deals."*

Why did the Reagan Administration make a com-
plete about-face on both of these publicly stated poli-
cies— to sell no arms to Iran and to make no conces-
sions to terrorists? The background of recent U.S.
policy toward Iran and of the seizure of American
hostages in Lebanon provides a context in which to
assess those policy reversals.

No Regional Guarantees

Partly in reaction to the war in Vietnam, the
United States in 1969 began to shift to a worldwide
policy of no longer directly guaranteeing the security
of its regional allies. Instead, the United States would
work with its friends to ensure that they had the
military capability to defend themselves against inter-
nal subversion or external threat. Under the Nixon
Doctrine, the United States looked to regional
powers, such as Iran, to serve as guardians of Ameri-
can interests in distant corners of the world.

Iran's armed forces, under Shah Mohammed Reza
Pahlavi, served as a deterrent to regional aggression
in this conception of American policy. "Iran," Presi-
dent Carter declared during a 1977 trip to Tehran,
"because of the great leadership of the Shah, is an
island of stability in one of the more troubled areas of
the world. "^ Equipped with the latest American
weaponry and backed by a 350,000-man army, Iran
had become America's policeman in the Gulf. The
Shah relished the role and his power. "Nobody can
overthrow me," he once boasted, "I have the support
of 700,000 troops, all the workers, and most of the
people. I have the power. "^

The Shah's power proved illusory. Growing pro-
tests by students, leftists, and, most importantly,
Muslim religious opponents led in February 1979 to
the Shah's overthrow and his replacement by a Shiite
Muslim religious leader, Ayatollah Khomeini, who
had been forced into exile in 1964, first to Iraq and
then to France. The new regime was contemptuous of
both the United States— the "Great Satan"— and the
West. Fiery Shiite clerics accused the United States of
imperialism and the murder of thousands during the
Shah's rule. America's fortunes in Iran had crumbled.

If any doubt remained about the nature of the new
regime, it was removed on November 4, 1979,
when youthful Iranian militants — the Revolutionary
Guards — stormed the U.S. Embassy in Tehran and
took 66 American diplomats hostage. The hostage
crisis lasted 444 days. It helped to drive one President
from office and to elect another who pledged that
America would not be so humiliated again.*

Arms Sales to Iran

In response to the Embassy seizure, the United States
on November 14, 1979, embargoed all arms shipments
to Iran as part of a general embargo on trade and
financial transactions. Ten months later, however, the
invasion of Iran by Iraq, on September 22, 1980,
raised the question of who might ultimately be pun-
ished by this punitive measure. The prospect of an
Iranian defeat and an increase in Soviet influence in
the region was of concern.

157

Chapter 8

Figure 8-1. Map of Iran

158

Chapter 8

Iran's armed forces were in disarray; the officer
corps and enlisted ranks had been decimated by gov-
ernment purges and desertions. Iran's mihtary arsenal
was also in poor shape. Modern aircraft, armor, and
naval vessels purchased by the Shah had been left
unattended during the 24-month revolution and were
badly in need of spare parts and maintenance. Adding
to Tehran's vulnerability was the fact that most of the
weaponry in the Shah's arsenal was of American man-
ufacture, and the U.S. embargo prevented resupply.
National Security Council (NSC) and Central Intelli-
gence Agency (CIA) analysts concluded that the
Ayatollah Khomeini was ill-prepared to meet Iraq in
a modern war.

Against this background, the Reagan Administra-
tion's Senior Interdepartmental Group (SIG) con-
vened on July 21, 1981, to discuss U.S. policy toward
Iran. SIG members concluded "that U.S. efforts to
discourage third country transfers of non-U. S. origin
arms would have only a marginal effect on the con-
duct and outcome of the war, but could increase
opportunities for the Soviets to take advantage of
Iran's security concerns and to persuade Iran to
accept Soviet military assistance."^ While no agency
representative argued in favor of U.S. action to en-
courage an increase in arms supply to Iran, some
expressed concern that a rigid U.S. policy against all
arms transfers to Iran would not serve overall U.S.
interests.

The Joint Chiefs of Staff, however, strongly op-
posed arms sales to Iran, which they believed would
represent a profound shift in U.S. policy that "would
be perceived by the moderate Arab states as an action
directly counter to their interests."^ Similarly, they
felt that any "improvement in the Iranian arms
supply would intensify the war with Iraq" and possi-
bly spill over into neighboring states. Administration
policy against arms sales to Iran remained firm.

Despite the U.S. embargo, Iran obtained weapons
and military support services on the thriving world
arms market. Oil was often the medium of exchange
in elaborate barter deals, and Persian Gulf trade
became an irresistible lure for international arms mer-
chants. The Reagan Administration listed no fewer
than 41 countries that had provided Iran with weap-
ons since the start of the war.'

As a result, by the spring of 1983, the tide in the
Gulf war had turned in favor of Iran. A steady supply
of munitions, artillery, and ground-to-air and ground-
to-ground missiles had enabled the more numerous
Iranian armed forces and Revolutionary Guards to
expel Iraqi forces, seize and retain some small pieces
of Iraqi territory, and shell the major city of Basra
and the capital city, Baghdad. Once thought by West-
ern analysts to be on the verge of collapse, Iran had
rebounded from its earlier battlefield setbacks.

Operation Staunch

At this point the Administration decided to initiate
Operation Staunch, a plan seeking the cooperation of
other governments in an arms sales embargo against
Iran. On December 14, 1983, the State Department
instructed its Embassies in countries believed to be
involved in arms trade with Tehran to urge their host
governments to "stop transferring arms to Iran be-
cause of the broader interests of the international
community in achieving a negotiated end to the Iran-
Iraq war."

Within the U.S. Government, authorities increased
surveillance of shipments of American equipment and
spare parts destined (usually through intermediaries)
for Iran. Between January 1984 and January 1987, the
State Department sent more than 400 cables to Amer-
ican overseas missions urging compliance with Oper-
ation Staunch. Secretary Shultz personally urged
member governments to work within the European
Community to reduce the fiow of materiel to Iran.

Reports persisted that Israel still actively supplied
the Iranian military despite U.S. efforts to stop arms
sales through Operation Staunch. Other reports hinted
that U.S. and Israeli representatives met regularly to
discuss Tehran's war needs. Widespread reports, par-
ticularly from the Middle East, also suggested that the
United States was violating its own arms prohibitions.
The effectiveness of Operation Staunch was uncer-
tain, but Iran's military potential clearly grew.

The U.S. Government repeatedly and publicly reaf-
firmed its commitment to lessening the flow of arma-
ments to Tehran. A typical public statement from the
State Department, dated May 1985, noted that: "The
U.S. does not permit U.S. arms and munitions to be
shipped to either belligerent and has discouraged all
free-world arms shipments to Iran because, unlike
Iraq, Iran is adamantly opposed to negotiations or a
mediated end to the conflict."*

Iran's Support of Terrorism

The long-suppressed Shiite community in Lebanon,
with close religious and familial ties to Iran, had
found inspiration in the rule of the Ayatollah Kho-
meini. In the aftermath of the Israeli invasion of Leba-
non in June 1982, some Shiite groups in Lebanon used
political kidnappings and terrorism against Americans
and American institutions as retaliation against per-
ceived U.S. support for the Israeli invasion and occu-
pation of their country. The United States became
aware in July 1982 that Iran was supporting groups in
Lebanon, such as Islamic Jihad and the Hizballah
(Party of God), that were suspected of terrorism.

United States Marines had been sent to Lebanon
briefly in August and September 1982 to supervise the
withdrawal of forces of the Palestine Liberation Or-
ganization (PLO) from Beirut and returned to Leba-

159

Chapter 8

non soon thereafter in the aftermath of the Sabra and
Shatila massacres. The purpose of the U.S. presence
in Beirut was to help support the Government of
Lebanon in its efforts to restore stabiUty and its au-
thority throughout Lebanon. The U.S. troops came to
be perceived in Lebanon as a partisan miUtia, howev-
er, working on behalf of the Maronite-and-Christian-
controlled government.

A series of bold attacks followed against Americans
and American interests throughout Lebanon. The
U.S. Embassy in Beirut was destroyed in April 1983,
killing 63, including 17 Americans. A suicide bombing
on October 23, 1983, killed 241 Marines in their bar-
racks in Beirut. This incident was followed in Decem-
ber by a series of bombing attacks against the U.S.
and French Embassies in Kuwait. The 17 men who
were apprehended in the Kuwait attack were tried
and sentenced to prison. The release of these "Da'wa
prisoners" (as they came to be known after a pro-
Khomeini party with supporters in several countries)
became a key demand of the Hizballah as attacks
against U.S. targets and the taking of American hos-
tages continued in Lebanon.

The Hizballah, a loosely structured movement cen-
tered on the Shiite clans of the Bekaa Valley,
emerged as a principal opponent of the United States
and the Western presence in Lebanon. The use of
force — particularly terrorism — against Western inter-
ests in Lebanon was viewed by the more militant
members of Hizballah as religiously sanctioned.

From the outset, U.S. intelligence recognized that
the Hizballah was composed of competing political
elements, not all of whom were controlled by Iran.
But frustration mounted within the Administration in
the aftermath of the Marine barracks bombing, the
Kuwait Embassy attack, and the assassination on Jan-
uary 11, 1984, of the President of the American Uni-
versity in Beirut, Malcolm Kerr.

On January 20, 1984, the Secretary of State desig-
nated Iran a sponsor of international terrorism. This
decision was followed 4 days later by the announce-
ment that Iran would be subjected to U.S. Govern-
ment regulations limiting the export of U.S. military
equipment to "countries that have repeatedly provid-
ed support for acts of international terrorism."^ The
State Department assured Congress that "[t]he ques-
tion of further controls under this rubric is currently
under active review at senior levels of the Adminis-
tration."'" The Department announced these addi-
tional measures based upon what it termed convincing
evidence of a broad Iranian policy furthering terror-
ism beyond its borders, including public statements by
Iranian officials supporting those acts.

Hostage-Taking Begins

The hostage-taking that was to propel the Iran-
Contra Affair began 6 weeks later.

Three Americans were seized in Beirut in 1984:
Jeremy Levin, Beirut Bureau Chief for the Cable
News Network, on March 7; William Buckley, CIA's
Chief of Station, on March 14; and the Reverend
Benjamin Weir, a Presbyterian minister who had lived
in the Lebanese capital for 30 years, on May 8, 1984.
Buckley's capture was of special concern for CIA
Director Casey. It was suspected at the time — and
later confirmed — that Buckley was being tortured,
and Casey wanted to spare no effort to get him back.
Citing a continuing pattern of Iranian support for
terrorism, the State Department imposed new restric-
tions in September 1984 on the export to Iran of
aircraft, spare parts for aircraft, and high-powered
outboard motors. The Department also banned all
other goods and technology to Iran intended for a
"military end-use or end-user."

The Administration staked out an increasingly
tough pubUc position on dealing with terrorists.
Speaking in New York on October 25, 1984, Secre-
tary Shultz called for "swift and sure measures"
against terrorists, both to prevent attacks and to re-
taliate for them: "[W]e cannot allow ourselves to
become the Hamlet of nations, worrying endlessly
over whether and how to respond," he said."

Yet the hostage-taking continued. Four Americans
were seized in 1985: Father Lawrence Martin Jenco,
Director of Catholic Relief Services in Beirut, on
January 8; Terry Anderson, chief Middle East corre-
spondent for the Associated Press, on March 16;
David Jacobsen, Director of the American University
Hospital, on May 28; and Thomas P. Sutherland,
Dean of the American University's School of Agri-
culture, on June 9.

Throughout this period, the only positive develop-
ment on the hostages came on February 13, when
Jeremy Levin gained his freedom. It remains uncer-
tain whether he escaped from, or was released by, his
captors after nearly 11 months of confinement.
Around the time that Levin was freed, the NSC, with
the Joint Chiefs of Staff, created an interagency Hos-
tage Location Task Force.

On June 14, 1985, Shiite terrorists struck again,
hijacking TWA Hight 847 and murdering one of its
passengers. Navy diver Robert Stetham. National Se-
curity Adviser Robert McFarlane publicly stated: "It
is my purpose to remind terrorists and to keep them
on notice that no act of violence against Americans
will go without a response."*^

160

Chapter 8

The President spoke on the same subject on June These were strong and unambiguous words from

30, 1985, "The United States gives terrorists no re- the President and a senior American official. Yet a

wards and no guarantees. We make no concessions. few weeks later, President Reagan authorized Israel

We make no deals." '3 to sell TOW antitank missiles to the government of

leader. Seven months later he authorized the direct the Ayatollah Khomeini, the Hizballah's spiritual
sale of arms to Iran.

161

Chapter 8

Chapter 8

1. The New York Times, July 1, 1985, at AlO.

2. President Jimmy Carter, remarks (Dec. 31, 1977), in:
Public Papers of the Presidents of the United States, Book
II, 2221 (1978).

3. The Washington Post (Mar. 6, 1978); U.S. News &
World Report (June 26, 1978).

4. There have been allegations that officials of the 1980
Reagan campaign — in order to prevent a pre-election an-
nouncement by President Carter (an "October Surprise") —
met with Iranian intermediaries and agreed to ship arms to
Iran in exchange for a post-election release of hostages.
Reagan campaign aides were, in fact, approached by indi-
viduals who claimed to be Iranian intermediaries about po-
tential release of hostages, as were other campaign staffs.
The Committees were told that the approaches were reject-
ed and have found no credible evidence to suggest that any
discussions were held or agreements reached on delaying
release of hostages or arranging an early arms-for-hostages
deal.

5. L. Paul Bremer, III, Executive Secretary, Department
of State to Richard V. Allen, White House, Memorandum,
Subj. Iran SIG Meeting of July 21, 1981, 8125833, S (Sept.
23, 1981), N33299.

6. Paul F. Gorman, Lieut. Gen.. Assist, to the Chairman,
JCS, Memorandum for Mr. L. Paul Bremer, III, Special
Assistant to the Secretary and Executive Secretary, Depart-
ment of State, Subj.: US Arms Transfer Policy Toward
Iran, S, CM 1041-81 (Sept. 3, 1981), N33300.

7. The New York Times, Apr. 11, 1987, at 2.

8. U.S. Government. Department of State. "Iran-Iraq
War," Gist (May, 1985).

9. 15 C.F.R. Section 385.4(d).

10. Developments In The Middle East, July, 1984: Hear-
ings before the Subcomm. on Europe and the Middle East
of the House Comm. on Foreign Affairs, 98th Cong., 2d
Sess., 52 (July 25, 1984).

11. George Shultz, speech, "Terrorism and the Modem
World," delivered at the Park Avenue Synagogue in Man-
hattan (Oct. 25, 1984); see The New York Times, at A12
(Oct. 26, 1984); "Shultz Says U.S. Should Use Force
Against Terrorism," The New York Times, at Al (Oct. 12,
1984).

12. Developments In The Middle East, June, 1985: Hear-
ings Before the Subcomm. on Europe and the Middle East
of the House Comm. on Foreign Affairs, 99th Cong., 1st
Sess., 22 (June 19, 1985).

13. The New York Times, July 1, 1985, at AlO.

162

Chapter 9
The Iran Arms Sales: The Beginning

In August 1985, the President decided that the United
States would allow arms sales to Iran. The decision
represented a reversal of U.S. policy against selling
arms to Iran and, as it later turned out, against
making concessions for the return of hostages. Yet it
was made so casually that it was not written down,
the President did not recall it 15 months later, and the
Secretaries of State and Defense were not even told
of it at the time.

The President's decision triggered a series of arms
transactions with Iran that continued for 15 months.
At the initial transaction, the Iranians established a
pattern of dealing that never changed: Iran would
agree to get the hostages freed in return for arms;
once the arms arrived, the Iranians would demand
still more weapons; only after another arms shipment
would a single hostage — not a group, as promised — be
freed. But, instead of breaking off the transactions, the
Americans continued to accede to the Iranian de-
mands. What follows is the story of how the arms
sales began.

The Actors Take Their Places

Long before the President made his decision, the indi-
viduals and circumstances that propelled the sales
were at work in Washington, Jerusalem, and Tehran.

Since the fall of 1984, the National Security Coun-
cil (NSC) staff had been pressing other Government
agencies to develop a plan for opening a relationship
with Iran and moderating that government's anti-
American stance. The State Department and the De-
fense Department opposed the notion, and while the
Central Intelligence Agency (CIA) was favorably in-
clined, officials there said renewed relations hinged on
the release of seven U.S. hostages held by the pro-
Iranian Hizballah in Lebanon and on a pledge by Iran
to stop terrorist activities.

In Jerusalem, officials were eager for better rela-
tions with Iran, for two very pragmatic reasons: com-
mercial and diplomatic. Israel had friendly relations
with Iran under the Shah. Despite revolutionary
Iran's vow to destroy Israel, the Israelis regarded Iraq
as a greater threat to their security than Iran. Israel's
goal was to create conditions for the resumption of

commercial and diplomatic relations with a post-Kho-
meini regime.

Tehran had its own agenda. Rhetoric notwithstand-
ing— the United States was considered "The Great
Satan" and Israel a blasphemy — Tehran wanted
modern tanks and high-technology antitank and anti-
aircraft missiles to counter Iraq's Soviet-made fighter
planes and modern tanks. It needed spare parts to
maintain the arsenal of weapons that the Shah had
purchased from the United States.

The unlikely catalyst for bringing these disparate
parties together was Manucher Ghorbanifar — a re-
sourceful Iranian merchant living in Paris who under-
stood the intersection of interests and saw how the
American hostages could be used as an incentive for
the sale of missiles to Iran.

Ghorbanifar

Since fleeing Iran in 1979, Ghorbanifar had sought
to make a career as a broker through whom Western
governments could develop contact with Iran. By
1984, Ghorbanifar was well known to U.S. intelli-
gence services, and details of his activities filled a
thick file in the CIA's Operations Directorate. The
CIA viewed Ghorbanifar with particular disfavor, but
that did little to discourage the Iranian from trying to
interest U.S. intelligence agencies in various schemes,
all of which would financially benefit him.

His CIA file describes Ghorbanifar as an Iranian
businessman and self-proclaimed "wheeler dealer"
who, prior to the 1979 revolution, had been the man-
aging director of an Israeli-connected Iranian shipping
company. According to rumors, Ghorbanifar also was
an informant for SAVAK, the Shah's intelligence
service, and had a relationship with Israeli intelli-
gence; but those relationships have never been con-
firmed.

Ghorbanifar's business permitted him to travel out-
side Iran, and, following the revolution, he chose
Paris as his base of operations, particularly after he
and his brothers, Ali and Reza, were implicated in an
abortive July 9, 1980, coup attempt in Iran. Ghorbani-
far apparently developed his own intelligence net-
work and endeavored to sell his services to various
Western governments. Ghorbanifar became a CIA re-
porting source in January 1980. Described by the

163

Chapter 9

Agency as a "rumormonger of occasional usefulness,"
Ghorbanifar lasted as a source only until September
1981, when the Agency decided he was concerned
solely with advancing his financial interests. •

Information generated by Ghorbanifar continued to
reach the CIA, however, both directly and through
other intelligence agencies. In January 1984, Ghor-
banifar contacted U.S. Army Intelligence in West
Germany with tales of "Iranian terrorist organiza-
tions, plans, and activities." ^ In mid-March, a CIA
officer met with Ghorbanifar in Frankfurt to explore
the data Ghorbanifar was offering. At that meeting,
Ghorbanifar indicated he had information on the kid-
napping, in Beirut, of CIA Chief of Station William
Buckley. He identified an Iranian official (the Second
Iranian), who would play a key role in the arms-for-
hostages transactions a year later, as the "individual
responsible" for the kidnapping.^ He also described
an Iranian plot to assassinate U.S. Presidential candi-
dates.''

A CIA-administered polygraph examination of
Ghorbanifar on this information indicated he was
lying. Ghorbanifar gave no satisfactory explanation
for the results.^ Undeterred, he again approached the
CIA in June 1984, this time trying to broker a meet-
ing between the U.S. Government and another Irani-
an official (the First Iranian).^ The First Iranian was
also to be a key player in the arms-for-hostages trans-
actions of 1985 and 1986. According to Ghorbanifar,
the First Iranian was favorably disposed towards the
United States.''

Again, Ghorbanifar was polygraphed, and again,
the examination indicated he was lying.* This time,
the CIA responded by publishing, on July 25, 1984, a
rarely issued "Fabricator Notice," warning Agency
personnel and other U.S. intelligence and law enforce-
ment agencies that Ghorbanifar "should be regarded
as an intelligence fabricator and a nuisance." ^

Ghorbanifar Proposes to Ransom the Hostages

Ghorbanifar continued to seek a relationship with
the U.S. Government. His first chance came in No-
vember 1984 when he met Theodore Shackley, a
former Associate Deputy Director for Operations of
the CIA who had retired from the Agency in 1978.
On behalf of his "risk management" firm, Research
Associates, Inc., Shackley maintained contact with
the former head of the Shah's SAVAK Counterespio-
nage Department VIII, General Manucher Hashemi.
At the suggestion of Hashemi, Shackley traveled to
Hamburg, West Germany, where he met with a
group of Iranians, including Ghorbanifar, the First
Iranian and a Dr. Shahabadi, chief of the Iranian
purchasing office in Hamburg and purportedly a
friend of Saudi entrepreneur and arms dealer Adnan
Khashoggi. At one meeting, on November 20, Ghor-
banifar told Shackley that for a price he could ar-
range for the release of U.S. hostages in Lebanon

through his Iranian contacts. Ghorbanifar said he re-
quired a response on the "ransom deal" by December
7. Ghorbanifar added that he would not work with
the CIA because the Agency was "unreasonable and
unprofessional." '° Upon his return to the United
States, Shackley sent a memorandum about his meet-
ings with Ghorbanifar to Lt. Gen. Vernon Walters,
Ambassador-at-Large in the State Department and
a former Deputy Director of the CIA." Walters
referred the memorandum to Hugh Montgomery,
Director of Intelligence and Research in the State
Department. Montgomery, in turn, passed the Shack-
ley memorandum to Ambassador Robert B. Oakley,
head of the State Department's counterterrorism ef-
forts, and Assistant Secretary of State for Near East-
ern Affairs Richard W. Murphy. Oakley and Murphy
regarded the hostage ransom proposal as a "scam,"
and on December 11, 1984, Montgomery told Shack-
ley that the State Department was not interested in
pursuing the Ghorbanifar ransom proposal.'^

Ghorbanifar Tries Again

Ghorbanifar still did not give up. Having failed
with the CIA, the Army, and the State Department,
he found another and ultimately more fruitful channel
into the U.S. Government through Israel. A New
York businessman, Roy Furmark, served as the con-
tact point. Furmark had previously worked for Adnan
Khashoggi, and was a friend of CIA Director William
Casey. Furmark also knew Cyrus Hashemi, a natural-
ized U.S. citizen of Iranian extraction whom Furmark
tried to interest in a number of business ventures.'^ In
January 1985, Furmark and Ghorbanifar met while
Furmark was in Europe to discuss business opportuni-
ties in Iran.'*

Furmark later introduced Ghorbanifar to Hashemi
and Khashoggi.'^ Ghorbanifar, at this time, was look-
ing for sophisticated weapons for Iran, and Khashoggi
suggested that Ghorbanifar try to develop access to
the United States and its weapons through Israel.
Sometime later, Khashoggi put Ghorbanifar and Ha-
shemi in touch with an Israeli group: Al Schwimmer,
an adviser to then Israeli Prime Minister Shimon
Peres, and Ya'accov Nimrodi, an Israeli businessman
with government service background.'^ Both Kha-
shoggi and Hashemi saw the potential for huge profits
if Ghorbanifar were to become the conduit for U.S.
arms to Iran and gain control of trade between the
United States and Iran."

At Khashoggi's initiative members of the Israeli
team met with Hashemi and Ghorbanifar in London,
Geneva, and Israel in early spring. Weapons sales to
Iran were discussed but the meetings produced noth-
ing concrete.'* In late April, Ghorbanifar proposed
to one of the Israelis that he be permitted to purchase
U.S. -manufactured TOW antitank missiles from Israel,
and, in return, he would obtain the release of CIA

164

Chapter 9

Beirut Chief of Station Buckley, then a hostage in
Lebanon.'^

Ledeen Gets Involved

At about that same time, NSC consultant Michael
Ledeen was trying to persuade National Security Ad-
viser Robert McFarlane to use him as an informal
channel to get intelligence on Iran from Israel, using
his close personal relationships with several high-
ranking Israeli ofricials.^° In March 1985, Ledeen met
in Europe with a senior official from a western Euro-
pean nation who told Ledeen that the United States
could play a significant role in Iran. The foreign offi-
cial recommended that the United States contact
Israel because the Israelis had the best intelligence
resources on Iran.^' Upon his return to the United
States in early April, Ledeen proposed to McFarlane
that he be authorized to meet with Israeli Prime Min-
ister Peres and other Israeli officials to explore poten-
tial Israeli-U.S. cooperation on Iran.^^ Although the
NSC staff told McFarlane that "none of us feel Mike
should be our primary channel for working the Iran
issue with foreign governments," ^^ they were im-
pressed with Ledeen's access to Prime Minister Peres,
and therefore recommended that Ledeen informally
meet with the Israelis to express interest in developing
"a more serious and coordinated strategy for dealing
with the Iranian succession crisis."^* McFarlane
agreed.

Ledeen traveled to Israel in early May.^^ On May
3 he met with Prime Minister Peres and then with a
former senior official of the Israel Defense Forces. ^^
During the meetings, Ledeen said he was acting on
McFarlane's behalf, although in a private rather than
official capacity, and expressed interest in sharing in-
telligence on Iran. According to Ledeen, the Ameri-
cans held hostage in Lebanon were not discussed at
these meetings in early May.^' An Israeli official,
however, recalls Ledeen's telling him about offers by
various Iranians to help get the hostages released.^®
According to Ledeen, the Prime Minister asked him
to advise McFarlane that Israel wanted to sell artil-
lery shells or pieces to Iran but would do so only if it
received U.S. approval.^*

The NSC Reconsiders Iran Policy

When he returned to the United States, Ledeen told
NSC staff member Donald Fortier that the Israelis
were interested in working with the United States on
Iran. At the time, Fortier was working closely with
CIA National Intelligence Officer for the Near East
and South Asia, Graham Fuller, who was updating
the Special National Intelligence Estimate (SNIE) on
Iran at McFarlane's request.^" A SNIE represents the
U.S. intelligence community's short-term assessment of
a given country or situation in response to a specific
need. Both the SNIE circulated on May 20 and a

memo submitted by Fuller three days earlier to CIA
Director Casey, included a recommendation of arms
sales through an ally as one of a number of options
for pursuing an opening to Iran. 3' The NSC staff
concluded that Israel should be that country, al-
though Fortier continued to question whether Ledeen
was the appropriate intermediary through which the
United States should deal with Israel. ^^

On June 3, 1985, McFarlane approved a second
Ledeen trip to Israel, ^^ but Ledeen's return to Israel
was delayed when Secretary of State George P.
Shultz protested Ledeen's earlier trip.^* Shultz had
heard from the U.S. Ambassador to Israel that
Ledeen had been in Israel talking to Israeli officials
about obtaining intelligence on Iran, without notice to
the U.S. Embassy. ^^ Shultz complained to McFarlane
that neither he nor the U.S. Ambassador to Israel had
been informed of the trip, and pointed out that Israel
and the United States had differing interests in Iran.
He also questioned the wisdom of relying upon Israeli
intelligence about Iran.^^ McFarlane told Shultz that
Ledeen had taken the May trip "on his own hook."
He also said he was "turning [the Iran initiative] off
entirely."^'' In fact, McFarlane told Ledeen to post-
pone, not cancel, the trip.^*

Major policy changes call for consultation with the
Secretaries of State and Defense and an opportunity
for the President to consider their views. McFarlane
thus began the established process of interdepartmen-
tal policy formulation. He had earlier requested the
CIA to prepare the updated SNIE on Iran, and in
June he asked members of his staff to prepare a draft
National Security Decision Directive (NSDD). An
NSDD is a Presidential directive establishing policy
in a particular area. It is the result of an analytical
process, including discussions among the interested
parties.

Fortier and Howard Teicher of the NSC staff sub-
mitted the draft NSDD to McFarlane on June 11, and
on June 17, McFarlane circulated this draft to Secre-
tary Shultz, Secretary of Defense Caspar W, Wein-
berger, and CIA Director Casey. The draft NSDD
recommended, among other things, that anti-Kho-
meini factions in Iran should be supported, and that
U.S. allies and friendly states should be encouraged to
"help Iran meet its import requirements . . .
includ[ing] provision of selected military equip-
ment."^^ To bolster the NSC's analysis, McFarlane
cited the CIA's earlier intelligence estimate that had
recommended such arms sales, and warned of the
Soviet threat to Iran.'*"

Only Casey endorsed the draft NSDD.*' Secretary
Weinberger wrote on the transmittal note accompany-
ing the draft, "This is almost too absurd to comment
on. . . . It's like asking Quadaffi to Washington for a
cozy chat.'"*^ Weinberger's response to the National
Security Adviser was less sarcastic but unambiguously
negative.''^ Secretary Shultz's response was also nega-

165

Chapter 9

live. He criticized the idea of relaxing the arms em-
bargo against Iran, warned against the danger of
strengthening Iran, and disagreed with the notion that
Iran was in danger of faUing into Soviet hands.''*
During the same period, the President was sharply
critical of Iran. In a speech to the American Bar
Association on July 8, 1985, the President declared
Iran to be part of a "confederation of terrorist states
... a new international version of Murder Incorpo-
rated." He added, "Let me make it plain to the assas-
sins in Beirut and their accomplices that America will
never make concessions to terrorists."*^

The Discussions Continue

While the Secretaries of State and Defense were
opposing any relaxation of the arms boycott of Iran,
Israel was receiving different signals from the NSC
staff. Ledeen testified that McFarlane had authorized
him to tell Prime Minister Peres that Israel could
engage in a one-time arms sale to Iran of artillery
shells or pieces, "but just that and nothing else."*®
One of the Israeli participants reported to another
Israeli participant, however, that the authorization
conveyed by Ledeen from McFarlane was for a trans-
fer of TOW missiles.*'

By early June, the Israelis were considering a trans-
action linking the sale of TOWs to the release of the
American hostages.** However, the Israelis were un-
willing to proceed without evidence of a clear, ex-
press, and binding consent by the U.S. Government to
the proposed transaction.*^

On June 19, Ghorbanifar, accompanied by Fur-
mark, met in Israel with the Israeli team. Ghorbanifar
proposed that the Israelis sell 100 TOWs to Iran
through him. He also agreed to set up a meeting with
an Iranian official.^"

The Israelis reported these developments to McFar-
lane. In late June, according to McFarlane's testimo-
ny, David Kimche, the Director General of the Israeli
Foreign Ministry, became involved in the project.
Kimche had an established relationship with McFar-
lane and Ledeen.^' While in Washington for another
purpose in early July, he briefed McFarlane on the
ongoing contacts of Israeli and Iranian officials, and
the Iranians' interest in establishing contact with the
United States. ^^ Kimche recommended that the dis-
cussions with the Iranians continue. McFarlane told
Secretary Weinberger about the meeting, and Wein-
berger's military assistant, Lt. Gen. Colin Powell, re-
called that McFarlane discussed both the sale of arms
to Iran and the hostages. ^^

On July 8, 1985, members of the Israeli team met in
Hamburg with Ghorbanifar, Khashoggi, Khashoggi's
son-in-law, and the First Iranian. Before the meeting,
Ghorbanifar told the Israelis that the sale of 100
TOWs was essential to enhance his credibility with
Iran, and claimed that the sale would be followed by
the release of the American hostages.**

Ghorbanifar described the First Iranian as a politi-
cally powerful individual in his own right, with close
personal connections to Khomeini, and a leader of
one of Iran's revolutionary organizations.^*

At the meetings, the First Iranian spoke of the need
for a party who could act as a bridge between Iran
and the United States, of the threat of Soviet influ-
ence in Iran, and of the risks he had taken in meeting
with Israel in order to promote an opening with the
United States. The participants also discussed missiles
and hostages.*® The First Iranian promised to present
a comprehensive written proposal within a week.

Shortly after that meeting, according to Ledeen's
testimony, Schwimmer flew to Washington and met
with Ledeen on July 11, 1985. He briefed Ledeen on
Ghorbanifar's proposal to obtain the release of the
American hostages in exchange for TOW missiles.*'
Ledeen then wrote McFarlane, "The situation [con-
cerning Iran] has fundamentally changed for the
better."** On July 13, he briefed McFarlane orally on
the Israeli talks with the Iranians.*^

After meeting with Ledeen, McFarlane cabled Sec-
retary Shultz with a summary of the proposal con-
veyed by Israel:

The short term dimension concerns the seven
hostages; the long term dimension involves the
establishment of a private dialogue with Iranian
officials on the broader relations. . . . They [the
Iranians] sought specifically the delivery from
Israel of 100 TOW missiles. . . .^°

McFarlane recommended to Shultz that the United
States go forward with a tentative show of interest,
although his admonition proved to be prophetic:

Then one has to consider where this might lead
in terms of our being asked to up the ante on
more and more arms and where that could con-
ceivably lead. . . .®'

Shultz responded to the proposal with caution, rec-
ommending that "we should make a tentative show of
interest without commitment." ®^

In the meantime, Israel awaited the United States'
response on whether it was authorized to sell the
TOWs.

The President Is Informed

McFarlane decided to take the matter to President
Reagan, even though the President was in the hospital
recuperating from surgery. By this time, the release of
the hostages had become an immediate concern to the
President. He had met with the hostage families for
the first time in late June, and had been moved by the
experience. On July 3, he had attended a National
Security Planning Group meeting to discuss the hos-
tages, and had come away frustrated at the lack of
alternatives.

166

Chapter 9

McFarlane met with the President at the hospital
on July 18. Donald Regan, the White House Chief of
Staff, was present.®^ What was discussed at this meet-
ing is not clear: Apparently no one took notes. Regan
did not recall any mention of arms at the meeting, ^^'
and McFarlane's accounts have varied: More than a
year later, on November 21, 1986, McFarlane wrote
in a PROF note to Poindexter that the President "was
all for letting the Israelis do anything they wanted at
the very first briefing in the hospital."^* But during
the public hearings McFarlane stated that the Presi-
dent's position was that no U.S. owned items from the
United [S]tates [could be] proper[ly] shipped at that
time.^^ This left open the possibility that the Israelis
were free to ship from Israel Israeli-owned TOWs
that had been acquired from the United States. ^^

McFarlane testified that the Israelis were informed
that the President was unwilling to allow the United
States to supply arms directly to Iran.^' Ledeen testi-
fied, however, that, in accordance with McFarlane's
instructions, he informed the Israelis that the Presi-
dent approved "in principle" the sale of TOWs by
Israel subject to further review of the details.®*

But Israeli Defense Minister Yitzhak Rabin would
not proceed unless he received assurances that the
Secretary of State knew of the plan and that the
President unequivocally approved. The Israelis were
concerned that the initiative could become public; and
without specific American approval, Israel would be
the target of criticism. In the meantime, the Israelis
had received the First Iranian's written proposal,
dated July 16, 1985, which was passed on to Ledeen.
The proposal was general, promising a more concrete
plan in the near future. It contained no commitment
for the release of the hostages.®*

The Israelis insisted on meeting with Ghorbanifar
to secure a commitment for the release of the Ameri-
can hostages in return for the shipment of 100
TOWs.''" The meeting took place in Israel on July 25.
Ghorbanifar stressed the need for the 100 TOWs and,
for the first time, mentioned spare parts for antiair-
craft missiles." He also said that the Iranians needed
other weapons as well. Ghorbanifar stated that the
weapons would not only strengthen his and the First
Iranian's credibility in Iran, but also win the support
of the military. The Israelis told Ghorbanifar that
they could recommend that their government supply
the missiles only if secrecy would be maintained and
the hostages released. Ghorbanifar stated that within
2 to 3 weeks of delivery of the missiles, the hostages
would be released, although he warned that the Irani-
ans might want to keep a few of the hostages for
leverage. '2 On July 28, the Israelis briefed Ledeen on
the meeting with Ghorbanifar, and on the Israeli deci-
sion not to proceed unless U.S. authorization was
more unequivocal. Ledeen reportedly said the Israelis
had already received sufficient authorization from the
response that the President had given in the hospital.
But the Israelis were insistent on confirmation.'''

The Israeli Arms Sales Are Authorized

On August 2, according to McFarlane's testimony,
Kimche fiew to Washington to meet with McFarlane
and to obtain the specific U.S. position on Israel's sale
of the TOWs. The meetings occurred on August 2
and 3. McFarlane made no memorandum of the meet-
ings, and recollections differ. All agree, however, that
the Israelis asked for permission to sell 100 TOWs,
and that McFarlane agreed to present the issue to the
President.''*

The White House log records an August 6 meeting
between McFarlane and the President, the Vice Presi-
dent, Secretaries Shultz and Weinberger, and Regan.
McFarlane reported that the Iranians wanted a dia-
logue with the United States and 100 TOWs from
Israel in return for which four hostages would be
released.''^ McFarlane also said that the United States
would be able to deny any connection to or knowl-
edge of the sale, a suggestion the Secretary of State
regarded as untenable.'® Secretary Shultz told the
President that it "was a very bad idea," and that
despite the talk of better relations, "we were just
falling into the arms-for-hostages business and we
shouldn't do it." ■"

Secretary Weinberger also opposed the sale. He
and Secretary Shultz argued that the initiative would
not work, and that the sale would contradict the U.S.
efforts to persuade other countries to observe the
embargo.'* None of the witnesses recalls the Vice
President's position, and there is no evidence that
Casey was consulted by the NSC staff at this stage.
McFarlane, according to Ledeen, directed that Casey
and the CIA not be informed for fear that the CIA
might leak."

Chief of Staff Regan testified that the President told
McFarlane to "go slow" at the August meeting and
to "make sure we know who we are dealing with
before we get too far into this." *" According to all
the participants, the President announced no decision
at the meeting.

Several days later, the President telephoned McFar-
lane and, according to McFarlane, authorized the Is-
raelis to proceed with the sale in modest quantities of
"TOW missiles or other military spares" that would
be replenished by the United States. The President
stipulated that the sales not affect the balance of the
I ran- Iraq war, not be used for terrorist purposes, and
not include such major items as aircraft.*' McFarlane
told Poindexter about the conversation, but Poin-
dexter did not recall its contents.*^ Regan recalled
that the President appeared upset when he learned in
September that TOWs had been shipped.

The President, in his Tower Board interview, origi-
nally confirmed that he had authorized the sale, but
later stated that he had no actual recollection one
way or another.*^ No documents record the decision.

167

Chapter 9

The Tower Board concluded that the President
most likely approved the Israeli sales before they oc-
curred. The evidence supports that conclusion. The
Israelis expressly sought the President's approval of
the Israeli sales and confirmation that the Secretary of
State had been consulted. By McFarlane's own admis-
sion, he told the Israelis that they were authorized to
sell the TOWs.*^° McFarlane had no motive to ap-
prove a sale of missiles to Iran if the President had
not authorized it. Moreover, Ledeen testified that
McFarlane told him of the President's decision.**
McFarlane also contemporaneously reported the
President's approval to Kimche.®^

The President's decision on the arms sale conveyed
by McFarlane to the Israelis committed the United
States to the policy unsuccessfully advocated in the
draft NSDD — the sale of weapons by an American
ally to Iran.

Preparations for the Delivery

In early August, the Israelis began to make the
necessary arrangements to obtain the 100 TOWs
through the Israeli Ministry of Defense.*^ Ghorbani-
far, in the meantime, was meeting with Khashoggi in
Spain to arrange financing for the initial TOW pur-
chase. The Israeli Ministry of Defense was unwilling
to supply the TOWs until payment had been deposit-
ed. Iran, on the other hand, was unwilling to pay
until the missiles were delivered. Ghorbanifar asked
Khashoggi to "bridge" this gap by lending him $1
million, which Ghorbanifar could then deposit with
the Israelis and repay upon payment by Iran. Kha-
shoggi agreed.*'' On August 7, Khashoggi ordered
the transfer of $1 million into an Israeli intermediary's
account.** Back in Washington, McFarlane asked
Ledeen to coordinate with the Israelis on the release
of the hostages in Lebanon.*^

Preparation for the TOW shipment continued in
Israel. On August 12, the Israelis decided to deliver
the TOWs to Iran by chartering a "neutral," non-
Israeli DC-8 aircraft. Still unresolved at this time,
however, was the price to be charged by the Israelis
to Ghorbanifar for the missiles and the price to be
paid by them to the Israeli Ministry of Defense for
the TOWs. After considerable bargaining, Ghorbani-
far agreed to pay $10,000 per missile, $2,000 less than
he was receiving from the Iranian Government.

The Israelis did not agree on the price the Ministry
of Defense would receive until after the missiles were
delivered to Iran. The Ministry of Defense wanted
$12,000 per missile, which it calculated to be the
replacement cost per missile. The Israeli intermediar-
ies maintained that they could only pay $6,000 per
missile, because the remainder of what they received
from Ghorbanifar was required for heavy shipping
costs and other substantial expenses. ®° The Ministry
of Defense eventually received $3 million from an

Israeli intermediary for the 504 TOWs in March
1986.91

Israel Ships 96 TOWs— But No Hostage
Is Released

On August 19, Ghorbanifar returned to Israel
where he met with the Israeli team. Ghorbanifar ad-
vised that he had made payments in Iran but he was
not certain how many hostages would be released. As
for CIA Station Chief Buckley, Ghorbanifar said that
the Iranians recognized his "special value" and, there-
fore, would return him last.^^ That same day, the
DC-8 transport aircraft arrived in Israel, and was
loaded with 96 (rather than 100) TOW missiles.'^ In
the early morning hours of August 20, the plane left
Israel bound for Iran, with Ghorbanifar on board.
The TOWs were then delivered and the aircraft re-
turned to Israel late that same day.'*

But no hostages were released. Ghorbanifar had an
explanation: contrary to his plan, delivery of the mis-
siles was taken by the Commander of the Iranian
Revolutionary Guards rather than by the Iranian fac-
tion for whom they were intended. ^^ Still, Ghorbani-
far remained hopeful that he could produce the hos-
tages. With McFarlane's assent, Ledeen met with
Kimche in London on August 20 to discuss ways to
bring the hostages out of Lebanon. ^^

From London, Ledeen flew to California, where
the President was vacationing, to brief McFarlane on
his meeting with Kimche and to obtain McFarlane's
authorization for a meeting in Europe with Ghorbani-
far and the Israelis. 9'' On August 22, McFarlane ap-
proved another trip to Europe for Ledeen. 9* On
August 30, McFarlane arranged for the State Depart-
ment to provide NSC staff member Oliver L. North
with a passport in the name of William P. Goode for
use in "a sensitive operation in Europe in connection
with our hostages in Lebanon." ^s On August 27, the
Government of Iran transferred $1,217,410 to Ghor-
banifar's Swiss account. On August 29, Ghorbanifar
repaid Khashoggi the $1 million loaned by Khashoggi
on August 7.'"° Khashoggi told the Israelis that, be-
cause he had been repaid for the first loan, he would
agree to loan $4 million to permit Ghorbanifar to
purchase an additional 400 TOWs from the Israe-
lis.'"i

400 More TOWs for 1 Hostage

On September 4 and 5, Ledeen met in Paris with
Ghorbanifar and members of the Israeli team. Since
no hostages had been released despite the delivery of
the 96 TOWs on August 20, severe arguments oc-
curred at the meeting.'"^ Ghorbanifar indicated that
one hostage would be released provided the Israelis
sold Iran an additional 400 TOW missiles. We are
satisfied from our review of all the evidence that the
President was informed and approved of the transac-

168

Chapter 9

tion in the hope that the hostages would be released.
The second shipment was approved by Prime Minis-
ter Peres and Defense Minister Rabin on September
9.'°^ On September 10, Khashoggi ordered the trans-
fer of $4 million into an Israeli intermediary's account
to finance Ghorbanifar's purchase of the 400
TOWs.'°'' The money reached the Israeli account on
September 13 and Ghorbanifar repaid Khashoggi that
$4 million the following day.'°*

The aircraft used to transport the second shipment
of TOWs to Iran arrived in Israel on September 14.
The DC-8 was loaded with 408 missiles (bringing the
total of TOWs shipped to 504), and, early the next
morning, it flew to Tabriz to make delivery. On
board was Ghorbanifar's Iranian assistant, Mahadi
Shahista. Tabriz, rather than Tehran, was used as the
Iranian delivery point to prevent this shipment from
falling into the hands of the Revolutionary
Guards. '06

The Iranians made it clear that this was an arms-
for-one-hostage bargain. They gave McFarlane the
choice of any hostage other than Buckley."" Ghor-
banifar told the Israelis that Buckley was too ill to be
released.'"* In fact, Buckley had died in June of a
pulmonary condition brought on by prolonged inter-
rogation, torture, and mistreatment.

On September 15, American hostage Reverend
Benjamin Weir was released near the U.S. Embassy in
Beirut. '09

On September 17, the Israeli intermediary's account
received an additional $290,000 from Ghorbanifar for
the expense of transporting the 504 TOWs to Iran,"o
and on September 18, Iran transferred $5 million to
Ghorbanifar's Swiss account for the additional TOWs.

Despite the fact that all the TOWs were delivered,
only one hostage had been produced, not the group
that Ghorbanifar originally had promised. Still, the
President continued to receive optimistic reports on
the initiative. However, no other hostages were re-
leased for the 504 TOWs.

NSC Staff Limits Distribution of
Intelligence

At the NSC, North was charged with making the
necessary arrangements in the event that any hostages
were released as the result of the September 1 5 TOW
delivery. North had been briefed on the initiative ear-
lier.'"

On September 12, North contacted Director Casey
for assistance in obtaining intelligence on Ghorbanifar
(who was then using an alias) and the Second Iranian.
Casey put North in touch with CIA's National Intelli-
gence Officer for Counter-Terrorism, Charles Allen,
who arranged for intelligence support. "^ At McFar-
lane's instruction, North told Allen to distribute the
intelligence only to McFarlane, Vice Admiral A. S.
Moreau, Jr. of the Joint Chiefs of Staff, Casey, and
North. ' ' ^ Secretaries Shultz and Weinberger were

not to receive the intelligence. (Weinberger later
found out about — and demanded — this intelligence.)
Denied access to the intelligence, the State Depart-
ment was not told of the Israeli TOW shipment, was
not advised of the linkage of Weir's release to arms
shipments, and was not informed of the President's
decision or the U.S. Government's involvement.

Replenishment

McFarlane assured the Israelis that the TOWs
shipped to Iran would be replenished at a price to be
determined. But, McFarlane emphasized, the linkage
between the Israeli sale to Iran and the U.S. sale to
Israel could not be obvious."*

On September 19, Ledeen sent a message to
McFarlane regarding replenishment of Israeli TOW
stocks in September: "Issue of replacements: The
people who sold the soap for us want to replenish
their supply." "*

The Initiative Continues: The Ante Is
Upped

Despite Ghorbanifar's failure to secure the release
of the four or five hostages originally promised, dis-
cussions of further arms deals continued. In late Sep-
tember, Ghorbanifar met with members of the Israeli
team and Ledeen in Paris. This time, Ghorbanifar
asked for antiaircraft missiles, including a new
HAWK missile to attack high-flying aircraft. (The
HAWKs do not have that capability, but apparently
none of the participants was aware of this.) Ledeen
reportedly consented to a HAWK transaction with
Iran, but demanded that the hostages be released."®
Ledeen recalls that McFarlane approved the sale of
HAWKs before November, but Ledeen could not
recall when."'' Nor could he recall this Paris meet-
ing. ' ' ®

In the meantime. North had received information
that another U.S. hostage, allegedly Buckley, would
be released between October 3 and 5."® However,
the Islamic Jihad in Lebanon announced, on October
3, that it planned to execute Buckley. North asked
Ledeen to arrange for Ghorbanifar to come immedi-
ately to the United States to discuss the hostages. On
October 8, Ghorbanifar arrived in Washington, ac-
companied by Schwimmer and Nimrodi, and met
with Ledeen at the Old Executive Office Building. '^o

At the meeting, Ledeen reportedly stated that the
trading of arms for U.S. hostages was a bad idea that
should be stopped. Ghorbanifar agreed.'^' Nonethe-
less, the Iranian continued to press for a variety of
weapons for Iran. '^^

At a subsequent meeting with North and McFar-
lane, Ledeen maintains that he again expressed his
reluctance to be involved with this arms-for-hostages
arrangement; preferring to pursue a strategic, not an
arms, relationship with Iran.'^^ McFarlane, on the

169

Chapter 9

other hand, has stated that Ledeen was the person
who communicated the most outrageous arms propos-
als to him, and that he, McFarlane, is the one who
was "consistently against arms-for-hostages." ^^*
Ledeen kept his reports oral,'^^ and there is no writ-
ten record from the fall of 1985 in which Ledeen or
McFarlane protest arms sales. Whatever McFarlane's
and Ledeen's own views may have been, arms were
the currency for the Iran initiative, and McFarlane
authorized Ledeen to go to Geneva in late October
for a meeting that was to strike the deal for the Israeli
HAWK shipment in November. '^^

Meeting in Europe, October 1985

According to Ledeen, the purpose of the late Octo-
ber meeting was not to strike an arms-for-hostages
deal with the Iranians, but rather to approach the
U.S.-Iranian initiative from the strategic, geopolitical
perspective. Ledeen testified that he and the First
Iranian discussed ways to improve U.S./Iranian rela-
tions without trading arms for hostages. In fact,
Ledeen maintained that like himself, this Iranian was
"vociferously opposed to what had been done in pro-
viding weapons to the Iranian regime over the course
of the past couple of months, said that all we could
achieve by sending arms to Iran was to strengthen the
Khomeini regime, which was the opposite of what he
thought we were about."i27 n ^35 Ledeen's belief
that "so long as the Iranians are able to obtain weap-
ons from the United States as a result of [a] dialogue
with us, they will say anything and they will do
anything in order to continue to get these weapons,
and so long as that pipeline of weapons functions, we
will never be able to evaluate their real inten-
tions."*^^

Ledeen stated that upon his return from Europe, he
reported to McFarlane that the First Iranian thought
he could have his people occupy "key positions in the

[Iranian] government" if the United States would help
by providing a quantity of "small arms and training."

By other accounts, however, such political discus-
sions are not all that transpired at the late October
meeting. According to one of the Israeli intermediar-
ies, the Iranian official emphasized that efforts must
be continued for the release of the four remaining
hostages in exchange for arms, particularly HAWK
missiles. Also according to the Israeli intermediary,
Ledeen was pressing, on behalf of the U.S. President,
for all four hostages to be released as soon as possible
and all at once, and he promised that following their
release the U.S. would assist Iran as far as it could. '^^

This appears to have been the last meeting among
Iranian, Israeli, and American representatives before
the shipment of HAWK missiles to Iran in late No-
vember 1985.

The Lessons of the First Arms
Shipment

The August-September 1985 TOW transaction set the

pattern for the entire Iran initiative:

—A promise by the Iranians to release the hostages in

exchange for an agreed quantity of weapons.

—The breach of that promise after delivery of the

weapons.

—The delivery of more weapons in response to new

demands by the Iranians.

—The release of a single hostage as an enticement to

further arms transfers.

The lesson to Iran was unmistakable: All U.S. posi-
tions and principles were negotiable, and breaches by
Iran went unpunished. Whatever Iran did, the U.S.
could be brought back to the arms bargaining table by
the promise of another hostage.

170

Chapter 9

Chapter 9

1. CIA Background Report on Manucher Ghorbanifar, C
1461 at 1462.

2. CIA Report, Army Intelligence and Security Com-
mand (INSCOM) Report on Iranian Terrorism, 1/24/84, C
1434-35.

3. CIA cables on William Buckley, C 1502-12.

4. C 1507.

5. CIA cable on Ghorbanifar, 7/25/84, C 1463.

6. Memo to CIA Chief of the Near East Division on the
First Iranian, 6/19/84, C 1479.

7. C 1479.

8. C 1461, 1463.

9. C 1463-64.

10. Report on American Hostages in Lebanon, 12/22/84,
N 7451-56; Shackley Int., 2/27/87, at 5-7.

11. N 7451-56.

12. Montgomery Int., 3/4/87.

13. Furmark Dep., 7/22/87, at 18-19. In May 1984, Fed-
eral criminal charges were filed against Cyrus Hashemi and
his brothers, Reza and Jamshid, among others, for alleged
arms export control violations. Ultimately, Hashemi ar-
ranged with the U.S. Customs Service to run a sting oper-
ation that resulted in the April 22, 1986, indictment of 17
individuals in the Southern District of New York on
charges that they had engaged in an illegal scheme to smug-
gle $2.5 billion in U.S. made weapons to Iran. Until his
death, apparently of natural causes, in July 1986, Hashemi
was to be the primary prosecution witness at the trial of
that case. CIA Memo on Cyrus Hashemi, C 9059-61.

14. Furmark Dep., 7/22/87, at 22-23.

15. Id. at 36-38.

16. Furmark Dep., l/ll/il, at 52-55. Furmark places
Khashoggi's introduction of Ghorbanifar to Schwimmer and
Nimrodi in June.

17. Furmark Dep., 7/22/87, at 53.

18. Israeli Historical Chronology. Classified information
from the Israeli Chronologies is used in this Report pursu-
ant to specific agreement between the Government of Israel
and the Committees. See, Appendix, "Organization and
Conduct of the Committees" Investigation."

19. Id.

20. Ledeen Dep., 3/11/87, at 9-11.

21. W.

22. Id. at 13-15.

23. PROF Note from Donald Fortier to McFarlane on
Iran, 5/28/85, N 16390.

24. Id.; PROF Note from Fortier to McFarlane on
Ledeen and Iran, 4/9/85, N 16390-91; PROF Note from
McFarlane to Fortier on Ledeen and Iran, 4/9/85, N 15306.

25. Ledeen Dep., 3/11/87, at 14, 16.

26. Id at 16-20.

27. Id at 17-19; Ledeen Dep., 6/19/87, at 40-43.

28. Israeli Historical Chronology.

29. Ledeen Dep., 3/11/87, at 17-19; Ledeen Dep., 6/19/
87, at 40-43.

30. N 16394.

31. Graham Fuller Memo, 5/17/85, to Casey: Subj; Irani-
an Policy, D 570-75.

32. N 16394.

33. N4113.

34. Ledeen Dep.. 6/19/87, at 44.

35. Ex. GPS B.

36. Ex. GPS 5.

37. Ex. GPS 6.

38. Ledeen Dep., 6/19/87, at 45.

39. McFarlane Memo, 6/17/85, to Shultz and Weinberg-
er: Subj: U.S. Policy Toward Iran, N 53467.

40. Ex. CWW 4.

41. Casey Memo, 7/18/85, to McFarlane: Subj: Draft
NSDD re U.S. Policy Toward Iran, N 7583.

42. Ex. CWW 4; Weinberger, 7/31/87, at 86.

43. Ex. CWW 5.

44. Ex. GPS 7; Shultz Test., 7/23/87, at 64.

45. President Reagan's Speech to American Bar Associa-
tion, 7/8/85.

46. Tower at B-6.

47. Israeli Historical Chronology.

48. Id. In early June 1985, Khashoggi advised the Israelis
that Khashoggi would deal directly with Ghorbanifar and
the Israelis, to the exclusion of Hashemi. Israeli Historical
Chronology. When, in June, Khashoggi excluded Hashemi,
Hashemi reacted by trying to market Ghorbanifar to the
CIA, through one of Director Casey's close friends, John
Shaheen.

On or about June 16, 1985. Shaheen called Casey and
relayed a message from Hashemi offering to set up a meet-
ing in Europe with a high-ranking Iranian official to discuss
Iran's interest in acquiring U.S. TOW missiles and Iran's
ability to help obtain the release of American hostages held
in Lebanon. Before talking to Casey, Shaheen had dismissed
part of Hashemi's proposal, telling him. "no weapons, no
Da'was." Casey Memo, 6/17/85, to CIA Chief of the Near
East Division: Subj: Release of the Hostages, C 8965-66.

Hashemi had tried to deal with Casey before without
success. However, this time, Casey agreed to Shaheen's
proposition, and directed the Chief of the Near East Divi-
sion of the CIA's Operations Directorate to pursue the
matter. The State Department was told that Casey was
"very anxious to move ahead on a proposal" for a meeting
with an Iranian representative; but, as outlined in a memo-
randum to Under Secretary of State Michael Armacost, the
proposal made no mention of any arms sales. By June 24,
Armacost had approved a plan by which a meeting would
be set up between foreign intermediaries and the Iranian
contact to be produced by Hashemi. Richard Murphy
Memo, 6/22/85, to Armacost: Subj: Possible Iranian Con-
tact, S 3812-13.

In early July, Hashemi identified his Iranian contacts as
the Second Iranian, described by Hashemi as Deputy Prime
Minister of Iran, and Manucher Ghorbanifar, described by
Hashemi as a ranking Iranian intelligence officer. CIA
Memo for the Record, 7/9/85, Subj: John Shaheen and
Hashemi, C 9082-84. The CIA recognized the Second Irani-
an as a significant Iranian official and Ghorbanifar as a
"fabricator" with whom it did not wish to do business. The
Agency suspected a scam but was nonetheless prepared to
pursue a meeting between foreign intermediaries and the
Second Iranian. Efforts in that regard continued through
July and August. CIA Cable on Possible Contacts with
Iranian Government Reps., 7/85, C 1475-77; CIA Memo for
the Record on Hashemi, 7/23/85, C 9072; CIA Cable. 7/85,
C 9073; CIA Cable re the Second Iranian Meeting, C 9074;
CIA Memo for the Record on Hashemi, 7/15/85, C 9075-

171

Chapter 9

76; CIA Memo for the Record on Hashemi, 7/15/85, C
9011-lS; CIA Memo for the Record on Hashemi, 7/23/85,
C 9079; S 3812-16. However, no meeting with the Second
Iranian occurred at that time. C 9059-60; George Test.,
Hearings. 100-11, at 191-192; Former Chief/NE (CIA) Dep.,
4/28/87, at 26-53.

49. Israeli Historical Chronology.

50. Id.

51. McFarlane Test., Hearings. 100-2, at 43.

52. Id. at 43-44.

53. Powell Dep., 7/19/87, at 5-7.

54. Israeli Historical Chronology.

55. Id

56. Id

57. Ledeen Dep., 6/19/87, at 51. Approximately 2 months
prior to the meeting with Schwimmer, Shackley told
Ledeen about a meeting Shackley had had with an "Iranian
in Europe" who offered to "arrange the Ransom of Buckley
and possibly other American hostages." Shackley also gave
Ledeen a memorandum describing the proposal, N 7452-56.
Although Shackley was describing his meeting with Ghor-
banifar in November 1984, see pp. 6-8, and the memoran-
dum mentions Ghorbanifar by name, Ledeen testified that
he passed the memorandum on to North without reading it
and that he had never heard of Ghorbanifar before meeting
with Schwimmer on July 11. Ledeen Dep., 3/11/87, at 28-
30.

58. Note to McFarlane from Wilma Hall, his secretary,
on Schwimmer and Ledeen, 7/11/85, N 10579.

59. Ledeen also gave McFarlane a document written by
Khashoggi that advocated an overture toward Iran.

60. Ex. GPS 9.

61. Id

62. Ex. GPS 10.

63. McFarlane Test., Hearings. 100-2 at 45-47. Regan
Test., Hearings. 100-10, at 6.

63a. Regan Test., Hearings. 100-10, at 6.

64. Ex. 59.

65. McFarlane Test., Hearings, 100-2, at 46.

66. Id

67. Id

68. Ledeen Dep., 9/10/87, at 27-28.

69. Israeli Historical Chronology.

70. Id

71. Id

72. Id

73. Id

74. McFarlane Test., Hearings, 100-2, at 48-49; Israeli
Historical Chronology.

75. Shultz Test., Hearings. 100-9, at 27.

76. Id
11. Id

78. Weinberger Test., Hearings, 100-10, at 131-32.

79. Ledeen Dep., 6/19/87, at 74.

80. Regan Test., Hearings.\QO-\Q, at 12.

81. McFarlane Test., 5/11/87, at 114-21.

82. Poindexter Test., 7/15/87, at 38.

83. Tower at B-19, 20.

83a. McFarlane Test., Hearings. 100-2, at 49.

84. Ledeen Dep., 6/19/87, at 58-61.

85. McFarlane Test., Hearings. 100-2, at 50.

86. Israeli Historical Chronology.

87. Furmark Dep., l/ll/il. at 73-76.

88. Israeh Financial Chronology.

89. Ledeen Dep., 6/19/87, at 66; Ledeen Dep., 6/19/87,
at 61-65.

90. Israeli Historical Chronology.

91. Id

92. Buckley died in June 1985 after long interrogation and
torture. But the U.S. Government believed that he was still
alive as late as the fall of 1985, and was seeking his release.

93. The TOWs were packed in pallets of 12 missiles each,
and no unpacked missiles were shipped for safety reasons.
Israeli Historical Chronology.

94. Id. The Tower Board Report states that the first
shipment by the Israelis of 100 TOWs occurred August 30,
1985. See Tower at B-26. The Board's source for that date
is not apparent from the text of the Report. The August 20
date from the Israeli Chronology appears accurate given the
context of related events.

95. Id at 27.

96. Ledeen Dep., 3/11/87, at 52; Ledeen Dep., 6/19/87,
at 66-68.

97. Ledeen Dep., 3/11/87, at 52-53.

98. PROF Note by McFarlane on Ledeen, 8/22/85, N
17790.

99. Tower at B-25; see also North Memo to McFarlane:
Subj: Fake Passport for North, N 6412-13. Ledeen has testi-
fied that to his knowledge, this was North's first involve-
ment in and knowledge of the Iran initiative. See Ledeen,
Tower Int. (1) at 46 and (2) at 74; Ledeen Dep., 6/19/87, at
72.

100. Israeli Historical Chronology. Only the $1 million
repayment figure is derived from the Israeli Chronology.

101. Id

102. Id

103. Id

104. Israeli Historical Chronology; Israeli Financial Chro-
nology.

105. Israeli Financial Chronology.

106. Israeli Historical Chronology.

107. McFarlane Test., 5/11/87, at 122-23.

108. Israeli Historical Chronology.

109. Id

110. Israeli Financial Chronology. The Tower Report's
analysis of this transaction differs from that provided by the
Israelis. According to Tower, Ghorbanifar initiated the
transaction with a $4 million check to Khashoggi. Kha-
shoggi transferred $4 million to the Israeli account on Sep-
tember 14. The Iranians transferred $5 million to Ghorbani-
far's Swiss account on September 18. Ghorbanifar then noti-
fied Khashoggi to negotiate the $4 million check. Ghorbani-
far paid later an additional $250,000 to the Israeli account
for "additional eight TOW missiles." Tower at B-176-77.

111. North Test., Hearings, 100-7, Part II, at 25, 48.

112. Charles Allen, National Intelligence Officer, Memo
Subj; Initiative to Secure Release of American Hostages,
10/7/85, I 0644; Allen Dep., 4/21/87, at 49-58.

113. Charles Allen, Tower Int. at 6. Within the CIA,
Allen testified that the intelligence reports were provided to
DDO Clair George, Allen Dep., 4/21/87, at 77-79. George
denies receiving the material generated prior to the Finding.
George Test., 8/5/87, at 277.

114. McFarlane Test., Hearings. 100-2, at 49.

115. N 16502; Ledeen Dep., 3/11/87, at 59-60; Ledeen
Dep., 6/19/87, at 68-80.

116. Israeli Historical Chronology.

117. Ledeen Dep.. 9/10/87, at 17.

172

Chapter 9

118. Id. at 16-17. 122. Id. at 81.

119. I 0645. 123. Ledeen Dep., 3/11/87, at 71-78; Ledeen Dep., 6/19/

120. Ledeen Dep., 6/19/87, at 81. Ledeen disputes the 87, at 81-88.

representation in Charles Allen's memorandum, I 0644-46, 124. McFarlane letter published in Wall Street Journal, 8/

linking the October 8 meeting to the threat on Buckley's life 14/87.

by the Islamic Jihad. Ledeen says there was no expectation 125. Ledeen Dep., 9/10/87, at 15.

of hostage releases in early October. See Ledeen Dep., 6/ 126. Ledeen Dep., 3/11/87, at 78-82.

22/87, at 132-39. 127. Ledeen Dep., 3/11/87, at 81-82.

121. Ledeen Dep., 6/19/87, at 83-84; Ledeen Dep., 6/22/ 128. Id at 83, 78.

87, at 181-83. 129. Israeli Historical Chronology.

173

Chapter 10

Arms to Iran: A Shipment of HAWKs
Ends in Failure

An Israeli-American plan to sell HAWK missiles to
Iran in exchange for American hostages crystallized
in November 1985. The plan — which grew out of the
late October meeting in Geneva among Michael
Ledeen and Iranian and Israeli officials and interme-
diaries— ultimately led to a shipment of 18 HAWK
antiaircraft missiles by a CIA airplane from Israel to
Tehran on November 24 and 25. As the plan evolved,
National Security Adviser Robert McFarlane had
contacts with senior Israeli officials, brought aspects
of the plan to the attention of the President, Chief of
Staff Donald Regan, and the Secretary of State, and
gave Oliver North increasing responsibility for over-
seeing the plan's implementation. The planning and
execution of the operation did not proceed smoothly,
and in the end, no hostages were released.

Ledeen Brings Home a Plan

NSC consultant Michael Ledeen returned to Wash-
ington from the Geneva meeting at the end of Octo-
ber 1985. He told North and McFarlane of the Na-
tional Security Council Staff of the proposal by Man-
ucher Ghorbanifar and the other Iranians that the
United States provide specified missiles in return for
the release of U.S. hostages in Lebanon. On October
30, 1985, Ledeen first met alone with North and then
with both North and McFarlane.' In the first meet-
ing, Ledeen said that the "First Iranian," a highly
placed Iranian official who acted as a go-between in
the arms sales negotiations, "wants to be U.S. ally —
has support in Tehran." Ledeen spelled out the Irani-
ans' demands for securing the American hostages'
freedom. He told North that, "to get hostages out,"
the Iranians wanted a "blanket order" of 150 HAWK
missiles, 200 Sidewinder missiles, and 30 to 50 Phoe-
nix missiles. The proposal contemplated that the hos-
tages would be released in three groups, with separate
arms deliveries to Iran to occur before the second and
third releases. Ledeen raised the unresolved problem
of U.S. replenishment of the 500 TOWs withdrawn
from Israeh reserves and shipped to Iran in August
and September 1985 prior to the release of hostage
Benjamin Weir. Ledeen said Israeli Defense Minister
Yitzhak Rabin was "complaining about" the United

States' failure to make good on its promise to replace
those items. ^

North and Ledeen met with McFarlane later that
day to continue the discussion. Ledeen, claiming that
improved U.S. -Iranian relations could follow an
agreement, advocated cooperation with the Israelis
"to bring out credible military and political leaders"
in Iran. McFarlane expressed skepticism even about
the existence of moderate elements in Iran, let alone
their ability to come to power. Nevertheless, he did
not oppose renewing arms shipments to Iran. McFar-
lane instructed North and Ledeen that "not one single
item" of armaments should be shipped to Iran without
the release of "live Americans."^ McFarlane, Deputy
National Security Adviser John Poindexter, and other
senior American officials often repeated this instruc-
tion over the next several months, but it was consist-
ently disregarded.

Ledeen's meeting with the First Iranian in Geneva
led to meetings between the Americans and Israelis in
early November 1985. The Iranians had significantly
increased their demands for weapons. Moreover, the
Israelis still sought replenishment of the TO'.Vs they
had sold to Iran.

On November 8, David Kimche, the Director Gen-
eral of the Israeli Foreign Ministry, met in Washing-
ton with McFarlane, North, and Ledeen.* This was
one of a series of meetings that McFarlane had with
Kimche in the fall of 1985.^ Ledeen arranged this
session in the hope of keeping the Iran initiative
moving:

I asked Kimche to talk to McFarlane because I
was convinced that McFarlane was getting ready
to resign, and was in a bad psychological state
and was planning to abandon the entire Iranian
initiative. I urged to Kimche to talk to McFar-
lane to ask him, first, not to resign; and second,
not to abandon the political initiative with regard
to Iran.®

North-Nir Dialogue Begins

North and Amiram Nir, the Israeli Prime Minister's
Adviser on Combatting Terrorism, met in Washington
on November 14.' Although they apparently did not
discuss arms sales to Iran, they did set the foundation

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Chapter 10

for a variety of future Israeli-U.S. covert operations.
North jotted notes indicating that this operation could
require at least a milhon dollars a month "for near
term and probably mid-term rqmts [requirements]."
North's notes list several unanswered questions:

• How to pay for

• How to raise $ . . .

• Use Israelis as conduit?

• Go direct?

• Have Israelis do all work w/U.S. pay?

• Set up joint/Israeli cover op ®

On November 19, North and Nir discussed two
code-named covert operations, "T.H. 1," the one they
had discussed on November 14, and "T.H. 2." North's
notes reflect that the second operation would also
require a source of "op[erational] funds. "^ In mid-
November, North did not have answers to the fund-
ing question. But, according to North, within a few
months, he and Nir had solved the problem: they
would use the Iran arms sales profits.'" Planning for
the privately funded joint covert activities began.

McFarlane Briefs CIA

On November 14, after a regular weekly meeting
attended by Director of Central Intelligence William
Casey, his deputy, John N. McMahon, and Poin-
dexter, McFarlane told Casey of "the Israeli plan to
move arms to certain elements of the Iranian military
who are prepared to overthrow the government.""
McMahon said McFarlane provided this information
casually as the meeting was breaking up. Casey relat-
ed this information to McMahon on the drive back to
Langley.'^ McMahon recalled that this information
left him with the impression that the NSC staff was
merely monitoring an ongoing Israeli effort.'^

McFarlane Gives Rabin the Go-Ahead

The following day, Israeli Defense Minister Rabin
met with McFarlane at the White House and told him
that Israel was about to make another arms shipment
to Iran and would need replenishment from the
United States.** Rabin wanted "to reconfirm that the
President of the United States still endorsed this con-
cept of Israel negotiating these arms sales." McFar-
lane replied that the President's authorization for
Israel to sell arms to Iran subject to replenishment by
the United States was still in effect, and that this was
"based upon recent questions and reaffirmation by the
President that I had received."'^ Rabin also sought
reassurance that the matter was indeed a joint project
between the United States and Israel. McFarlane re-
plied that while the United States supported Israel's

activities, it was going along with Israel on this
matter. ' ^

Rabin raised the still unresolved question of the
U.S. commitment to replenish the 504 TOW missiles
sent to Iran in August and September. McFarlane
replied that he was aware of the difficulties and that
within two weeks he would be sending North to
Israel to find a technical means of achieving the re-
placement.'''

McFarlane Briefs the President

McFarlane told the President about the developing
plans for the HAWK transaction shortly before they
left on November 17 for a summit meeting with
Soviet leaders in Geneva. Regan, who was present,
said it was:

[JJust a momentary conversation, which was not
a detailed briefing to the President, that there [is]
something up between Israel and Iran. [McFar-
lane said] [i]t might lead to our getting some of
our hostages out, and we were hopeful. . . .'^

McFarlane did not stress that what he and Rabin saw
as Ghorbanifar's unreliability was adding to the risks
of the operation. Instead, McFarlane merely made "a
passing reference here or there" about these concerns,
and did not discuss them at length with the President
at the time. '^ The President's reaction was "cross
your fingers or hope for the best, and keep me in-
formed."^"

The November HAWK Shipment

By the third week of November, the Israeli interme-
diaries and the Americans believed they had reached
an agreement with Ghorbanifar on a plan that would
gain release of all the hostages by Thanksgiving. The
plan was, in essence, a straight swap: U.S. -made mis-
siles in Israeli stocks would be sold to Iran in ex-
change for American hostages. As the exchange date
approached, many details remained unresolved. They
were only hammered out in separate and frantic long-
distance negotiations among the Israeli intermediaries
and Ghorbanifar, Ghorbanifar and his contacts in the
Iranian Government, and Israeli Government officials
and NSC officials.

How Many Missiles?

One critical component of the plan was unsettled
until the eleventh hour — the number and type of mis-
siles that the Israelis would ship to Iran. As evidenced
by their late October proposal, the Iranians wanted to
purchase immediately hundreds of millions of dollars
worth of sophisticated U.S. -made missile systems for
use in their war with Iraq. The Israelis were con-
cerned about depleting their stocks. The Americans,
who had not found a solution to the replenishment

176

Chapter 10

requirements arising out of the August and September
missile shipments, sought an agreement involving
smaller quantities of missiles shipped over time. The
middlemen in the transaction — Ghorbanifar and Al
Schwimmer and Yaacov Nimrodi, Israeli arms dealers
also involved in the negotiations — had substantial
monetary incentives to negotiate a deal in which large
quantities of weapons and money would change
hands.

By Sunday, November 17, the planners had decided
on an initial shipment of 80 HAWK missiles. 2' This
shipment was to be just the start of a much larger,
phased transaction.

On November 18, North called Schwimmer, who
was in direct contact with Ghorbanifar. They dis-
cussed a sale of 600 HAWKs to Iran in groups of 100
spread out over the next 3 or 4 days. Schwimmer told
North that the first shipment of 100 missiles had been
"approved" in Tel Aviv and that it was to be fol-
lowed by the release of five "boxes," the code name
for the American hostages. ^^ After the call. North
wrote in his Notebook: "Schwimmer to P/U [pick up]
HAWKs in U.S."^^ That day, an Israeli official told
Prime Minister Shimon Peres that the Americans
were willing for 500 HAWK missiles to be supplied,
but it was proposed that Israel supply 80 HAWKs. ^^

There is other evidence of plans for a very large
weapons shipment to Iran: In mid-November a Euro-
pean broker sought an air carrier to transport immedi-
ately 10 planeloads of armaments in long crates from
the capital of Country 15 to Tehran. ^^ An airline
owned by the CIA became aware of the shipment. ^^
This CIA airline proprietary learned that "[t]he cargo
is declared to be medicine but is in reality ammunition
etc." ^' When this same proprietary was called in
about 10 days later by CIA officials to move HAWK
missiles, the company's manager concluded that the
cargo was the same as what the European broker had
offered earlier.^®

By November 20, the plan — as reported by North
to Poindexter — had moved away from one involving
500 to 600 HAWKs toward one that included these
components: First, 80 HAWKs from Israeli stocks
were to be moved to Iran on Friday, November 22,
on three planes spaced apart by 2 hour intervals.
After the planes were launched, but before they
landed in Iran, five American and possibly one
French hostage would be released. After the hostages
were freed, 40 more HAWKs would be moved to
Iran. The United States would replenish Israel's
stocks promptly by sale at a mutually agreed price. ^^

North's notes from the same day confirm that the
initial delivery was to be 80 items, but indicate a key
difference from what he had reported to Poindexter:
the American hostages would not to be freed all at
once in advance of the arrival of any HAWKs, but
rather would be released sequentially after each ship-
ment. After referring to the total of 80 HAWKs,
North wrote:

—One 27-2
27-3
26-1
6+ 1 French ^°

This notation appears to mean that 2 hostages were to
be released after a first shipment of 27 missiles, 3
hostages were to be released after a second shipment
of the same amount, and 1 hostage would be released
after a third shipment of the remaining 26 items. In
fact, within a few days, an initial load of HAWKs
arrived in Tehran without any prior hostage release.

McFarlane's instruction not to ship weapons with-
out the prior release of the hostages thus was not
followed. From this point on, the Iranians would
always insist on sequential delivery of weapons, fol-
lowed by the release of hostages. On November 20,
North wrote in his notebook: "120 HAWKs=l) 5
Amcits, 2) Guarantee that no more." ^'

North's notes also suggest that although the initial
shipment quantity had been reduced from 600
HAWKs, additional arms shipments to Iran were con-
templated after the shipment of 120 HAWKs. Follow-
ing a description of the sequence of delivery for the
first 80 HAWKs and the hostage releases. North
wrote: "After— 40 more HAWKs, 200 SW [Sidewind-
er] missiles, 1900 TOWs." ="2

McFarlane Puts North in Charge

While McFarlane was at the Geneva summit with
the President, North became immersed in the details
of the HAWK transaction. North testified that he was
"thrown into this on the night of November 17," in
almost simultaneous telephone calls from Rabin and
McFarlane. ^^ Rabin told North that the plan called
for Israel to move 80 HAWK missiles by November
20. He said that Israel was unwilling to commence the
shipment without satisfactory arrangements for re-
plenishment by the United States.^* According to
North's notes, McFarlane told North to solve Rabin's
replenishment problem, and "to keep orders under
$14M" each — the threshold figure for reporting for-
eign military sales to Congress. ^^ After the calls from
McFarlane and Rabin, North "flew up immediately
[to New York] to talk with Mr. Rabin." In New
York, he met with officials of the Israeli Ministry of
Defense Procurement Mission, who wanted to ar-
range replenishment sales to Israel of 508 TOWs and
120 HAWK missiles. 3 6

The next day. North or Poindexter asked Lt. Gen.
Colin Powell, then military assistant to Secretary of
Defense Casper Weinberger, about the availability
and price of HAWKs and TOWs, and the legality and
method of transferring such missiles. The requester
initially sought information on a proposed transfer of
500 HAWKs, but, in accordance with the evolving
plan, soon cut the number to 120. Powell understood

177

77-02O 0

Chapter 10

that the ultimate destination of the weapons would be
Iran and that Israel was acting as an intermediary.^''
After receiving this request, Powell contacted Noel
Koch, Principal Deputy Assistant Secretary of De-
fense for International Security Affairs, who in turn
asked Henry Gaffney, Director of Plans, Defense Se-
curity Assistance Agency (DSAA), to find out how
many HAWKs were available for immediate transfer.
DSAA is the entity within the Department of De-
fense that is primarily responsible for arms sales to
other governments. Koch asked Gaffney to prepare a
Point Paper examining the requirements for notifica-
tion of Congress and whether the ultimate destination
of the weapons might be concealed.''*

Gaffney testified that he understood from his supe-
riors that the Point Paper should cast a negative view
of the transaction to reflect Secretary Weinberger's
presumed opposition to arms transfers to Iran.'® He
completed his paper, entitled "HAWK Missiles for
Iran," on November 22 or 23 and submitted it to
Powell. Powell testified that he gave the paper to
Secretary Weinberger,*" who did not, however,
recall receiving it.*"

Gaffney's Point Paper included important informa-
tion about the price and availability of HAWKs: 164
missiles were available for foreign sale at that time;
the missiles cost the United States approximately
$300,000 per unit; and replacement cost would be as
much as $437,700 per unit. Transportation and admin-
istration charges would have to be added. Seventy-
nine of the missiles were available for immediate ship-
ment. This state of the inventory may be one reason
why the number of HAWKs planned for immediate
shipment from Israel to Iran — and therefore the
number which the United States would have to quick-
ly replenish — was set at 80. Gaffney's Point Paper
also described political drawbacks of a weapons trans-
fer to Iran.''^

Gaffney testified that under the Arms Export Con-
trol Act, Iran was not an eligible country for direct
sales from the United States, and that, in his view,
even if Iran were to become eligible, the contemplat-
ed sales of HAWKs could not be made directly or
indirectly (through Israel or otherwise) unless the
President notified Congress. In addition, Gaffney tes-
tified that if the transfer were to be made by Israel,
U.S. -Israeli agreements require advance, written U.S.
consent. U.S. law mandates that the President cannot
give that consent without certain conditions being
met in advance, including obtaining assurance from
Iran that it would use the weapons only for self-
defense and would comply with U.S. restrictions on
retransfer to another country. These were conditions
that Iran could not or would not meet.*'

McFarlane Informs the President and the
Secretary of State

While they were still in Geneva, McFarlane updat-
ed the President and Chief of Staff Donald Regan on
the status of the HAWK shipment and the anticipated
hostage release.*'' McFarlane informed them that the
Israelis were about to ship the weapons, and ex-
pressed hope*^ that the hostages would come out by
the end of the week.*^ McFarlane specifically told
the President that Israel was about to deliver 80
HAWK missiles to Iran via a warehouse in Country
15, and that Israel wanted the United States to re-
place those missiles.'"

McFarlane testified that he simply told the Presi-
dent that the Israelis were about to act, but did not
ask for specific approval:

[T]he President provided the authority in early
August for Israel to undertake, to sell arms to
Iran, and to then come to the United States for
replenishment, to buy new ones. That didn't re-
quire then the Israelis to come back to us on each
occasion and get new approval.**

The President asked McFarlane to arrange a meeting
at which the President and his top advisers would
review the initiative after the summit.*®

At about the same time, McFarlane also told Secre-
tary of State George Shultz of the impending arms-
for-hostages swap.*" McFarlane called Secretary
Shultz by secure phone "out of the blue, about a
hostages release and arms sales to Iran."*' McFar-
lane explained that Israel was about to ship 100
HAWKs to Iran through Country 15, that the ship-
ment would occur only if the hostages were released,
and that the United States would sell replacements to
Israel.*^ Secretary Shultz understood it as "a straight-
out arms-for-hostages deal." He expressed his opposi-
tion, and rebuked McFarlane for not informing him
about it earlier: "I told him I hoped that the hostages
would get out, but I was against it, and I was upset
that he was telling me about it as it was just about to
start so there was no way I could do anything about
it." *' When asked about Secretary Shultz' account,
McFarlane testified: "I don't recall it that way." **

Even as McFarlane was filling in Shultz on the
broad outline of the plan, his NSC subordinates took
steps to keep the Department of State hierarchy in
the dark about the complex diplomatic problems
caused by the operation. For instance. Secretary
Shultz was not told of the back-channel communica-
tions and actions of State Department officials, taken
at the behest of CIA and NSC officials, to support the
HAWK shipment."

North Recruits Secord

As McFarlane had explained to the President and
Secretary Shultz, the plan was to move 80 HAWKs

178

Chapter 10

from Tel Aviv to the capital of Country 15, transfer
them to other planes, and then ship them on to Iran.
The planners chose this circuitous routing because
direct flights from Israel to Iran would draw attention
given the poor relations between Israel and Iran.^'^
Because the cargo was arms, special clearances had to
be obtained from the government of Country 15. As
the pilot who ultimately flew the HAWKs to Iran
stated:

Everybody can fly [in Europe] without clear-
ances unless you have . . . sensitive stuff like
arms aboard, and then you have to have diplo-
matic clearance.^''

A problem developed on November 18: The gov-
ernment of Country 15 was unwilling to grant the
special clearances. On that day, North asked Richard
Secord — his confederate in the covert operation sup-
porting the Contras — to fly to Country 15 to "see
what he could do to straighten out the mess."*^
Secord said this was when he learned of the Iran arms
initiative. ^^ North explained the secret operation to
Secord, indicating that it had been sanctioned by the
United States, that it had run into difficulties in Coun-
try 15, and that there was "quite a bit of urgency" to
get Secord to go there. According to Secord, North
"knew that we had — my organization had had exten-
sive deals with the armament [industry]" in Europe
and "wondered if I could arrange for this transship-
ment."^°

The next day. North gave Secord a letter on White
House stationery, signed by North "for" McFarlane,
stating

Your discrete [sic] assistance is again required in
support of our national interests. At the earliest
opportunity, please proceed to [the capital of
Country 15] and other locations as necessary in
order to arrange for the transfer of sensitive ma-
teriel being shipped from Israel.

As in the past, you should exercise great caution
that this activity does not become public knowl-
edge. You should ensure that only those whose
discretion is guaranteed are involved.^'

McFarlane testified he was not aware that North
was providing this letter to Secord, and that his per-
mission was not sought to send it out.^^

Secord arrived in Country 15 on November 20.®^
He and his associate Thomas Clines, who Secord said
"had really been handling all of the matters for the
Enterprise" in Europe, together started "to work the
problem . . . through our colleagues in the armament
industry . . ."^*

Million-Dollar Deposit to Lake Resources

On November 18 — the same day that he brought
Secord into the deal — North began to arrange for a

$1 -million transfer from Israeli intermediaries to the
account of Lake Resources,''^ a Panamanian company
controlled by Secord and referred to by North as
"our Swiss Co[mpany]."^8 Lake Resources and its
account at Credit Suisse in Geneva had been estab-
lished by North and Secord in May 1985 "to receive
monies in support of the covert operations."®'' Prior
to this deposit, which was made on November 20,**
Secord and North had used the company exclusively
for supporting the Contras.

The purpose for this $1 -million deposit is unclear.
North and Secord testified that the payment was for
chartering planes to move the 80 HAWKS to Iran.^s
The Israeli Historical Chronology affirms this expla-
nation.'" North and Secord, however, were unable to
explain why they were asking for transportation ex-
penses on November 18 when, according to Secord,
his original assignment was only to help obtain land-
ing clearances for planes already chartered by
Schwimmer." It was not until November 22, when
Schwimmer's charter unexpectedly fell through, that
Secord's role was expanded. '^ At that time, the
amount Secord expected to pay for chartering planes
was less than $1 million. '^

Some evidence suggests that Secord made, or con-
templated making, expenditures in Country 15. One of
the persons with whom Secord was working, an offi-
cer of a European arms company, reportedly attempt-
ed to bribe an official of the government of Country
15 to obtain the necessary clearances,'''' and there are
references to Secord having spent substantial sums in
Country 15.'^ However, bank records do not show
any such payments out of the Lake Resources ac-
count.

Whatever the initial purpose of the deposit, the
Committees have ascertained its use. Secord used ap-
proximately $150,000 to pay for air charters relating
to the HAWK shipment, and the remaining $850,000
was spent to support the Contras and to make profit
distributions to Secord and his business associates,
Albert Hakim and Thomas Clines.''* North testified
that in early 1986 he told the Israelis that the money
had been used "for the purpose of the Contras" and
that they acquiesced.'" The first "diversion" to the
Contras of money received in connection with the
Iranian arms sales had occurred.

Confusion in Country 15

The plan to ship the HAWKs through Country 15
faced collapse because the government there refused
to grant the necessary clearances. Upon arriving in
Country 15, Secord and his associates — the European
businessman and Clines — tried to overcome this prob-
lem.''* All three were fully aware that the cargo to be
moved was HAWK missiles.''^ Because their efforts
were outside normal diplomatic channels and in con-
tradiction to stated U.S. policy, they were not well-
received by the government of Country 15.*°

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Chapter 10

The European businessman may have tried to solve
the problem even before Secord arrived. The Deputy
Chief of Mission of the U.S. Embassy in Country 15
recalled learning on November 23 that about one
week earlier the European businessman had ap-
proached an official of Country 15 and offered what
the official considered to be a bribe to assist in the
transit of a shipment involving the United States,
Israel, and Iran.*' If this approach occurred around
November 16, as the evidence suggests, then it draws
into question Secord's testimony that he was not
brought in until November 18.

On November 20, the European businessman called
an official of Country 15's Foreign Ministry and ex-
pressed the hope that the Foreign Ministry would
grant permission for two aircraft carrying weapons
from Israel for Iran to transit the country. To the
official, the businessman appeared to be "acting as a
broker for the arms deal." The European businessman
referred to an "American general," presumably
Secord, involved in the undertaking. The foreign gov-
ernment was disturbed by the businessman's approach,
and the next day another official asked the American
Embassy for "information about this strange case."
The Embassy, unaware that the U.S. Government
supported this shipment of weapons to Iran, told the
Foreign Ministry that the shipment was not author-
ized by the United States and was contrary to U.S.
Government policy strongly opposing arms sales to
Iran.*^

Contributing to the confusion of the government of
Country 15 was another incident on November 21.
"Anonymous people claiming to 'represent the Ameri-
can administration' " attempted to intercept the coun-
try's Foreign Minister and Prime Minister at the air-
port of the capital of Country 15 following their
return from the European Economic Summit in Brus-
sels.*^ A CIA cable reporting this incident stated that
this approach, while unsuccessful, was "particularly
upsetting" to the foreign government because it
"aroused both attention and suspicion."**

North Updates Poindexter

As the operation faltered on November 20, North
reported to Poindexter and portrayed a mission well
under control. He made no mention of the obstacles
faced in Country 15:

The Israelis will deliver 80 Mod HAWKS to [the
capital of Country 15] at noon on Friday 22 Nov.
These 80 will be loaded aboard three chartered
aircraft, owned by a proprietary which will take
off at two hour intervals for Tabriz, [Iran]. The
aircraft will file for overflight through the [cap-
ital of Country 16] FIR enroute to Tabriz [from
Country 15]. Appropriate arrangements have
been made with the proper . . . [Country 16] air
control personnel. Once the aircraft have been
launched, their departure will be confirmed by

Ashghari [a pseudonym for Ghorbanifar] who
will call [the Second Iranian official] who will
call [an Iranian in Damascus] who will direct
[another Iranian in Beirut] to collect the five rpt
five Amcits [American citizen hostages] from
Hizballah and deliver them to the U.S. Embassy.
There is also the possibility that they will hand
over the French hostage who is very ill.

There is a requirement for 40 additional weaps of
the same nomenclature for a total requirement of
120. $18M in payment for the first 80 has been
deposited in the appropriate account. No acft will
land in Tabriz until the AMCITS have been de-
livered to the embassy. The Iranians have also
asked to order additional items in the future and
have been told that they will be considered after
this activity has succeeded. All transfer arrange-
ments have been made by Dick Secord, who
deserves a medal for his extraordinary short
notice efforts.

Replenishment arrangements are being made
through the MOD [Israeli Ministry of Defense]
purchasing office in NYC. There is, to say the
least, considerable anxiety that we will somehow
delay on their plan to purchase 120 of these
weapons in the next few days. JAW [in accord-
ance with] your instructions I have told their
agent that we will sell them 120 items at a price
that they can meet. I have further told them that
we will make no effort to move on their purchase
LOA [Letter of Offer and Acceptance] request
until we have all five AMCITS safely delivered.
In short, the pressure is on them.*^

This PROF message is clear evidence that North in-
formed Poindexter in detail of the HAWK transac-
tion— including the involvement of Secord and the
replenishment arrangements — well in advance of the
shipment.

North Asks the CIA for Assistance

Secord and the European businessman were unable
to budge the government of Country 15. With only
hours left before an Israeli plane carrying 80 HAWKs
was to depart for the capital of Country 15, North
urgently sought assistance from McFarlane, the CIA,
and the State Department. North called McFarlane
on the evening of November 21; they discussed
whether McFarlane should call Country 15's Prime
Minister or Foreign Minister in the morning.*^"

Informed by Secord of the difficulties in Country
15, North immediately asked CIA official Duane
Clarridge to assist in obtaining clearances for the
plane going there. *^ Clarridge said Secord should
contact the CIA Chief in Country 15, whose name
North then relayed to Secord.*' At the same time,
Clarridge sent "flash" cables instructing the CIA

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Chapter 10

Chief in Country 15 and his deputy to report immedi-
ately to the office for a "special assignment."**

The next morning, November 22, Secord, using his
Copp pseudonym, called the CIA Chief and said that
he urgently needed clearance for an El Al charter
flight scheduled to leave Tel Aviv in 20 minutes and
fly to the capital of Country 15. Secord urged the
CIA Chief to call an official of Country 15 and em-
phasize the urgency of obtaining the clearance. At
this point, the CIA Chief suggested enlisting the help
of the Deputy Chief of Mission at the U.S. Embassy
in Country 15.*^

North Brings State Into the Operation

At about this time, North pressed to involve the
U.S. Embassy directly in the efforts to obtain the
clearances. North accurately told Robert B. Oakley,
then Director of the Office of Counterterrorism and
Emergency Planning at the Department of State, that
Israel had encountered problems obtaining clearances
in Country 15 for a transshipment of HAWK missiles
for Iran. In contrast, North falsely told Oakley that
he had learned of the shipment when " 'one of his
people' went to an arms warehouse [in Country 15] to
obtain arms for the Nicaraguan Resistance, and
learned that the Israelis had been obtaining arms from
the same source for shipment to Iran." In any event,
Oakley gave North permission to tell the Embassy in
Country 15 that the State Department was "aware" of
the unfolding operation and that the Embassy "could
request clearances." ®° Thereafter, the CIA Chief was
instructed to insure that if the Deputy Chief of Mis-
sion felt compelled to communicate with the State
Department, he should use only the CIA channel.^ ^

The NSC also involved Oakley and the State De-
partment in another capacity. On November 21,
Oakley notified the CIA's counterrorism component
that "information from the NSC indicated that one or
more U.S. hostages would soon be released in Leba-
non." Oakley reported that a team was departing for
Wiesbaden, West Germany, to await the arrival of the
hostages. The team arrived in Wiesbaden the follow-
ing day, and remained there until November 27. ^^

On November 22, Oakley reported to Secretary
Shultz (who had returned from Geneva) and others at
the State Department "that the hostages would be
released that afternoon in exchange for 120 HAWKs
at $250,000 each— worth $30 million in all." Secretary
Shultz and his advisers. Deputy Secretary John C.
Whitehead and Undersecretary Michael Armacost,
shared their apprehension about the endeavor. The
Secretary, who "regarded it as a $30 million weapons
payoff," told his deputies: "Bud [McFarlane] says he's
cleared with the President."*^

The next day. Secretary Shultz was told that no
hostage had been released and that the deal had col-
lapsed.^* That was false. The operation was still

being actively pursued, and the movement of 18
HAWKs was yet to occur.

Jumbo Jet Departs for Country 15
Transit Point

Although the clearance for landing in Country 15
had not been authorized on the morning of November
22, the El Al 747 carrying the 80 HAWK missiles
was ordered to take off for that country's capital. As
the plane neared its "go — no go point," frantic efforts
were underway to change the country's government's
position. Clarridge cabled the CIA Chief in Country
15 and ordered him to "pull out all the stops" to
solve the problem. ^^ Secord called an official in
Country 15's foreign ministry, who said that the gov-
ernment had decided to withhold permission based
upon the U.S. Embassy's previous statement that the
United States did not concur in the shipment.**
Hoping to reverse this position, the Deputy Chief of
Mission made hurried phone calls attempting to
summon the Country 15 Foreign Minister out of a
cabinet meeting; and Secord told the CIA Chief that
"McFarlane was being pulled out of [a] meeting with
[the] Pope" to call the Foreign Minister.*^

All these efforts were in vain. By early afternoon,
Secord, who was in radio contact with the El Al
plane,®* telephoned North and informed him that the
government of Country 15 had refused permission.
He said the aircraft had been ordered back to Tel
Aviv.®*

North and Clarridge Bring In a CIA
Airline

Due to the delays, the El Al plane, which the
Israelis had reserved for this operation for only a
limited time, was no longer available. '°° Clarridge,
North, and Secord scrambled to find other ways to
transport the HAWK missiles to Iran. Within hours,
Clarridge met with the Chief of the CIA's air branch
and told him "we [have] a very sensitive mission in
the Middle East and we need a 747 aircraft right
away." The branch chief could not locate such a
large aircraft on short notice, but suggested that a
CIA airline proprietary might be able to move the
cargo.'"' At 4 p.m. on November 22, an air branch
official called the CIA project officer for the proprie-
tary, and asked whether its Boeing 707 cargo planes
were available to move 80 pieces of "sensitive hi
priority cargo" from Tel Aviv to the capital of Coun-
try 15. The project officer reported that at least one
of the airline proprietary's planes was available.'"^

Clarridge's actions resulting in the involvement of
the air proprietary were at North's request and with
the authority of CIA Associate Deputy Director of
Operations, Edward Juchniewicz.'°^ Juchniewicz
spoke with both Clarridge and North on November
22, and told them he had no objection to giving

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Secord the commercial name of the airhne proprie-
tary to charter the necessary flights.'"* Over the next
48 hours, Clarridge and CIA air branch personnel
closely managed the proprietary's flight activities in
support of this covert operation.'"^ Before the oper-
ation was over, the proprietary's project officer also
became directly involved in coordinating matters.'"^

Clarridge Brings in Another CIA Chief

Even as the problems in Country 15 remained unre-
solved, Clarridge, on the evening of November 22,
moved to obtain clearances from another country,
Country 16, for overflight rights into Iran."" Clar-
ridge cabled the CIA Chief in Country 16 proposing
that he ask Government authorities for "overflight
clearances for three commercial DC-8 aircraft (or
similar aircraft) flying on a chartered basis from
[Country 15] to Tabriz and then retracing their
route." Clarridge explained that this was "a National
Security Council initiative and has the highest level of
USG [United States Government] interest." The CIA
Chief was to explain that "the purpose of the flight is
humanitarian in nature and is in response to terrorist
acts." Clarridge specifically instructed that the U.S.
Ambassador to Country 16 "should not be in-
formed." '°*

Schwimmer's DC-8 Charter Falls Through

On the evening of November 22, Schwimmer
called North to say the charter of the DC-8s for the
Country 15-to-Iran leg of the mission had fallen
through. In a PROF note to Poindexter, North updat-
ed the situation as of 7:00 p.m.:

Unbelievable as it may seem, I have just talked to
Schwimmer, in TA [Tel Aviv,] who advises that
they have released their DC-8s in spite of my call
to DK [David Kimche] instructing that they be
put on hold until we could iron out the clearance
problem in [the capital of Country 15]. Schwim-
mer released them to save $ and now does not
think that they can be re-chartered before
Monday.'"^

Within minutes of Schwimmer's call, North and
Secord discussed a substitute method of transporting
the missiles from Country 15 to Iran. Secord suggest-
ed that the European businessman's company try to
find some planes."" North wrote to Poindexter that
Secord would solve the problem by diverting a plane
from the Contra operation to the Iran operation:

Advised Copp of lack of p/u [pick up] A/C
[aircraft]. He has advised that we can use one of
our LAKE Resources A/C which was at [the
capital of Country 15] to p/u a load of ammo for
UNO [United Nicaraguan Opposition]. He will
have the a/c repainted tonight and put into serv-
ice nit [no later than] noon Sat so that we can at

least get this thing moving. So help me I have
never seen anything so screwed up in my life.
Will meet with Calero tonite to advise that the
ammo will be several days late in arriving. Too
bad, this was to be our first direct flight to the
resistance field . . . inside Nicaragua. The ammo
was already palletized w/ parachutes attached.
Maybe we can do it on Weds, or Thurs.

More as it becomes available. One hell of an
operation. ' ' '

In fact, it appears that Lake Resources had no planes
at this time. Nevertheless, this PROF note reveals
that North was beginning to meld the two operations
he was overseeing and to recognize that the Lake
Resources enterprise could operate in a variety of
settings.

Over the next 12 hours, Secord and others tried to
hire a cargo carrier for the Country 15-to-Iran leg.
They unsuccessfully sought to convince officials of a
European national airline to take on the assign-
ment."^ By the morning of November 23, Secord
had identified an aircraft to make the flight,"* but
this plane was never used.

Clarridge's Office Becomes the
Command Post

By November 23, Clarridge's office at Langley had
become the command post for coordinating the
HAWK transport. North was there most of the
(jgy 115 ;^]so present and assisting were the CIA air
branch chief, an intelligence officer, and Charles E.
Allen. "^ Numerous problems with aircraft and flight
clearances continued to crop up. As the situation de-
teriorated, Clarridge sent cables to the far-flung CIA
stations involved, and North stayed in continuous
contact with Secord in Country 15 and Schwimmer
in Israel.

Clarridge's superiors, specifically Juchniewicz and
McMahon, were aware of at least some aspects of the
activity being directed from Clarridge's ofiice. Juch-
niewicz's office received all of the cables being sent to
and from Clarridge on the operation."' In a memo-
randum for the record written 2 weeks later, McMa-
hon stated:

On Saturday, 23 November 1985, Ed Juch-
niewicz asked me if I was aware of all the activi-
ty transpiring on the effort to get the hostages
out. He showed me a cable to [the capital of
Country 15] asking that we pass a message to the
[Deputy Chief of Mission] from the Deputy As-
sistant to the President for National Security Af-
fairs [Poindexter]. The message assured the
[Deputy Chief of Mission] that only the Secre-
tary of State and Ambassador Oakley were aware
of the operation. I told Juchniewicz that I was
unaware of the specifics of the operation but due

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Chapter 10

to the sensitivity of the operation, it was appro-
priate that we pass correspondence between the
NSC and the ambassadors overseas, but only
communications, that we could not be involved
without a Finding."*

McMahon testified that he did not know then that the
CIA's airline proprietary had been brought into the
operation. ' ' ^

Allen also learned that day of the CIA role in the
operation. North called him in the morning and asked
him to deliver to Clarridge intelligence data on the
Iran initiative. Allen showed the materials to Clar-
ridge, who told him that North "had requested some
assistance in obtaining a name of a reliable charter
airline," that he was considering using the Agency's
airline proprietary, and that he was trying to obtain
landing and transit clearances in Country 15.'^°

The Oil-Drilling Equipment Cover Story

During the planning of the HAWK missile ship-
ment, the Israeli and American participants agreed to
keep the true nature of the operation secret. They
would use a false "story line" that the cargo to Iran
was oil-drilling equipment.'^' Several American offi-
cials who knew of the operation were advised of this
cover story but understood that it was false and knew
that the cargo was missiles.

At the time, the President and Regan knew that the
cargo comprised HAWK missiles and were specifical-
ly told of the false story before the shipment was
made, presumably by McFarlane. Regan testified: "I
recall that that was to have been a cover story if
discovered, it was to have been said that these were
oil-drilling parts."'^^

The government of Country 1 5 also was aware that
the clearances being sought by Secord and others
were for moving missiles through its capital and into
Iran as part of an effort to gain the release of Ameri-
can hostages. Secord understood that both the Prime
Minister and Foreign Minister were informed. Indeed,
Secord testified that it was not possible to ship
HAWKs through the foreign capital without the host
country knowing, because special handling of the
weapons was required at the airport. '^^

North claims he used the cover story when he
brought Clarridge and Allen into the operation. As he
later testified, "I lied to the CIA because that was the
convention that we had worked out with the Israelis,
that no one else was to know."'^"* Allen testified that
North "stated emphatically" that the cargo was oil-
drilling equipment, but that he (Allen) had "serious
doubts" about whether this was true.'^*

If Clarridge did not know the contents of the cargo
at the start, he soon learned it. In Country 15, late in
the morning of November 23, Secord gave the CIA
Chief a full accounting of the mission. Their meeting
occurred in a car in a hotel parking lot. Secord re-
vealed his identity, explained he was formally associ-

ated with the NSC, and specifically told the officer
that the planned flight would contain HAWK missiles
being sent to Iran in exchange for hostages. '^^

The CIA Chief testified that he returned to his
office and sent two cables to Clarridge through the
"Eyes Only" privacy channel he was using on the
HAWK project. The first cable contained a general
report, mentioning the discussion with Secord but not
setting forth the substance of the conversation. '^^
The second cable reported that the flights would con-
tain HAWK missiles sent to secure the release of the
hostages.'^* The Committees' investigation did not
locate this cable. But the CIA Chiefs subsequent tes-
timony about its existence was corroborated in testi-
mony by the CIA Deputy Chief '^9 and by the
Deputy Chief of Mission — who at the time either read
the cable or was told about it by the CIA Chiefs"
In addition, the CIA communicator, who transmitted
the cable from Country 15, vividly recalls being
shocked when he read the message and learned that
the United States was sending arms to Iran.'^'

Clarridge received additional information that re-
vealed that the cargo was HAWKs: North testified
that shortly after the shipment occurred, if not before,
he had told Clarridge the true nature of the cargo. '^^
Moreover, on November 23, Allen showed Clarridge
a report that, according to Allen, would cause "one
[to] think that this initiative had involved arms in the
past."'^^ Allen suspected that the November ship-
ment also involved arms and "couldn't help but be-
lieve that [Clarridge] suspected that. Particularly he
could see the [report] as clearly as I, and he leafed
through [its contents] ... I left the folder with him
and then picked it up later." '3* After the shipment,
Clarridge received additional information that made
clear that the cargo was missiles.'^''

Clarridge insisted in testimony before these Com-
mittees that he had no recollection of having learned
that the cargo was missiles prior to early 1986.'**
This testimony conformed to the false story certain
Administration officials put out in November 1986
when they were trying to conceal the advance knowl-
edge in the U.S. Government of the shipment of
HAWK missiles.

The Committees are troubled by the fact that the
cable informing Clarridge of Secord's detailed ac-
count of the operation, and an earlier cable Clarridge
sent to the CIA Chief at the outset of the oper-
ation,'*' are inexplicably missing from an otherwise
complete set of 78 cables sent by CIA officials during
the operation.'**

Country 15 Routing is Abandoned

By the afternoon of November 23, the plan to
transship the missiles through Country 15 was aban-
doned. The previous evening, McFarlane had called
the country's Foreign Minister and believed he had
received a "green light" for the flights. '^^ However,

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Chapter 10

the foreign government still insisted that the United
States provide a diplomatic note setting forth the
nature of the cargo and the shipping route, and stat-
ing that the release of American hostages was the
purpose of the shipment. '''° The foreign government
wanted this documentation because it saw the oper-
ation as "so directly in conflict with known U.S.
policy and [its own] policy."'*' The American plan-
ners balked,'*^ apparently out of a concern about
creating a formal paper record of the true nature of
the operation. Later that day, the Deputy Chief of
Mission, on instructions from Poindexter, handed the
Foreign Minister a terse diplomatic note stating that
the U.S. Embassy "expresses regret that the Govern-
ment of [Country 15] was unable to fulfill the request
of the Government of the United States for the hu-
manitarian mission."'*^ Clarridge cabled the CIA
Chief in the capital of Country 15 that in light of the
diplomatic message, "it is obvious . . . that we are
closing down [the Country 15] aspect of this oper-
ation."'**

As the Country 15 transit plan was falling through,
North and Clarridge sought a substitute transit point.
Clarridge cabled the CIA Chief in the capital of an-
other country, Country 18, to request assistance in
obtaining landing rights in that country for "5 sorties"
by a CIA airline proprietary 707 airplane between Tel
Aviv and Tabriz, the first to occur "in the next 12
hours or so . . . and likely result in the release of the
hostages."'*^

Meanwhile, still on November 23, Israeli military
personnel began to load the HAWKs into the CIA
proprietary airplane at the Tel Aviv airport. If they
had not already been told, the proprietary's crew sur-
mised from the appearance of the crates that their
cargo was missiles and reported this to the airline
manager.'*®

Later that day, the participants decided to move
the shipment directly from Tel Aviv to Iran, without
transiting a third country. Under the new plan, one of
the proprietary's planes would make a series of fiights
to move the 80 HAWKs.'*' After dismissing one
route, the planners selected a shorter — but more dan-
gerous— route across Country 16.'*® But obtaining
overflight clearances from Country 16 remained a
problem, so Clarridge once again cabled the CIA
Chief there. '*'' Several hours later, the CIA Chief
replied that the Government of Country 16 was sup-
portive, but needed "some idea of what the aircraft
would carry as presumably they would not be
empty." '^° Late that night, Clarridge sent two more
increasingly urgent cables to the CIA Chief in Coun-
try 16. In conformity with the cover story, these
cables told the CIA Chief to advise the government
of Country 16 that "the aircraft are carrying sophisti-
cated spare parts for the oil industry" and that the
five flights would be spread over a number of
days. '^'

North and Clarridge, working with Schwimmer,
continued to coordinate the flight activity on Sunday,
November 24. At the last minute, they decided that,
at least on the first sortie, the plane should land at a
transit point in another country. Country 17, to dis-
guise the fact that the shipment was moving from
Israel to Iran.'^^ While this decision was being made,
the CIA Chief in Country 16 informed Clarridge that
the government there had approved the five over-
flights, but that "incoming flight cannot come directly
from [Country 17]. "'*3

CIA Airline Proprietary Moves the
Missiles

On November 24, the CIA proprietary aircraft car-
rying 18 HAWK missiles flew from Tel Aviv to the
transit point in Country 17. Because Schwimmer had
sent the plane without a cargo manifest, the pilot
lacked the documentation required by customs offi-
cials at the transit point, who wanted to inspect the
cargo. '^* Simultaneously, Schwimmer and the propri-
etary manager, along with North and Clarridge, fran-
tically discussed how to solve this. While there is
evidence to the contrary, it seems the pilot simply
talked his way out of the problem. '^^

After getting out of the transit point in Country 17,
the pilot ran into trouble while flying over Country
16. According to the airline manager's report,

nothing was prepared for overflight in [Country
16] and [the pilot] had again to talk his way
through. Since they [the Country 16 ground con-
trollers] repeatedly insisted on a diplomatic clear-
ance number, he made one up which was not
accepted after long negotiations and then he fili-
bustered one hour and 30 min his way through
[Country 16], using different altitudes, positions
and estimates that he told [Country 16's] Military
with whom he was obviously in radio con-
tact . . .

However, radar realized his off-positions which
gave additional reason for arguments and time
delays.'^®

Cables the next day from the CIA Chief in Country
16 to Clarridge suggested several reasons why the
pilot encountered these difliculties. For example, the
destination of the plane was changed at the last
minute from Tabriz to Tehran, which "provoked
query" from Country 16 because it did not square
with the clearance request.'*' Other discrepancies
caused outright anger:

[An official of Country 16 was] quite upset over
multiple flight plans received, fact first flight
came directly from [the transit point in Country
17] and did not request clearance beforehand and
conflicting stories about plane's cargo. [The CIA

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Chapter 10

Chief] told [the official] it was oil industry spare
parts, telex from carrier stated medical supplies
and the pilot told ground controllers he was car-
rying miUtary equipment. . . .

Bottom line is that [the government of Country
16] still wants to assist but has developed a little
cynicism about our interaction with them on the
matter.'^*

Ironically, the pilot reportedly told the flight control-
lers the true nature of the cargo even while Clarridge
was spreading the cover story to high level officials
of Country 16.'5»

The only part of the operation that went smoothly
was the flight into Tehran. The Second Iranian Offi-
cial and Ghorbanifar, who were in Geneva, passed
word to officials in Tehran to prepare to receive the
plane. The plane landed in Tehran early in the morn-
ing.'*" After an encounter with a military officer
who apparently was unaware of the operation, "a
civilian with a submachine gun on his back" arrived
at the aircraft.'®' The pilot understood that this
person was a member of the Iranian Revolutionary
Guard. He instructed the pilot not to disclose to
anyone at the airport that the flight had originated in
Israel, arranged for the unloading of the plane by
military personnel, and got the crew to a hotel —
formerly the Sheraton — in downtown Tehran. '^^

Fourteen hours later, after a warm send-off that
included caviar, the plane departed Tehran at 12:15
p.m. E.S.T., on Monday, November 25.'®^ The air-
line proprietary crew expected they would return
shortly with more missiles and told the Iranian at the
airport, "Don't worry, we [will] come back."'**
However, the airline manager radioed them after they
were airborne and instructed them not to return to
Israel.'*^ Problems surfacing in both Washington and
Iran put an end to the CIA proprietary airline's role.
Within a few days, Secord, using funds from the Lake
Resources account, wired a $127,700 payment to the
proprietary.'**

Aftermath of the HAWK Flight
The Failure Sinks In

On November 25, with the Americans still enter-
taining the hope that one or more hostages might be
released, senior White House and CIA officials were
informed about the weekend's activities. Poindexter
told the President at his regular 9:30 a.m. briefing that
a shipment of arms to Iran had just taken place.'*'

At 7 a.m. that morning at CIA headquarters,
Edward Juchniewicz told McMahon that Secord and
"those guys" at the NSC had "used our proprietary
to send over some oil supplies" to Iran. McMahon's
reaction was anger:

I said goddam it, I told you not to get involved.
And he [Juchniewicz] said, we're not involved.
They came to us and we said no. And they asked
if we knew the name of a secure airline and we
gave them the name of our proprietary. I said,
for Christ's sake, we can't do that without a
Finding.'*^

McMahon said that at the time he accepted Juch-
niewicz's report that the cargo had been oil-drilling
equipment: "[M]y focus was that we had done some-
thing wrong . . . and I didn't care what was on that
airplane." McMahon's view was that any use of the
CIA airline proprietary at the direction of CIA but
without a Presidential Finding was illegal.'* 8'

Shortly after talking to Juchniewicz, McMahon
went to Deputy Director for Operations Clair
George's office where several staffers were discussing
the weekend's activities. McMahon told them "that
they weren't going to do anything more until we got
a Finding."'*^ That same morning. North sent word
to Schwimmer that the operation was to be put on
hold.''"

McMahon also moved quickly to contact CIA Gen-
eral Counsel Stanley Sporkin on the matter of the
airline proprietary's activity.''" McMahon testified
that "during the day I called Sporkin several times
and I told him that I wanted a Finding and I wanted
it retroactive to cover that flight."'''^ Sporkin re-
called that McMahon simply asked him to look into
the legal aspects of the activity, but did not declare
that a Finding was necessary.'''^

Late in the day, two officers from the Operations
Directorate, an air branch officer and his group chief,
were directed to brief Sporkin on the proprietary's
flight."'' The CIA officials most involved in the op-
eration— Clarridge, Allen, and the chief of the air
branch — were not selected to do the briefing. At
Sporkin's request, his deputy, J. Edwin Dietel, sat in
on the briefing.'''^

The participants' accounts of the briefing of Spor-
kin differed significantly. The air branch subordinate
officer said that the meeting lasted about 45 minutes
and that he and his superior explained to the lawyers
that the airline proprietary — acting at the direction of
the NSC staff and with the approval of Juch-
niewicz— had moved some cargo from Israel to Iran.
He testified that as of November 25, he knew nothing
about the cargo other than its weight and dimensions
and that that was the only information about the
cargo that was discussed at the briefing. He recalled
that the lawyers exhibited no curiosity about the
nature of the cargo and that there was no mention
that the cargo was either oil-drilling equipment or
military equipment. He also testified that nothing was
said to indicate that the proprietary's flight was relat-
ed to an effort to free hostages."*

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Chapter 10

The CIA group chief said he did not even know of
the activity being scrutinized until that morning. He
stated in an interview that he and the subordinate
explained that a CIA proprietary plane, acting in a
strictly commercial capacity, had carried "commercial
cargo" into Iran. The subject of weapons being
aboard the plane did not arise, he said. He added that
at this point he understood that the cargo might have
been farm equipment and that the shipment was not
part of an NSC staff operation. ^ ' '

Notwithstanding these divergent accounts from of-
ficials of the Operations Directorate, it is clear that
the briefers told Sporkin that missiles had been trans-
ported, and the shipment was part of an effort to free
the hostages. Sporkin testified: "What they told me
indicated an involvement in a shipment of arms to
Iran.""* Sporkin's deputy, Deitel, specifically re-
called that the briefers said the cargo was missiles.'''^
Sporkin testified that the briefers probably specified
the exact type of missiles being shipped. '*°

During the briefing, Sporkin tentatively concluded
that a covert action Finding was necessary to author-
ize the previous activity.'*' He stated that there
should be no more flights to move the rest of the
cargo in Israel until the matter could be looked into
further.'*^ After the briefers left, two senior staff
attorneys, whom Sporkin had enlisted earlier and who
were waiting for the briefing to end, were called into
the room. Sporkin related to them that a shipment of
"military equipment or missiles" from Israel to Iran
had just occurred and that more flights were contem-
plated.'^^

Sporkin then dictated a draft Finding that author-
ized the CIA to assist in "efforts being made by
private parties" to obtain the release of hostages
through the provision of "certain foreign materiel and
munitions" to the Government of Iran. The draft
stated that Congress would not be notified of the
operation "until such time as [the President] may
direct otherwise" and that the Finding "ratifies all
actions taken by U.S. Government officials in further-
ance of this effort."'** Sporkin directed one of the
lawyers, Bernard Makowka, to stay late and work on
the Finding.'** Later that night, Sporkin informed
McMahon "that a Finding would be required, not so
much from the airlift standpoint, but from our in-
volvement in influencing foreign government officials
to assist the mission."'*^ Sporkin and his deputies met
on the morning of November 26, and worked up a
final draft of the Finding.'*'' In its entirety, the Find-
ing stated:

Finding Pursuant to Section 662 of The Foreign
Assistance Act of 1961, As Amended, Concerning
Operations Undertaken by the Central Intelligence
Agency in Foreign Countries, Other Than Those
Intended Solely for the Purpose of Intelligence Col-
lection.

I have been briefed on the efforts being made by
private parties to obtain the release of Americans
held hostage in the Middle East, and hereby find
that the following operations in foreign countries
(including all support necessary to such oper-
ations) are important to the national security of
the United States. Because of the extreme sensi-
tivity of these operations, in the exercise of the
President's constitutional authorities, I direct the
Director of Central Intelligence not to brief the
Congress of the United States, as provided for in
Section 501 of the National Security Act of 1947,
as amended, until such time as I may direct oth-
erwise.

SCOPE: Hostage Rescue— Middle East
DESCRIPTION

The provision of assistance by the Central Intelli-
gence Agency to private parties in their attempt
to obtain the release of Americans held hostage
in the Middle East. Such assistance is to include
the provision of transportation, communications,
and other necessary support. As part of these
efforts certain foreign materiel and munitions
may be provided to the Government of Iran
which is taking steps to facilitate the release of
the American hostages.

All prior actions taken by U.S. Government offi-
cials in furtherance of this effort are hereby rati-
fied.'**

The draft Finding referred to no objective of opening
a diplomatic channel with Iran. Yet, this was the
justification for the arms deals that the Administration
offered after they were exposed in November 1986.
Rather, the Finding depicted a straight swap of arms
for hostages.

Sporkin sent the proposed Finding to Casey on
November 26.'*^ That morning, Clair George
phoned North to tell him that Sporkin had deter-
mined a Finding was necessary.'^" Later that day,
after Casey called McFarlane and Regan "to ascertain
that indeed this had Presidential approval and to get
assurances that a Finding would be so signed," Casey,
who agreed a Finding was needed,'^' delivered the
text to Poindexter.'^^ Poindexter did not immediately
present it to the President. Over the next several days,
Casey, McMahon, and George made repeated inquir-
ies to Poindexter and other "NSC personnel" and
"continuously receive[d] reassurances of the Presi-
dent's intent to sign the Finding." '^^

The President Renews His Approval

On the day the CIA sent the proposed Finding to
the White House, November 26, the President author-
ized continuing the arms-for-hostages transaction.'^*

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Chapter 10

North's notes indicate that he was so informed by
Poindexter at an hour-long meeting:

0940-1050. Mtg w/JMP. RR directed op[eration]
to proceed. If Israelis want to provide diff model,
then we will replenish. We will exercise mgt
over movmt if yr side cannot do. Must have one
of our people in on all activities.'^*

Later that day, North related to an Israeli official
that the Americans wanted to carry on even if the
supply of additional arms was needed and even if the
weapons had to come from the United States.'^® But
events not within the control of the American side
prevented immediate progress in accord with the re-
newed authorization of the President.

The Iranians Feel Cheated

After midnight on November 26, Allen learned that
officials in Iran were upset that the wrong model of
HAWKs had been delivered.'^' The Iranians also
complained through Ghorbanifar that the missiles had
Israeli markings, which "the Iranians took to be a
prov[o]cation." ' ^ *

On November 25 or 26, Ghorbanifar, "on the very
edge of hysteria," called NSC consultant Michael
Ledeen, and said "the most horrible thing had hap-
pened. . . . [TJhese missiles had arrived and they were
the wrong missile." '^^ Ghorbanifar gave Ledeen an
urgent message from the Prime Minister of Iran for
President Reagan: "We have done everything we said
we were going to do, and you are now cheating us,
and you must act quickly to remedy this situation."
Ledeen conveyed this to Poindexter.^""

At this point. North dispatched Secord to Israel.
During meetings with Kimche and Schwimmer,
Secord quickly deduced the source of Iran's displeas-
ure: according to him, Schwimmer and Nimrodi had
promised Ghorbanifar that the missiles being provided
could shoot down high-flying Soviet reconnaissance
planes and Iraqi bombers. The I-HAWK missiles that
were provided, like all HAWKs, had no such capabil-
ity.^"' The Iranians were insisting that "these embar-
rassing missiles" be removed from Tehran. ^°^

Money Flows Back and Forth

In advance of the HAWK shipment, on November
22, Iran made two transfers — one of $24.72 million,
the other of $20 million — to bank accounts in Switzer-
land to which Ghorbanifar had access. ^"^ Iran appar-
ently understood that the larger transfer was its pur-
chase price for 80 HAWKs, at a unit cost of approxi-
mately $300,000,204

On November 22, Ghorbanifar transferred to an
Israeli intermediary's account $18 million and $6 mil-
lion.^^^ According to an Israeli intermediary, the $18
million was the purchase price paid by Ghorbanifar
for 80 HAWKs and the $6 million was to be held in
trust by the Israeli intermediary at Ghorbanifar's re-

quest. Later, it was to be paid back to Ghorbanifar,
with Ghorbanifar intending to keep $1 million for
himself and use the remainder for payments to certain
Iranians.^"** North was aware of the $18 million de-
posit. On November 20, he wrote in his notebook:
"18M Deposited Covers 80H 225K." 207

Around the time that the Israeli intermediary re-
ceived these funds from Ghorbanifar, he transferred
$1 million to Lake Resources on North's demand. 2"*
On November 22, the Israeli intermediary paid the
Israeli Ministry of Defense $11.2 million for the 80
HAWKs at a price of $140,000 per missile.^os Thus,
the Israeli intermediary had received from Ghorbani-
far $11.8 million more than his total payments to
Israel and Lake Resources. According to the Israeli
intermediary as reported in the Israeli Financial Chro-
nology, $6 million of this residual was held in trust by
the Israeli intermediary for Ghorbanifar and the re-
maining $5.8 million was to cover shipping and other
expenses for the rest of the operation. 2'" The Chro-
nology indicates that Ledeen and North agreed with
the Israeli intermediary that this money be kept in the
Israeli intermediary's account for these purposes. 2"

Israel intended to purchase replacement HAWKs
with the sum received from the Israeli intermediary.
It was doubtful whether the amount received —
$140,000 per missile — would be enough to purchase
replacements at standard U.S. prices. On November
19, North and the head of the Israeli Procurement
Mission in New York discussed replenishment, and
North's notes of the conversation refer to a price of
"$220K/230K each for Hawks." 212 However, Poin-
dexter had instructed North, and North had told the
Israelis, "that we will sell them [Israel]" replacement
HAWKs "at a price that they can meet." ^'^

When the HAWK deal collapsed in late November,
the Israelis and Ghorbanifar reversed the flow of
funds. On November 27, the Israeli Ministry of De-
fense returned $8.17 million to the IsraeH interme-
diary. This was $3.03 million less than the Israelis had
paid to the Ministry of Defense. The difference, ac-
cording to the Israeli Chronology, represented the
prorated charge for the 18 missiles delivered to Iran
at $140,000 per item and a deduction of $510,000 for
expenses incurred by the Ministry of Defense in the
HAWK transaction and in previous transactions. ^'^

Also on November 27, the Israeli intermediary
transferred to Ghorbanifar the sum of $18.6 million.
This represented a prorated refund of Iran's purchase
price for the 62 HAWKs that had not been deliv-
ered.2** Thus, at the end of November 1985, the
Israelis held more than $5 million in residuals from
the failed transaction, most of which was repaid to
Ghorbanifar by the Israeli intermediary and to the
Israeli Ministry of Defense after Iran returned 17
HAWKs to Israel in early 1986.2'6

187

Chapter 10

Conclusion

The shipment of HAWKs to Iran was bad poUcy,
badly planned and badly executed. In contradiction to
its frequently emphasized public policy concerning
the Iran-Iraq war and nations that support terrorism,
the United States had approved the sale of arms to
Iran. The United States had agreed to a sequential
release of hostages following successive deliveries of
weapons; thereafter, this departure from policy
became the norm. This precedent, established in No-
vember 1985, gave the Iranians reason to believe that
the United States would retreat in the future from its
demand for the release of hostages prior to any weap-
ons shipments.

The planning and execution of the operation were
also flawed. By the time the U.S. Government
became directly involved, official disclaimers by un-
witting State Department officials had already com-
plicated the foreign relations aspect of the project.
And the mission itself jeopardized the security of the
CIA airline proprietary's operation.^''

Finally, the cover story that was used by certain
NSC and CIA officials in November 1986 was first
employed in November 1985 for purposes of oper-
ational security. The President, Secretary Shultz,
McFarlane, Poindexter, North, and various CIA offi-
cials, however, were fully aware in November 1985
that Israel was shipping HAWKs to Iran — not oil-
drilling equipment — with U.S. approval and assistance
to obtain the release of the American hostages.

188

Chapter 10

Chapter 10

1. North Notebook, 10/30/85, Ex. CG-40, Hearings, 100-
11.

2. Id.

3. Id.

4. McFarlane Calendar, 11/8/85, MF0OO856-57; Ledeen
Dep., 6/22/87, at 231.

5. McFarlane Test., Hearings, 100-2, at 97.

6. Ledeen Dep., 6/22/87, at 231.

7. North Calendar, 11/14/85, N329.

8. North Notes, 11/14/85, Ex. OLN-69A, Hearings, 100-7,
Part III.

9. North Notes, 11/19/85, Ex. OLN-69A, Hearings, 100-7,
Part III.

10. North Test., Executive Session, 1/9/^1, at 6-10.

11. McMahon, Memorandum for the Record, 11/15/85,
C4510.

12. McMahon Dep., 6/1/87, at 90.

13. Id

14. McFarlane Test., Hearings, 100-2, at 97, 100. Accord-
ing to the Israeli Historical Chronology, Rabin did not
discuss with McFarlane during this visit that Israel was
planning another arms shipment to Iran.

15. W. at 51-52, 100.

16. Israeli Historical Chronology. According to the Israe-
lis, in a telephone conversation on November 21, Rabin
stressed to McFarlane that if the Iranian project were not
viewed as a joint U.S.-Israel operation, Israel would not
undertake it alone. Id.

17. Israeli Historical Chronology; see also McFarlane
Test., Hearings, 100-2, at 97.

18. Regan Test., Hearings, 100-10, at 12.

19. McFarlane Test., Hearings, 100-2, at 51-52.

20. McFarlane Tower Int., 2/19/87, at 41.

21. North Notebook, 11/17/85, Ex. OLN-69A, Hearings,
100-7, Part III.

22. North Notebook, 11/18/87, Ex. OLN-69A, Hearings,
100-7, Part III.

23. North Notebook, 11/18/85, Ex. OLN-69A, Hearings,
100-7, Part III. According to the Israelis, Israel approved
only a shipment of 80 HAWKs. Israeli Historical Chronolo-
gy-

24. Israeli Financial Chronology. On November 19,
North and the head of the Israeli Procurement Mission in
New York discussed a sale by the United States to Israel of
600 of the Pentagon's most advanced version of the HAWK
missile, presumably to replenish a similar number of
HAWKs to be shipped by Israel to Iran. North Notebook,
11/19/85, Ex. OLN-69A, Hearings, 100-7, Part III.

25. Airline Proprietary Manager Memorandum, 11/21/85,
C9706; Airiine Proprietary Manager Dep., 6/11/87, at 71-
74.

26. Airline Proprietary Manager Memorandum, 11/21/85,
C9706; Airline Proprietary Manager Memorandum, 11/30/
85, C6522-C6529, at 6; Airiine Proprietary Manager Dep.,
6/11/87, at 71.

27. Airline Proprietary Manager Memorandum, 11/21/85,
C9706.

28. Airline Proprietary Manager Dep. at 80; Airline Pro-
prietary Manager Memorandum, 11/30/85, C6522-C6529 at
I, 6.

29. PROF Note from North to Poindexter, 11/20/85, Ex.
JMP-17, Hearings, 100-8.

30. North Notebook, 11/20/85, Ex. JMP-84, Hearings,
100-8.

31. Id

32. Id

33. North Test., Hearings, 100-7, Part I, at 51, 59; North
Notebook, 11/17/85, Ex. OLN-69A, Hearings, 100-7, Part
III.

34. Id

35. Id. The Arms Export Control Act bars the President
from authorizing a transfer of any "major defense equip-
ment valued (in terms of its original acquisition cost) at
$14,000,000 or more" unless he submits an unclassified
report on the sale to the Speaker of the House and the
Senate Committee on Foreign Relations. 22 U.S.C. Section
2753(d).

36. North Test., Hearings, 100-7, Part I, at 51.

37. Powell Dep., 6/19/87, at 15-19.

38. Gaffney Test., Hearings, 100-6, at 133-39; Ex. DOD 1,
3, 5, Hearings, 100-6. Gaffney's notes of November 18-19
also indicate that the United States had shipped 100
HAWKs to Israel 2 weeks previously. In fact, on Novem-
ber 21, 1985, an Israeli ship, Zim Houston, took on 100
HAWKs and other weapons in New Jersey and sailed for
Israel. Those HAWKs were transferred pursuant to a Letter
of Offer and Acceptance between the United States and
Israel entered into in 1982. (Validated Shipper's Export
Declaration and attachments, 11/6/85, U.S. Customs, N.Y.,
N.Y. S2045659).

39. Gaffney Test., Hearings, 100-6, at 112.

40. Powell Dep., 6/19/87, at 32-33.

41. Weinberger Dep., 6/17/87, at 22-23, Ex. CWW-9.

42. Ex. DOD-5, Hearings, 100-6. Gaffney's paper provid-
ed as follows:

The modalities for sale to Iran present formida-
ble difficulties:

Iran is not currently certified for sales, including
indirectly as a third country, per Sec. 3 of the
AECA.

Congress must be notified of all sales of $14
million or more, whether it is a direct sale or
indirect to a third country. The notice must be
unclassified (except for some details), and the sale
cannot take place until 30 days after the notice.
The 30 days can be waived for direct sales, but the
third country transfer has no such provision, and
notice must still be given in any case.

Thus, even if the missiles were laundered
through Israel, Congress would have to be noti-
fied.

It is conceivable that the sale could be broken
into 3 or 4 packages, in order to evade Congres-
sional notice. While there is no explicit injunction
against splitting up such a sale (subject to check
. . .), the spirit and the practice of the law is
against that, and all Administrations have observed
this scrupulously.
Ex. DOD-5, Hearings. 100-6.

43. Gaffney Test., Hearings, 100-6, at 61-64.

44. McFarlane Test., Hearings, 100-2 at 102; Regan Test.,
Hearings, 100-10, at 13.

189

Chapter 10

45. In retrospect, McFarlane quantified his hope for re-
lease of the hostages at no more than a 20 percent probabili-
ty. McFarlane Test., Hearings, 100-2, at 102. Even this
would have been too optimistic. A CIA polygraph test of
Ghorbanifar 2 months later "indicated that he knew ahead
of time that the hostages would not be released and deliber-
ately tried to deceive us. . . ." Memorandum for the
Record, Subject: Manucher Ghorbanifar Polygraph Exami-
nation, C6090.

46. McFarlane Test., Hearings, 100-2, at 102.

47. Regan Test., Hearings, 100-10, at 13.

48. McFarlane Test., Hearings, 100-2, at 261.

49. McFarlane Test., Hearings, 100-2, at 55. This meeting
occurred on December 7.

50. McFarlane Test., Hearings, 100-2, at 102.

51. Shultz Test., Hearings, 100-9, at 28.

52. Id. at 28; Charles Hill Notes, 11/18/85, Cooper Ex.
CJC-17, Hearings, 100-6.

53. Shultz Test., Hearings, 100-9, at 28-29.

54. McFarlane Test., Hearings, 100-2, at 102.

55. Shultz Test,, Hearings, 100-9, at 29.

56. North told Poindexter a few days later that direct
flights would "compromise origins and risk eventual uncov-
ering of many operational details." North PROF message to
Poindexter, 11/22/85 (19;27;15) Ex. OLN-45, Hearings, 100-
7, Part III. Historically, weapons shipments to Iran from
Israel during the last decade had been disguised by moving
them through other countries. A purpose for disguising
such flights is to prevent the Iraqis from intercepting them.
Airline Proprietary Manager Dep., 6/11/87, at 24-27.

57. CIA Air Proprietary Pilot Dep., 6/25/87, at 77.

58. North Test., Hearings, 100-7, Part I, at 51.

59. Secord Dep., 6/10/87, at 85-86.

60. Secord Test., Hearings, 100-1, at 79-80.

61. Letter from McFarlane to Secord, 11/19/85, Ex. 1,
Hearings. 100-1, at 415.

62. McFarlane Test., Hearings, 100-2, at 209.

63. Secord Dep., 6/10/87, at 83-84.

64. Secord Test., Hearings, 100-1, at 80.

65. North Notebook, 11/18/85, Ex. OLN-69A, Hearings,
100-7, Part III.

66. North to Poindexter PROF Note, 11/22/85, (19:27:15)
Ex. OLN-45, Hearings, 100-7, Part III.

67. North Test., Hearings, 100-7, Part I, at 58; Panamani-
an Public Instrument, 5/14/85, H679.

68. CSF Ledger for Lake Resources, H986.

69. Secord Test., Hearings, 100-1, at 83, 87-88; North
Test., Hearings, 100-7, Part I, at 54.

70. Israeli Historical Chronology.

71. Secord Test., Hearings, 100-1, at 80; Secord Dep., 6/
10/87, at 89.

72. Secord Dep., 6/10/87, at 87-88; Secord Test., Hear-
ings, 100-1, at 88.

73. On November 22, Secord arranged a charter for sev-
eral fights between Tel Aviv and Country 1 5 at a total cost
of $60,000, plus fuel, landing, and handling costs. These
flights never occurred. Airline Proprietary Manager's
Memorandum Re: Mission TLV/THR, 11/30/85, C6522;
Airline Proprietary Manager Dep., 6/11/87, at 65-66.
Secord ultimately paid $127,700 to the CIA airline proprie-
tary, which flew two planes to Tel Aviv and one to Tehran
via Country 17. Airline Proprietary Receipt Records, 11/
29/85 and 12/3/85, C6567 and C6573.

74. DCM Dep., 5/27/87, at 24-25.

75. After the flight to Tehran, Secord— who was then in
Paris — remarked to the manager of the proprietary airline
that he had "to go back to [the capital of Country 15] to
save $225,000." Airline Proprietary Manager Dep., 6/11/87,
at 148, 171. An entry in North's notebook states "Dick
Copp— Spent 750K in [Country 15]." North Notebook, 11/
24/85, Ex. OLN-69A, Hearings, 100-7, Part III.

76. Financial Chronology, Accounting Workpaper. In ad-
dition to the $127,700 paid to the CIA air proprietary,
Secord spent $21,983 on chartering a private jet to attend
meetings related to the operation.

77. North Test., Hearings, 100-7, Part I, at 56.

78. Secord Dep., 6/10/87, at 88-89.

79. Secord Dep., 6/10/87, at 99.

80. CIA cables after the operation was over explained
that these were the reasons for the poor reception. CIA
Cables, capital of Country 15 to Headquarters, 11/26/85
and 11/27/85, C5794-95 and C5796-97.

81. DCM Dep., 5/27/87, at 24-25.

82. Cable from American Embassy in Country 15 to De-
partment of State Headquarters, 11/22/85, S000304.

83. CIA Cable, capital of Country 15 to Headquarters,
11/23/85, C5758-59.

84. Id.

85. PROF Note, North to Poindexter, 11/20/85, 21:27:39,
Ex. JMP-17, Hearings, 100-8.

85a. North Notebook: 11/21/85, Ex. OLN-69A, Hearings,
100-7, Part III.

86. North Notebook, 11/21/85, Ex. OLN-69A, Hearings,
100-7, Part III; Clarridge Dep., 4/27/87, at 7-8.

87. North Notebook, 11/21/85, Ex. OLN-69A, Hearings,
100-7, Part III.

88. CIA Cables, Headquarters to capital of Country 15,
11/22/85, Ex. DRC-1-1 and 1-2, Hearings, 100-11.

89. CIA Cable, capital of Country 15 to Headquarters,
11/22/85, Ex. DRC-1-4, Hearings, 100-9.

90. Oakley Affidavit, 7/2/87, Ex. GPS-55., Hearings, 100-
9.

91. CIA Cable, Headquarters to capital of the Country
15, 11/22/85, Ex. DRCl-5, Hearings, 100-11.

92. Letter from John A. Rizzo to Paul Barbadoro, 7/17/
87, C10123.

93. Shultz Tower Test., 1/22/87, at 28.

94. Shultz Test., Hearings, 100-9, at 29.

95. CIA Cable, Headquarters to capital of Country 15,
11/22/85, Ex. liKC-X-d, Hearings, 100-11.

96. CIA Cable, capital of Country 15 to Headquarters,
11/22/85, Ex. DRC 1-7, Hearings, 100-11.

97. Id

98. CIA Cable, capital of Country 15 to Headquarters,
11/22/85, Ex. DRC-1-8, Hearings, 100-11.

99. North Notebook, 11/22/85 (incorrectly dated 11/21/
85), Ex. OLN-69A, Hearings, 100-7, Part III.

100. PROF Note, North to Poindexter, 11/22/85
(19:27:15), Ex. OLN-45, Hearings, 100-7, Part III.

101. CIA air branch chief Dep., 6/19/87, at 19-22.

102. Handwritten Notes of CIA Airline Proprietary
Project Officer, 11/22/85, C6535-C6538.

103. Clarridge Dep., 4/27/87, at 59-60.

104. Juchniewicz Dep., 4/23/87, at 8-19.

105. CIA air branch chief Dep., 6/19/87, at 22-31.

106. Airline Proprietary Project Officer Dep., 6/12/87, at
69

190

Chapter 10

107. North had incorrectly reported to Poindexter two
days earlier that this matter had already been taken care of.
North PROF message to Poindexter, 11/20/85 (21:27:39),
Ex. JMP 17, Hearings, 100-8.

108. CIA Cable, Headquarters to capital of Country 16,
11/22/85, Ex. OLN-61, Hearings, 100-7, Part III.

109. PROF Note, North to Poindexter, 11/22/85
(19:27:15), Ex. OLN-45, Hearings. 100-7, Part III.

110. North Notebook, 11/22/85, Ex. OLN-69A, Hearings.
100-7. Part III.

111. PROF Note, North to Poindexter, 11/22/85
(19:27:15), Ex. OLN-45, Hearings, 100-7, Part HI.

113. CIA Cable, capital of Country 15 to Headquarters,
11/23/85, Ex. DRC 1-19, Hearings, 100-11.

114. CIA Cable, capital of Country 15 to Headquarters,
11/23/85, C5742.

115. North Test., Hearings, 100-7, Part I, at 60.

1 16. CIA air branch chief Dep., 6/19/87, at 21-25.

117. The cable routings reflect that the copies of cables
were sent to office of the Directorate of Operations.

118. Memorandum for the Record, Subject: NSC Mission,
John N. McMahon, 12/7/85, Ex. DRC-12, Hearings, 100-11.

119. McMahon Dep., 6/1/87, at 104.

120. Allen Dep., 4/21/87, at 157-61.

121. North Test., Hearings, 100-7, Part I, at 38.

122. Regan Test., Hearings, 100-10, at 24.

123. Secord Dep., 6/10/87, at 100-01.

124. North Test., Hearings, 100-7, Part I, at 38.

125. Allen Dep., A/l\/?,l, at 161, 165, 176-77.

126. CIA Chief in Country 15 Dep., 4/13/87, at 19-21.

127. CIA Cable, capital of Country 15 to Headquarters,
11/23/85, Ex DRC 1-19, Hearings, 100-11.

128. CIA Chief in Country 15 Dep., 4/13/87, at 25-28.

129. Deputy CIA Chief in Country 15 Dep., 7/15/87, at
30-35. In addition, CIA records confirm that a cable of
which no copy can be found was sent at this time and
assigned a unique file number.

130. DCM Dep., 5/27/87, at 34-37.

131. CIA Communicator Dep., 7/13/87, at 66-68.

132. North Test., Hearings, 100-7, Part I, at 63, 70.

133. Allen Dep., 7/2/87, at 674.

134. Id. at 676.

135. North Test., Hearings, 100-7, Part I, at 38; Allen
Dep., 4/21/87, at 167-68; Clarridge Test., Hearings, 100-11,
at 7, 20-21.

136. Clarridge Test., Hearings, 100-11, at 8, 20-21.

137. The first cable that the CIA Chief in Country 15
sent to Headquarters on this matter stated it was a reply to
Cable 625103. CIA Cable, capital of Country 15 to Head-
quarters, 11/22/85, Ex. DRC 1-3, Hearings, 100-11. No
cable having this number was located.

138. The Committees have been informed that copies of
privacy channel cables are ordinarily sent to the office of
the Deputy Director for Operations. CIA officials have
searched for the missing cables, and they were unable to
locate them or account for the fact that they are missing.
The Committees have also been informed that officers as-
signed to the office of the Deputy Director for Operations
do not have a recollection of seeing the missing cables.

139. PROF Note, North to Poindexter, 11/22/85
(19:27:15), Ex. OLN-45, Hearings, 100-7, Part III; CIA
Cable from capital of Country 15 to Headquarters, 11/26/
85, C5794-95.

140. DCM Dep., 5/27/87, at 10, 20-21; CIA Chief in
Country 15 Dep., 4/13/87, at 16, 22.

141. CIA Cable from capital of Country 15 to Headquar-
ters. 1 1/26/85, C5794-95.

142. DCM Dep., 5/27/87, at 22-24.

143. Id. at 24; Diplomatic Note from U.S. Embassy in
Country 15 to Ministry of Foreign Affairs, 11/23/85, Ex.
GPS- 14, Hearings, 100-9.

144. CIA Cable, Headquarters to capital of Country 15,
11/23/85, Ex. DRC 1-29, Hearings. 100-11.

145. CIA Cable, Headquarters to capital of Country 18,
11/23/85, Ex. OLN-62, Hearings, 100-7, Part III.

146. Airline Proprietary Pilot Dep., 6/25/87, at 49-50, 64,
141; Airline Proprietary Manager Dep., 6/11/87, at 108-09.
In fact, the crew immediately surmised it was a large arma-
ment cargo which the airline proprietary had learned a few
days earlier was being moved from the capital of Country
15 to Iran under a cover story that it was medicine. Airline
Proprietary Manager Dep., 6/11/87, at 71-77. Two days
later, the proprietary's project officer told the CIA's air
branch chief that the crew believed that the cargo was
missiles and had joked that "we should be firing them at
Iran rather than Hying them into Iran." Airline Proprietary
Project Officer Dep., 6/12/87, at 48-49. The air branch
chief testified that he did not know the cargo was missiles
until months later. CIA air branch chief Dep., 6/19/87, at
43-44.

147. Airline Proprietary Manager Memorandum, 11/30/
85, Re: Mission TLV/THR, C6523-24 (hereinafter "Airline
Proprietary Manager's Report"), at 2-3. The Americans de-
cided it was too dangerous to fly the other plane into Iran
because it was registered in the United States. The plane
which was used was registered in another western hemi-
sphere country. Schwimmer argued the U.S. plane could be
used safely by painting a false registration on its tail or by
flying it in a formation with the other plane so as to dis-
guise it from radar operators. The airline proprietary man-
ager reported to CIA that Schwimmer "must be crazy" and
rejected these proposals. Id. at 3; Airline Proprietary
Project Officer Dep., 6/12/87, at 37-38; Airline Proprietary
Manager Dep., 6/11/87, at 116-19.

148. Airiine Proprietary Pilot Dep., 6/25/87, at 40-42, 48.

149. CIA Cable, Headquarters to capital of Country 16,
11/23/85, C5749.

150. CIA Cable, capital of Country 16 to Headquarters,
11/23/85, C5759.

151. CIA Cable, Headquarters to capital of Country 16,
11/24/85, C5763; CIA Cable, Headquarters to capital of
Country 16, 11/24/85, C5764.

152. Airline Proprietary Manager Dep., 6/11/87, at 138-
39.

153. CIA Cable, capital of Country 16 to Headquarters,
11/24/85, C5767.

154. Airiine Proprietary Pilot Dep., 6/25/87, at 56-57, 70
71; Airline Proprietary Manager's Report at 4.

155. Airhne Proprietary Project Officer Dep., 6/12/87,
41-42.

1 56. Airline Proprietary Manager's Report, at 4.

157. CIA Cable, capital of Country 16 to Headquarters,
11/25/85, C5774.

158. CIA Cable, capital of Country 16 to Headquarters,
11/25/85, C5775.

159. The pilot denied that he had any serious problems
with the overflight of Country 16 and insisted he did not

191

Chapter 10

and would never tell ground controllers he was carrying
arms. Airline Proprietary Pilot Dep., 6/25/87, at 78-79.

160. Airline Proprietary Pilot Dep., 6/25/87, at 96.

161. Airline Proprietary Manager Report, at 4.

162. Airline Proprietary Pilot Dep., 6/25/87, at 99-100.

163. Airline Proprietary Manager's Report at 6; Airline
Proprietary Pilot Dep., 6/25/87, at 121. According to the
Israeli Historical Chronology, the Iranians were displeased
with the inissiles prior to the departure of the plane, and the
Iranian Prime Minister impounded the aircraft, crew, and
missiles. According to this account, an Israeli intermediary
personally interceded to persuade the Iranians to release the
crew and plane. Israeli Historical Chronology.

164. Airline Proprietary Pilot Dep., 6/25/87, at 116. The
pilot, believing he probably would be back the next day,
ordered a carpet from a rug merchant and arranged to have
it put on what he thought would be the next flight. Id., 113-
14.

165. Id. at 122-23.

166. Airline Proprietary Receipt Records, 11/29/85 and
12/3/85, CIIN 2561 and 2567.

167. Poindexter Test., Hearings, 100-8, at 124; Poindexter
Notes, 11/25/85, Ex. JMP-19, Hearings, 100-8.

168. McMahon Dep., 6/1/87, at 95.
168». Id, at 97-101.

169. Id, at 95-96, 103.

170. North Notebook, 11/25/85, Ex. OLN-69A, Hearings,
100-7, Part III.

171. Memorandum for the Record, 12/7/85, John N.
McMahon, Ex. DRC-12, Hearings, 100-11.

172. McMahon Dep., 6/1/87, at 96.

173. Sporkin Test., Hearings, 100-6, at 116-19.

174. Group Chief Interview Report, 6/1/87.

175. Dietel Dep., 6/5/87, at 4.

176. CIA air branch subordinate Dep., 6/5/87, at 16, 134-
46; CIA air branch Interview Report, 6/1/87.

177. Group Chief Interview Report, 6/1/87.

178. Sporkin Test., Senate Select Committee on Intelli-
gence, 12/3/86, at 9.

179. Dietel Dep., 6/5/87, at 6.

180. Sporkin Test., Hearings, 100-6, at 128.

181. Sporkin Test., Hearings, 100-6, at 118.

182. CIA air branch subordinate Dep., 6/5/87, at 142-43.

183. Makowka Dep., 5/15/87, at 25-28.

184. Transcription of Sporkin's secretary's shorthand
notes of 11/25/85, Ex. SS-1, Hearings, 100-6; Sporkin Test.,
Hearings. 100-6, at 13-14.

185. Makowka Dep., 5/15/87, at 31-32.

186. McMahon Memorandum for the Record, Ex. DRC-
12, //earmgi, 100-11.

187. Makowka Dep., 5/15/87, at 33.

188. Finding, undated, CIIN 103.

189. Note for the Director from Stanley Sporkin, 11/26/
85, Ex. SS-2, Hearings, 100-6.

190. North Notebook, 11/26/85 (misdated 10/26/85) Ex.
OLN-47, Hearings, 100-7, Part III. North had already heard
through Clarridge of McMahon's angry reaction. Just after
midnight on November 26, North wrote: "Call from Clar-
ridge— summoned in by Clair [George]/McMahon — '[t]his

is criminal.' — Told Agency was "freight forwarder' by
Dewey." North Notebook, 11/26/85 (misdated 10/25/85).
Clarridge testified; "I specifically don't remember this tele-
phone call and it [North's note] is inaccurate." Clarridge
Test., Hearings, 100-11, at 19.

191. McMahon Dep., 6/1/87, at 122.

192. McMahon Memorandum for the Record, Ex. DRC-
12, Hearings. 100-11; Memorandum from Casey to Poin-
dexter, 11/26/85, Ex. JMP-18, Hearings, 100-8.

193. McMahon Memorandum for the Record, Ex. DRC-
12, Hearings. 100-11; McMahon Dep., 6/1/87, at 107-08.

194. North Test., Hearings, 100-7, Part I, at 66.

195. North Notebook, 11/26/85, Ex. OLN-69A, Hearings,
100-7, Part III.

196. Israeli Historical Chronology.

197. Allen Dep., 4/2\/&l, at 168.

198. Ledeen Dep., 3/11/85, at 95.

199. Ledeen Dep., 6/19/87, at 100.

200. Ledeen Dep., 3/11/87, at 86-87.

201. According to the Israeli Historical Chronology, the
promises regarding the capability of the missiles were made
by Ghorbanifar, not the Israelis.

202. Secord Test., Hearings, 100-1, at 83-85.

203. Tower Review Board Report at B-179. On Novem-
ber 25, Iran made a third transfer of $20 million (Id.) The
purpose of the two $20 million transfers is unclear, but $40
million is the amount which Ghorbanifar had available for
proposed weapons purchases in late 1985 and early 1986.

204. Israeli Financial Chronology.

205. Israeli Financial Chronology. On November 20,
North reported to Poindexter that "$18M in payment for
the first 80 has been deposited in the appropriate account."
(North PROF Note to Poindexter, 11/20/85 (21:27:39))

206. Israeli Financial Chronology.

207. North Notebook. 11/20/85, Ex. JMP-84, Hearings,
100-8.

208. Israeli Financial Chronology. The $1 million transfer
actually preceded the intermediary's receipt of funds from
Ghorbanifar.

209. Id

210. Id
in. Id

212. North Notebook, 11/19/85, Ex. OLN-69A, Hearings,
100-7, Part III.

213. PROF Note, North to Poindexter, 11/20/85
(21:27:39), Ex. JMP-17, Hearings. 100-8.

214. Israeli Financial Chronology.

215. Israeli Financial Chronology. The Israeli interme-
diary claims that during this same period he paid an addi-
tional $700,000 to various other Iranians and $88,752 to
defray expenses incurred during the operation. Israeli Finan-
cial Chronology.

216. Id

217. Airline Proprietary Project Officer Dep., 6/12/87, at
102-05. The manager of the airline was furious: "I was
really upset that I was put in this situation where I risk the
clandestine layout of the whole company just for a stupid
flight like that." Airline Proprietary Manager Dep., 6/11/
87, at 46.

192

Chapter 1 1

Clearing Hurdles: The President Approves A

New Plan

The difficulties with the November 1985 HAWK
shipment and the failure to secure the release of more
hostages did not end the arms-to-Iran initiative.
Having already traveled down the path of bargaining
for the hostages' lives, the President and his NSC staff
were reluctant to turn back. North quickly began to
plan another arms deal, and the President signed the
Finding that Stanley Sporkin prepared immediately
after the HAWK shipment. North claimed repeatedly
in December that reversing course would cause the
radical captors to kill the hostages.

North had another motivation for continuing the
arms deals. As he explained to Israeli officials in early
December, he wanted to divert profits to benefit the
Contras he was supporting in Nicaragua.

In December 1985 and January 1986, the Secretar-
ies of State and Defense argued aggressively to the
President against trying to trade arms for hostages.
Among other things, they asserted that this initiative
was illegal and contrary to longstanding U.S. public
policy against providing arms to terrorist states and
bargaining with terrorists.

Secretary Weinberger and Secretary Shultz' argu-
ments, together with a first-hand assessment by
McFarlane that the Iranian intermediary was the
"most despicable man" he had ever encountered,
caused the initiative to lose momentum in December.
However, in early January the Israelis approached
Poindexter — who had replaced McFarlane as National
Security Adviser — with a new plan that Poindexter
and North quickly embraced. The President decided
to go forward. He signed an expanded Finding and
directed that the covert activity not be reported to
Congress.

Unlike the 1985 transactions, the President decided
that the weapons for Iran would now come directly
from U.S. stocks. The NSC staff took charge of the
initiative, relegating the Israelis to a secondary role.
Secord was designated as the agent of the U.S. Gov-
ernment in the future transactions. This created the
opportunity to generate profits on the arms sales that
the Enterprise could use for its other covert
projects — including support of the Contras.

The Players Change

John Poindexter — soon to be elevated to National Se-
curity Adviser — and Oliver North met on November
27, 1985, to devise a new plan. Poindexter directed
North to have Richard Secord or Israeli official
David Kimche deliver a message to soothe the Irani-
ans' feeling of having been cheated because the
HAWKs delivered three days earlier did not meet
their expectation. North and Poindexter also discussed
a "change of team" on the operation. North's notes of
the meeting indicate that the United States was pre-
pared to deliver 120 items (probably a new version of
HAWKs) in exchange for all the hostages after the
first delivery and a commitment by Iran of no future
terrorism. *

The change in team included removing Michael
Ledeen, the NSC terrorism consultant, as an interme-
diary. When Ledeen gave Poindexter the message
that the Iranians felt cheated, Poindexter told him,
"We're going to take you off this thing for awhile
because we need somebody with more technical ex-
pertise."^ This was the last time Ledeen spoke to
Poindexter on the Iran initiative, "since from the time
[Poindexter] became National Security Adviser,
[Ledeen] was unable to get an appointment with
him."^

In late November, Secord, Iranian go-between
Ghorbanifar, Kimche, and Israeli arms dealers Al
Schwimmer and Yaacov Nimrodi met in Paris.* Ac-
cording to notes North took when Secord briefed him
on the meeting, Ghorbanifar was "angry," apparently
because the Iranians wanted "something to deal w[ith]
Soviet Recon[naisance]" — such as Phoenix or Har-
poon missiles — rather than the HAWKs that were
delivered.* Ghorbanifar advanced a set of proposals
that "blatantly" called for the swapping of arms for
hostages.* The first proposal, as later related to North
by Secord, provided for a phased exchange of 3200
TOW missiles for hostages:

600 TOWs = 1 release
H -I- 6 hrs later = 2000 TOWs = 3 release
H-f 23 hrs = 600 TOWs = 1 release'
The other options were variations in which other
armaments — such as Maverick air-to-surface missiles,

193

Chapter 1 1

Dragon surface-to-surface missiles, Improved-HAWK
missiles, spares for F-4 air planes, ground artillery,
and bombs — would be substituted for some or all of
the TOWs. Ghorbanifar's proposal also contemplated
arms deliveries beyond the initial swap.® The Paris
group agreed to meet with U.S. representatives in
London on December 6 to pursue these proposals.*

North Looks for Weapons

During the first few days of December, North had
separate meetings with Assistant Secretary of Defense
Richard L. Armitage and Israeli Ministry of Defense
officials. ' ° The purpose of these sessions was to estab-
lish liaison between the Pentagon and the Israelis and
to identify methods of obtaining weapons to ship to
the Iranians or to replenish Israeli stocks following
Israeli shipments." One of the Israeli officials met
Armitage at the Pentagon on December 2.'^ Armi-
tage testified that he could not recall whether he met
with the official or what they discussed. ^^ Armitage
testified that he warned North of resistance to the
plan within the Defense Department, noting that Sec-
retary Weinberger would be "appalled" if he knew
North was dealing with Iranians.'* Nonetheless, after
this meeting, Armitage asked Dr. Henry Gaffney, Di-
rector of Plans, Defense Security Assistance Agency
(DSAA), to prepare a paper on I-HAWKs and I-
TOWs and directed Glenn A. Rudd, Deputy Director
of DSAA, to prepare a paper on the legal methods
for transferring TOW and HAWK missiles to Iran.'^

Rudd's two-page paper, entitled "Possibility for
Leaks," discussed legal methods of selling HAWKs
and TOWs to Iran and outlined the inherent risks of
Congressional disclosure or discovery by the security
assistance community. Rudd concluded there was no
way to transfer the weapons, whether directly to Iran
or through Israel to Iran, under the Arms Export
Control Act without notifying Congress; nor, he said,
was there any way to prevent the security assistance
community of bureaucrats, diplomats, and arms manu-
facturers and dealers from learning of the transfers. ' ^

When he received Rudd's paper, Armitage instruct-
ed Rudd to treat the matter as very confidential and
destroy all drafts. Armitage kept the sole copy in his
personal office safe.'' When Armitage briefed Wein-
berger prior to a December 7, 1985, meeting at the
White House, they reviewed "all the arguments that I
[Armitage] had laid out, plus the legal arguments
which I had mentioned in passing, and that he had
absorbed."'**

•Weinberger did not recall such a meeting, but did not dispute
that it had occurred. Weinberger Test., Hearings, 100-10, at 97. In
any event, at the White House meeting on December 7, he was
well-prepared to attack the plan on a variety of legal and policy
grounds.

North Lays Out A Plan

On December 4, North wrote a PROF message to
Poindexter setting out the current situation and pro-
posing a new arms-for-hostages transaction. He de-
scribed the "extraordinary distrust" the Iranians de-
veloped because Schwimmer and Ledeen had prom-
ised that the missiles shipped in November could fiy
high enough to stop Soviet reconnaissance flights. He
said, "None of us [Kimche, Meron, Secord] have any
illusions about the cast of characters we are dealing
with on the other side. They are a primitive, unso-
phisticated group who are extraordinarily distrustful
of the West in general and the Israelis/U.S. in particu-
lar."'^

While acknowledging "a high degree of risk" in
continuing the operation, North emphasized, "we are
now so far down the road that stopping what has
been started could have even more serious repercus-
sions." He exhorted Poindexter to press on in a way
that suggested the United States was already subject
to Iranian extortion:

If we do not at least make one more try at this
point, we stand a good chance of condemning
some or all [of the hostages] to death and a
renewed wave of Islamic Jihad terrorism. While
the risks of proceeding are significant, the risks of
not trying one last time are even greater. ^°

North outlined the proposal slated for the upcom-
ing meeting in London. He said the "package" would
comprise deliveries from Israel of "50 I HAWKs w/
PIP (product improvement package) and 3300 basic
TOWs" and reported that the Iranians had already
deposited $41 million to pay for these items and that
this sum was "now under our control."^' The sched-
ule that North laid out made plain that this would be
an unadulterated swap of arms for hostages:

H-hr: 1 707 w/300 TOWs = 1 AMCIT
H+lOhrs: 1 707 (same A/C) w/300 TOWs = 1
AMCIT

H+16hrs: 1 747 w/50 HAWKs & 400 TOWS =
2 AMCITs

H-h20hrs: 1 707 w/300 TOWs = 1 AMCIT
H-h24hrs: 1 747 w/2000 TOWs = French Hos-
tage ^^

As it had been previously, the schedule was set up so
that the Americans had to deliver weapons before the
Iranians would produce any hostages.

North also reported to Poindexter that "replenish-
ing Israeli stocks" is "probably the most delicate
issue." He proposed that the Israelis purchase replace-
ments with cash, rather than with Foreign Military
Sales credits. However, he ignored the legal question
about third-country transfers under the Arms Export
Control Act. Lastly, North told Poindexter that be-

194

Chapter 1 1

sides themselves, only National Security Adviser
Robert McFarlane and Duane Clarridge of the CIA
had a complete understanding of the full plan.^^ Clar-
ridge has denied that he and North discussed this
plan, and said that the appearance of his name in
North's PROF message is probably due to North's
"tendency to use my name with McFarlane and Poin-
dexter because if I said it was a good idea, then they
tended to think it was a good idea."^*

The following day. North put the proposal into an
unsigned, unaddressed memorandum. This memoran-
dum made clear that all 3,300 TOWs and all 50 Im-
proved HAWK missiles would come from Israel's
"prepositioned war reserve."^* North's memorandum
proposed not only that Congress not be notified about
the operation and replenishment, but also that there
be a cover story to explain why Israel needed to buy
weapons:

The Israelis have identified a means of transfer-
ring the Iranian provided funds to an Israeli De-
fense Force (IDF) account, which will be used
for purchasing items not necessarily covered by
FMS. They will have to purchase the replenish-
ment items from the U.S. in FMS transaction
from U.S. stocks. Both the number of weapons
and the size of the cash transfer could draw at-
tention. If a single transaction is more than
$14.9 M, we would normally have to notify Con-
gress. The Israelis are prepared to justify the large
quantity and urgency based on damage caused to
the equipment in storage.^^

Although the Finding CIA Counsel Stanley Sporkin
drafted in November contemplated delayed Congres-
sional notification. North's proposal represented an
entirely different approach: structuring the transaction
so as to evade Congressional reporting altogether.
As North was putting together his plan for a new
arms-for-hostages deal, the CIA stood by to provide
support for more flights into Iran. In the days after
the HAWK shipment, Clarridge and CIA stations in
Countries 16 and 18 exchanged numerous cables relat-
ing to clearances for anticipated flights from Israel to
Iran transiting at Country 18 and overflying Country
16.2' On November 27, Clarridge told the stations
that the "operation is still on but we have encoun-
tered delays" and that "whatever was supposed to
happen after the first sortie did not happen and we
are regrouping. "^^ On December 3, he reported to
them: "We are still regrouping. Key meetings of prin-
cipals will take place this weekend with earliest possi-
ble aircraft deployments sometime mid to late week of
December 8."29 Clarridge left the United States on

other business in early December. However, before
leaving he told his deputy to expect another flight to
Iran on a project being run by the NSC for which the
CIA would be asked to obtain clearances. ^° (For an
organizational chart of the CIA in 1985, see Figure
11-1.)

The President Signs a Finding

McFarlane returned to his office on December 3 for
the first time after the Geneva summit. He had al-
ready told the President of his decision to resign, and
he tendered his resignation the following day.^' On
December 3 and 4, McFarlane had several lengthy
meetings with Poindexter. However, he does not
recall any discussion of the status of the covert action
Finding^^ — which CIA Director William Casey had
delivered to Poindexter with a recommendation that
the President sign it and about which McMahon had
been anxiously pestering Poindexter for days.^^

On December 5, in one of his first acts as National
Security Adviser, Poindexter presented the Finding to
the President at his daily national security briefing.
The President signed it.^* Poindexter's notes of his
daily briefing of the President refer to the Finding.'^
Chief of Staff Donald Regan was present at this brief-
ing, but testified that he has no recollection of the
Finding or the President's signing it:

I have racked my brains since I've read about it
in the press, that you have had testimony to that
effect. I've checked with my members of the
staff, the White House staff who were working
with me at the time, as to whether they remem-
ber it. No one can remember seeing that docu-
ment.^®

Poindexter testified that he was never happy with
the Finding because it failed to mention any objec-
tives other than trading arms for hostages. He said he
submitted it to the President without the staffing and
review that normally accompanies a Finding. In fact,
other than Casey and McMahon — who both urged
that the Finding be signed — Poindexter did not recall
discussing it with anyone else.^'*

♦McMahon recalled that Sporkin told him he was going to con-
sult with the Department of Justice and the White House counsel
before finalizing the Finding. (McMahon Dep., 9/2/87, at 52)
North testified that he believed that Meese had "seen and ap-
proved" this Finding before it was signed. However, he based this
not on personal knowledge but on his understanding that "[ajll
Findings are reviewed by the Attorney General." (North Test.,
Hearings, 100-7, Part I, at 71-72) Both Poindexter and Meese testi-
fied that Meese was not consulted. (Poindexter Test., Hearings, 1(X)-
8, at 125; Meese Test., Hearings, 100-9, at 8-9).

195

Chapter 1 1

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196

Chapter 1 1

Poindexter testified that, to him, the primary signifi-
cance of the Finding was its retroactivity — a feature
that was highly unusual, if not unique.* He said,
"There really wasn't a forward-looking aspect to the
Finding. "3* However, at the time that the Finding
was signed, Poindexter was considering the detailed
plan that North had presented for further arms sales,
and this was the subject of a meeting two days later
with the NSC principals.

The original of the signed Finding was kept in Paul
Thompson's safe at the NSC.^^ Contrary to normal
practice, the CIA and other agencies were not given
a copy. Indeed, no copies were made. McMahon said
that he knew of no other occasion when this oc-
curred.''°

When the Iran initiative was unraveling almost a
year later, Poindexter destroyed this Finding. He be-
lieved that if the Finding came to light it would cause
"significant political embarrassment" to the President
because it would reinforce the emerging picture that
the United States had traded arms for hostages.*' In
addition, the Finding was evidence of the Administra-
tion's contemporaneous knowledge of the HAWK
shipment, a fact that Poindexter, Casey, North, and
others sought to conceal in November 1986.

Poindexter Briefs Shultz

The same day the President signed the Finding,
Poindexter briefed Secretary of State George Shultz
by telephone on the status of the Iran initiative. The
briefing — Shultz's first from Poindexter on the sub-
ject— was not complete: Poindexter did not even men-
tion the Finding. Not knowing he was hearing only
part of the story, Shultz commented at the time to an
aide, "he [Poindexter] told me more than I had
known before of what went on in the latter half of
1985 and I felt this was a good thing and we were off
to a good start.'"* 2 Shultz told Poindexter that the
Iran initiative was a "very bad idea'"*^ and that "[w]e
are signaling to Iran that they can kidnap people for
profit."**

That same day, December 5, CIA Deputy Director
John McMahon convened a meeting with several top
CIA officials, including Robert Gates, Edward Juch-
niewicz, and Chief of the Near East Division (C/NE).
McMahon said that a meeting with the President was
slated for the weekend to "take stock" of U.S. efforts
to free hostages and expand ties with Iran. He re-
quested that various facts relating to Iran's military
strength and the status of the Iran-Iraq war be pulled
together. Someone at the meeting reviewed what had

* Poindexter testified that he could recall only "one or possibly
two other findings that had a retroactive nature to them. I, frankly,
was always uncomfortable with that, because I thought it didn't
particulary make a lot of sense." (Poindexter Test.. Hearings. 100-8
at 18) In Executive Session, Poindexter testified that after further
thought, he could not recall any other retroactive Findings. (Poin-
dexter Test., Executive Session, 8/6/87, at p. 8).

already happened, including the November 24 ship-
ment and the preparation and signing of the Finding,
and the planning for more shipments, including
North's chartering of planes and his upcoming trip to
London for more talks. *^

North Raises Contra Diversion with
Israelis

On the day after the President signed the Finding,
December 6, North remarked during a meeting with
Israeli officials that the United States wanted to use
profits from the upcoming arms sale to Iran to fund
U.S. activity in Nicaragua. The meeting, which was
held in New York, concerned replenishment of Israeli
TOWs. One of the Israeli officials made handwritten
notes of this meeting on December 12, 1985. Accord-
ing to these notes, the Israelis were told by North
that not only did the United States have no budget to
pay for the 504 TOW missiles (and planned on the
Israeli Government's receiving this money from the
Israeli intermediaries), but that in the future the
United States wanted to generate profits from this
transaction in order to finance part of its activity in
Nicaragua. According to the Israeli Historical Chro-
nology, North had a position paper with him at the
meeting that he said was to be presented to the Presi-
dent at a meeting the following day.*®**

North testified that he recalled no such conversa-
tion, though he could not rule it out:

My recollection was that the first time it [the
diversion] was specifically addressed was during
a [later] meeting with Ghorbanifar. It may well
have come up before, but I don't recall it.*'

North testified that his "clearest recollection" was
that the notion of using the residuals for the Contras
was first suggested by Ghorbanifar in January 1986. *8
North flew from New York to London on Decem-
ber 6 and met with Secord, Ghorbanifar, Kimche,
Schwimmer, and Nimrodi to discuss the 50-HAWK,
3,3(X)-TOW proposal that North had previously pre-
sented to Poindexter.** Ghorbanifar acknowledged
that the Iranians were having increasing difficulty
maintaining control over the Hizballah captors and
pressed vigorously for a quick renewal of arms ship-
ments.^"

The President and His Advisers Review
the Initiative

While North was moving full-steam ahead in the
negotiations, the President and his top national securi-
ty advisers debated the Iranian initiative at an infor-

•• Two of the Israeli officials at the December 6 meeting, who
did not take notes, did not recall the remarks of North recorded by
the other Israeli official in his notes. Israeli Historical Chronology.

197

Chapter 1 1

mal meeting on the morning of Saturday, December
7, in the White House residence. Present were the
President, Secretaries Shuhz and Weinberger, McMa-
hon (sitting in for Casey, who was out of town),
McFarlane, Poindexter, and Regan.*' According to
McFarlane, the purpose of the meeting was "to
review what has taken place since the President's
approval of August and the negative viewpoints of
the Secretaries of State and Defense to the effect that
we hadn't achieved our purpose, and [that the initia-
tive] was degenerating into an arms for hostage ar-
rangement."*- The discussion that ensued "was now
more specific than it had been in August, and it was
about a specific plan" to trade weapons for hos-
tages.*'

Secretary Shultz, Secretary Weinberger, and Regan
all voiced strong opposition to the initiative. Secre-
tary Shultz advanced multiple policy reasons for not
pursuing it. His "talking points" for the session stated
that the initiative would "negate the whole policy" of
not making "deals with terrorists"; that he doubted it
would buy the United States influence with moderates
in Iran; that it would undoubtedly become public and
"badly shakeQ" moderate Arabs when they learned
that the United States was "breaking our commitment
to them and helping the radicals in Tehran fight their
fellow Arab Iraq"; and that U.S. allies would be
"shocked if they knew we were helping Iran in spite
of our protestations to the contrary."*''

Secretary Weinberger also forcefully voiced oppo-
sition, including on legal grounds. He said the pro-
posed arms deal would violate both the U.S. embargo
against the shipment of arms to Iran and the restric-
tions on third-country transfers of U.S. -provided arms
in the Arms Export Control Act. He later testified:
"[T]here was no way in which this kind of a transfer
could be made if that particular Act governed."**

Secretary Weinberger also pressed many of the ar-
guments made by the Secretary of State:

I ran through a whole group [of specific objec-
tions] and raised every point that occurred to me,
including the fact that we were at the same time
asking other countries not to make sales of weap-
ons to Iran, that there was no one of any reliabil-
ity or, indeed, any sense with whom we could
deal in Iran and the government, and that we
would not have any bargain carried out, that if
we were trying to help get hostages released,
why there would be a real worry that the matter
would not be held in any way confidential, that
we would be subjected to blackmail, so to speak,
by people who did know it in Iran and else-
where, and that we had no interest whatsoever in
helping Iran in any military way, even a minor
way, and that in every way it was a policy that
we should not engage in and most likely would
not be successful.*^

Secretary Weinberger told the President that the initi-
ative "wouldn't accomplish anything, and that they
[the Iranians] would undoubtedly continue to milk
us."*'' McMahon argued that the long-range rationale
of the arms transactions — to bring about a more mod-
erate regime in Iran — was unfounded.

I said that I was unaware of any moderates in
Iran, that most of the moderates had been slaugh-
tered by Khomeini, that whatever arms we give
to these so-called moderates they will end up
supporting the present Khomeini regime and they
would go to the front and be used against the
Iraqis and that would be bad.***

McMahon "was convinced that all of this was an
arms for hostage arrangement, no matter what you
called it. . . ."*^ There is evidence that McMahon
also argued that Ghorbanifar was unreliable.*"

The President, along with McFarlane and Poin-
dexter, spoke in favor of continuing the initiative.®'*
According to Secretary Shultz:

The President, I felt, was somewhat on the fence
but rather annoyed at me and Secretary Wein-
berger because I felt that he sort of — he was very
concerned about the hostages, as well as very
much interested in the Iran Initiative.®^

Secretary Shultz testified that the President was
"fully engaged" in the conversation and frustrated
with the situation.®'

In response to Weinberger's legal objections, Shultz
recalls that the President responded: " 'Well, the
American people will never forgive me if I fail to get
these hostages out over this legal question,' or some-
thing like that." Weinberger replied: " '[B]ut visiting
hours are Thursday', or some such statement."®***

The participants left the meeting with different
views about whether the initiative would proceed.
According to Poindexter, the President wanted to
pursue every means of trying to get the hostages
back.®* But McFarlane recalled that the President,
with disappointment and frustration, approved the po-
sition of no more arms sales to Iran, at least pending
the London meeting.®® McMahon said that no deci-
sion was made, and that the President left the meeting
to do his Saturday afternoon radio broadcast, telling
his advisers to "talk more on this and see what ought
to be done."®' Secretary Weinberger testified that he
believed the initiative had been put to rest once and
for all. Indeed, he returned to the Pentagon after the

•Casey was also in favor of continuing the initiati\ e al this point,
according to Poinde.xter. Poindexter Test.. Hearings. 100-8. at 25.

••Shultz testified that this "banter" between the President and
Secretary Weinberger did not ha\'e the tone of the President advo-
cating violating the law, but rather "was the kind of statement that
I aiti sure we all make sometimes when we are frustrated " Shultz
Test., Hearings. 100-9. at .^2.

198

Chapter 11

meeting and told his military aide that "this baby had
been strangled in its cradle, that it was finished."**
And Secretary Shultz "wasn't sure" where things
stood after the meeting, but believed that he and
Secretary Weinberger had prevailed.^*

A striking aspect of the December 7 meeting was
what was not discussed: According to McMahon and
Weinberger, neither the November shipment of
HAWK missiles, nor the Finding that was signed just
two days earlier, came up.''°

Despite varying impressions of the meeting, the
President directed McFarlane to go to London to
meet with Ghorbanifar and others. Poindexter testi-
fied that the purpose was to "check out" the Israeli
channel to Iran so that the President could have first-
hand information on which to base a decision."*
McFarlane testified that his purpose was to stress to
Ghorbanifar that the United States was open to politi-
cal discourse with Iran but no arms sales. '^ But there
is evidence of a more specific purpose: McFarlane
was to try to talk Ghorbanifar into arranging a release
of the hostages outside the framework of an arms
deal, or at least before any more arms deliveries.'^
Poindexter proposed at one point during the meeting
that McFarlane also have authority, if the Iranians
rejected this approach, to inquire whether the British
Government would perform the replenishment sales
to Israel that Weinberger had argued the United
States could not make.''* There is no evidence that
such an approach was made.

McFarlane Meets Ghorbanifar in
London

On December 8, McFarlane joined Kimche, Secord,
North, Nimrodi, and Ghorbanifar in London. '^
McFarlane presented an agenda that focused on a
political opening with Iran and on areas of possible
common interests between the United States and Iran.
In contrast, Ghorbanifar wanted to talk only about
specified numbers of TOW missiles for each hos-
tage.'^ Ghorbanifar explained that the Iranians were
very angry over receiving the wrong kind of HAWK
missiles. McFarlane responded: "[G]o pound sand,
that is too bad."'" McFarlane was "revolted" by the
bargaining and found Ghorbanifar to be a "borderline
moron."''*

North's view of the meeting was slightly different.
He thought McFarlane was telling Ghorbanifar that
there could be no more arms sales until after the
hostages were released, not that McFarlane was pre-
cluding arms sales. ''^ Once again, as the initiative
began to come apart. North raised the specter of the
death of the hostages in retaliation for a U.S. decision
to break off the negotiations. In a memorandum to

McFarlane and Poindexter, he wrote: "[A]ll it would
take for the hostages to be killed is for Tehran to
'stop saying no' [to the captors]. "*°

McFarlane, North, and Secord flew back to Wash-
ington together on December 9. On the way back,
McFarlane said he was very unhappy with Ghorbani-
far's arms-for-hostages pitch. He viewed Ghorbanifar
as a businessman interested only in profit and "one of
the most despicable characters he had ever met."*'

North was unhappy with McFarlane's negative re-
action*^ and that day wrote an "eyes only" memoran-
dum to McFarlane and Poindexter entitled "Next
Steps." In it. North reviewed options that he saw as
necessary "[i]f we are to prevent the death or more of
the hostages in the near future."*^ After reviewing
the problems of Ghorbanifar's untrustworthiness,
Schwimmer's arrangement of previous deals that an-
gered the Iranians and left Israel with inadequate
funds for replenishment, and the United States' "lack
of operational control over transactions with Ghor-
banifar," North initially set out four options: the arms-
for-hostage swap discussed in London, an Israeli de-
livery of 400 to 500 TOWs to Iran to restore "good
faith," a military raid, and "do nothing." North sum-
marily rejected the "do nothing" approach:

Very dangerous since U.S. has, in fact, pursued
earlier Presidential decision to play along with
Gorbanifahr's plan. U.S. reversal now in mid-
stream could ignite Iranian fire — hostages would
be our minimum losses.**

North testified that Casey shared his view that termi-
nating the negotiations would lead to the death of the
hostages.*^

At the end of the memo. North described a "fifth
option": the United States would directly sell arms to
Iran, acting pursuant to a Presidential Finding and
using Secord as an operational "conduit."*^ The Iran
initiative was restructured over the next few weeks to
closely resemble this 'Tifth option." Moreover, using
the Enterprise as a conduit for the arms sales pro-
ceeds facilitated the diversion of funds to the Contras
that North had mentioned to the Israelis only a few
days earlier.**

McFarlane Briefs the President on tlie
London Meeting

On December 10, McFarlane briefed the President
on the London meeting. Also present were Casey,

•In fact. Ihe United States already had substantial first-hand in-
formation on Ghorbanifar from both CIA officials and Ledeen.

••On the same day that North prepared this "Next Steps" memo-
randum, he also met with the General Counsel of the CIA, Stanley
Sporkin. (North Calendar. 12/9/85. N336) Sporkin recalls that
McMahon was to attend this meeting as well and that the purpose
was to discuss McMahon's desire that the CIA's role in the Iran
initiative be eliminated or reduced. Sporkin Test., Hearings. 100-6,
at 127-128.

199

Chapter 1 1

Poindexter, North, and Regan.*'* McFarlane empha-
sized that Ghorbanifar lacked integrity and that the
initiative was unlikely to bear fruit if he remained the
channel to the Iranians.** At the same time, McFar-
lane or North said that abandoning the initiative
would risk the lives of the hostages.*^ The President
seemed influenced by this concern.*"

No decision was reached about the future of the
initiative, and again there were differing perceptions
about what would happen. The President continued
to hope that its continuation might lead to freedom
for the hostages. McFarlane recalled that the Presi-
dent asked,

[W]hy couldn't we continue to let Israel manage
this program, and was expressing and searching
for, I think understandably, ways to keep alive
the hope for getting the hostages back, and it is
quite true that the President was profoundly con-
cerned for the hostages.*'

Casey left the meeting with "the idea that the Presi-
dent had not entirely given up on encouraging the
Israelis to carry on with the Iranians."*^

I suspect he would be willing to run the risk and
take the heat in the future if this will lead to
springing the hostages. It appears that Bud
[McFarlane] has the action.*^

Poindexter testified that the President was disappoint-
ed that Ghorbanifar appeared to be so unreliable, but
was reluctant to abandon the project.** In contrast.
State Department officials were left with the impres-
sion that the initiative was dead. Under Secretary of
State Michael Armacost reported to Shultz, who was
in Europe, that "Bud's recommendation, upon return-
ing from his latest discussions, was to drop the enter-
prise. That has now been agreed."*^

Late that evening, Clarridge's deputy, who was the
acting Chief of the CIA's European Division in Clar-
ridge's absence, cabled CIA stations in Countries 16
and 18 to inform them that there would be no more
flights, at least in the short run. He wrote:

As late as last night the negotiating was still
going on. We have just received word now that
the deal is apparently all off. Don't know why
yet or whether there is a possibility that it will
revive in the future. . . . [F]or now it looks like
we are standing down.*®

Poindexter to North: Keep Trying

Following the briefing, Poindexter had the clear im-
pression that the President wanted to continue the
program, and he moved to put it "on a sounder foot-

•Some of the participants place Weinberger at this meeting, but
he has no recollection of it.

mg.

Casey too was "a very strong advocate of

proceeding."** Poindexter told North to continue his
efforts to keep the Iran initiative moving forward.**
This involved at least three steps: first, preparing a
fully staffed and more comprehensive covert action
Finding; second, substituting a new team — to be lead
by North and Israeli Amiram Nir — to replace Ledeen,
Schwimmer, and Nimrodi; and third, finding a legal
way to sell arms to Iran. On this last point, Poin-
dexter asked North to work with "the appropriate
people at CIA and in [Attorney General] Ed Meese's
office, if not Ed Meese himself" '°°

The CIA Evaluates Ghorbanifar

Ledeen, with North's approval, aggressively urged
the CIA to establish an intelligence relationship with
Ghorbanifar. In early December, Ledeen met with
the CIA's Duane Clarridge and Charles Allen. He
told Allen the history of the Iran initiative, including
the HAWK missile debacle. He then explained why
he believed Ghorbanifar had contacts that could help
the CIA gain insights into the Iranian regime and
assist its counterterrorism efforts. Ledeen said Ghor-
banifar was "a good fellow who is a lot of fun" and
"praised [him] to the hilt."'°'** Allen passed the
information to the CIA's Near East Division for eval-
uation.'°^

After meeting with Ghorbanifar in mid-December
in Switzerland, Ledeen met with Casey on December
19 and repeated his arguments for dealing with the
Iranian. Casey reacted favorably but indicated a need
to clear up the controversy over Ghorbanifar's poor
record with the CIA.i°='

Casey called Deputy Director for Operations Clair
George and instructed him to arrange a new evalua-
tion of Ghorbanifar.'"* On December 22, the Chief
of the Iran branch at the CIA interviewed Ghorbani-
far at Ledeen's home. Ledeen and Allen were there
and North showed up near the end. Ledeen told the
Chief of the Iran branch that Ghorbanifar is "a won-
derful man . . . almost too good to be true." The
conversation focused on terrorism and leading person-
alities in Iran.'°^

The Chief of the Iran branch reported to his CIA
superiors that he was "only further convinced of the
untruthfulness or lack of trust that we could put in
Mr. Ghorbanifar." They decided that Ghorbanifar
should be given a polygraph test, and Ghorbanifar
agreed.'"® After hearing the briefing on Ghorbanifar,
Casey sent the President an "eyes only" letter stating
that one of the ongoing initiatives to free the hostages
was a plan involving Ghorbanifar. Casey wrote of

••At this time, Ledeen also outlined Ghorbanifar's proposal for
an anti-Libyan "sting" operation in which the assassination of a
leading opponent of Qadhafi would be staged and later revealed to
be faked. Ledeen Dep,, 6/22/87, at 167, 172-74.

200

Chapter 1 1

Ghorbanifar: "He has 3 or 4 scenarios he would hke
to play out."'"''

The decision to consider continued reliance on
Ghorbanifar was remarkable. Previously, Agency offi-
cials had found his information so marked by deceit,
lies, and self-serving proclamations that it had issued a
"burn notice" warning the U.S. intelligence communi-
ty that he could not be trusted and should not be
dealt with.'"" Moreover, the information Ghorbanifar
was providing was almost impossible to corroborate.
He alone was explaining the Iranian position on the
hostage issue. The last deal he had helped arrange,
the November HAWK shipment, had been a com-
plete disaster.

Acceleration of the Initiative:
January 1986

Israelis Add a New Element to the
Negotiations: The Southern Lebanon
Army Prisoners

In mid-December, 1985, Amiram Nir, adviser to the
Prime Minister of Israel, became involved in the Iran
operation; he later became the liaison to the Ameri-
cans and Ghorbanifar. Nir, who reportedly was un-
aware of the secret Iranian arms deals prior to this
time, had spent the last month exploring whether
American hostages in Lebanon would be released if
the Southern Lebanon Army freed Shiite prisoners.
Nir proposed to his superiors that he discreetly get
the reaction of the Americans to a hostage release
initiative along these lines. ^"^

After being briefed on the U.S. -Israeli Iran oper-
ation, Nir began work on a plan linking that operation
with his own plan. He presented to high-ranking Is-
raeli officials a proposal that included: (1) a direct sale
of TOWs out of Israeli arsenals to Iran and the simul-
taneous release of American hostages; (2) a purchase
by Israel from the United States of replacement arms,
using the proceeds from the Iran sale; (3) exerting
Israeli influence to obtain the release of prisoners held
by the Southern Lebanon Army; (4) the handling of
all logistics by the Israelis to enable the Americans to
deny any involvement; and (5) the construction of a
convincing cover story to explain the release of the
hostages and the prisoners. ''° Nir then went to
London in late December to meet, for the first time,
with Ghorbanifar and one of the Israeli intermediar-
ies. The three hammered out a detailed — but tenta-
tive— plan embodying these elements. The Israeli
Government authorized Nir to present this plan to the
United States but made clear that the transaction
could occur only with U.S. agreement to the entire
concept and that Israel would assist in whatever way
the Americans requested, but not play a leading
role. 1 ' >

Nir Comes to Washington

On January 2, 1986, Nir flew to Washington to
meet with Poindexter and North at the request of
Prime Minister Peres. "^ In an opening meeting with
North in a hotel, Nir said that he had an idea about
how to improve the progress of the Iranian oper-
ation.'''' Nir met later that morning with Poindexter,
North, and Don Fortier, Poindexter's deputy, and laid
out his plan. ' ' * The central features of the proposal
were recorded by Poindexter in his notes: the Israelis
would ship to Iran 4,000 "unimproved TOWs"; after
the delivery of the first 500, all five American hos-
tages would be released; simultaneously the Southern
Lebanon Army would release "20-30 Hizballah pris-
oners who don't have blood on their hands." "^ If the
American hostages were released, Israel would ship
to Iran the other 3,500 TOWs and Iran would "con-
firm" its agreement for "no more hostages [and]
terror."!'^ Under the plan, the United States would
replace the TOWs only if the hostages were released.
If the hostages were not released, replenishment was
not required and Israel would have lost 500 TOWs. If
they were freed, then the United States would replace
the 4,000 TOWs, plus the 500 TOWs the Israelis had
shipped in 1985. '''

Rapid replacement of the TOWs was of particular
concern to Nir. He emphasized that the number of
TOWs would decrease Israel's arsenal when tension
with Syria increased the urgency to keep Israel's arse-
nal at full strength. To address Israel's concerns about
readiness, Nir called for the United States to "preposi-
tion" substitute TOWs near Israel as soon as possible
in case a sudden need for them occurred. Thereafter,
the United States was to proceed with "regular steady
replacement" of the TOWs by sale to Israel. The
Israelis also wanted a U.S. commitment that, if the
operation were exposed, the United States would say
it knew of the operation and did not object. ' ' *

Nir and North Discuss Use of Residuals

Nir's proposal included another feature: generating
profits that could be diverted to other covert projects.
This was not a new concept: Nir and North had
talked generally about joint covert operations in No-
vember, and North had told other Israelis in Decem-
ber that the United States wanted to use profits from
the arms sale under discussion at that time to finance
U.S. activities in Nicaragua.

Poindexter recalled that at either the January 2
meeting or another meeting with Nir a few days later,
"[t]here also was a very brief, general discussion
about some other cooperative activities.""^ North —
who talked alone with Nir several times during the
first days of January — testified to a more specific dis-
cussion about uses for the "residuals":

201

Chapter 1 1

I recall that we met New Year's day or the day
after . . . and it was his [Nir's] proposal at that
point to use the profits by the arrangement they
envisioned, selling Israeli TOWs at a profit, re-
plenishing them with part of that money, using
part of that money for other operations. ... I do
not believe he mentioned contras at that meeting,
but my recollection is we began to talk in early
January about other joint U.S. -Israeli, and in
some cases unilateral Israeli operations of a cer-
tain kind ... .120

A New Finding Is Prepared

Poindexter realized from the start that if the United
States embraced the Nir proposal for revitalizing the
Iranian initiative, a new covert action Finding would
be essential. In notes that he wrote on a fiight to join
the President in California immediately after the Janu-
ary 2 meeting he jotted: "Covert Finding — already
pregnant for 500."^^' Poindexter testified that the
"500" was a reference to the TOWs that Israel had
already shipped to Iran with U.S. approval but with-
out a Finding. '22

On the same day that Nir advanced his new pro-
posal. North contacted Sporkin to set in motion the
drafting of a new covert action Finding to authorize
the activity. North told Sporkin he wanted a more
expansive Finding than the one Sporkin prepared in
November. He said it should "cover certain other
activities, that there was a broader concept to the
relationship that was being considered with Iran."'23

A first draft of the new Finding, prepared by a
CIA staff lawyer who was told nothing of the No-
vember Finding, '24 did not mention the objective of
gaining the release of American hostages. It did au-
thorize shipment of arms to Iran. This draft included
the standard provision calling for the Director of
Central Intelligence to report the activity to the Intel-
ligence Committees of Congress. '25

On January 3, Sporkin edited the draft Finding,
making several significant changes. First, he put the
provision calling for Congressional notification in
brackets, and above it inserted new language directing
that the Director instead "refrain from reporting . . .
until I [the President] otherwise direct." Sporkin
made this change to present squarely to the President
the alternatives on notification. Sporkin also changed
the description section of the Finding. He apparently
sent this draft to North during the day on January
3. '26 The draft contained no references to hostages.

North asked Sporkin to meet with him that night to
work on the Finding. Before agreeing to this, Sporkin
tracked down Casey — who was vacationing in Flori-
da— and asked if he should do so. Casey told Sporkin
that he knew nothing about what was going on, but
that Sporkin should meet North and keep Casey in-
formed.'2''

At the meeting. North showed Sporkin another
draft of the Finding. '^s xhe preamble of the North
draft included only the nonnotification alternative, a
modification that Poindexter, and — North assumed—
the President, approved. '^^ Among other changes
were inclusion of a reference to "third parties" and a
reference to "USG" (U.S. Government) — rather than
just the CIA — as the entity authorized by the Finding
to act.'^° Sporkin understood "third parties" to refer
"to the people that were working with Iran, Ghor-
banifar," as well as the Israelis who, Sporkin learned,
were involved in the initiative in November.'" The
North draft, like the Sporkin draft, contained no ref-
erence to the central quid pro quo for the arms
sales — the hostages.

Later that evening or the following day. North
called Casey, and Casey's reaction to the renewed
initiative was positive. North then reported to Poin-
dexter that Casey "thought the Finding was good and
that this is probably the only approach that will
work."' ^2

The next day, North drafted a cover memorandum
for Poindexter to send to the President with the Find-
ing. North wrote that Nir had proposed a plan "by
which the U.S. and Israel can act in concert to bring
about a more moderate government in Iran." He said
that under the plan, this goal was to be achieved by
providing "military materiel, expertise and intelli-
gence" to "Western-oriented Iranian factions." Pro-
viding such items to moderates would enable them to
come to power by "demonstrat[ing] their credibility
in defending Iran against Iraq and in deterring Soviet
intervention," North said. '^^

North's draft cover memorandum described the
role to be played by the United States under the plan:

As described by the Prime Minister's emissary
[Nir], the only requirement the Israelis have is an
assurance that they will be allowed to purchase
U.S. replenishments for the stocks that they sell
to Iran. Since the Israeli sales are technically a
violation of our Arms Export Control Act em-
bargo for Iran, a Presidential Covert Action
Finding is required in order for us to allow the
Israeli sales to proceed and for our subsequent
replenishment sales. '^^

North's memorandum thus makes plain that he under-
stood that, without a Finding, the sale of U.S. -made
weapons by Israel to Iran would violate the Arms
Export Control Act.

The memorandum also stated that if the plan were
approved and the Finding signed, Israel would "uni-
laterally" commence delivery of TOW missiles to
Iran in January, the United States would replenish
Israeli stocks in less than 30 days, and five American
hostages in Beirut would be released. '^^ The memo-
randum made no reference to Nir's proposal regard-
ing release of dozens of prisoners held by the South-

202

Chapter 1 1

ern Lebanon Army, nor to the plan to use profits for
other covert operations.

On Sunday, January 5, North, Sporkin, and Casey
met at Casey's home to discuss the new plan and the
draft Finding. Casey read the draft Finding along
with a draft cover memorandum and voiced his ap-
proval.'^^ Sporkin, however, felt uncomfortable
about omitting the hostage release objective from the
Finding and raised this concern with Casey. Accord-
ing to Sporkin, North explained to Casey that the
State Department did not want this in the Finding
because it would create an appearance of a "hostage-
for-arms shipment" and therefore would not "look
right."* Sporkin argued that the hostage release
aspect of the Finding was a "very important element"
that "ought to be in there." Casey agreed.'^''

Apparently around this time, North also revised the
cover memorandum to the President. He deleted the
statement that the contemplated Israeli sales were a
"technical violation" of the Arms Export Control Act
and included a sentence expressly recommending that
"you exercise your constitutional prerogative to
withhold notification of the Finding to the Congres-
sional oversight committees until such time that you
deem it to be appropriate."*^*

On Monday, January 6, North hand-carried the
draft Finding and cover memorandum to Attorney
General Meese for his review. North discussed it with
the Attorney General and his deputy, D. Lowell
Jensen. Attorney General Meese approved the Find-
ing and the "procedures we were using," according to
North. *^^ Attorney General Meese does not recall
the meeting, but is "satisfied that it took place. "''"'
Jensen testified that North presented the papers for
"informational" purposes only, and that the Attorney
General was not asked for, and did not offer, any
opinion.'*'

The President and Advisers Consider the
New Proposal

At the morning national security briefing on Janu-
ary 6, Poindexter told the President of the Nir pro-
posal.'''^ The Vice President, Regan, and Don For-
tier were also present.'*^ The President "indicat[ed]
he was in general agreement" with the proposal and
decided there would be a full NSC meeting the fol-
lowing day on the proposal and the Finding. Poin-
dexter presented the President with the January 6
draft of the Finding at this briefing. Poindexter did
not intend that it be signed at this point because it had
not yet been "fully staffed" and discussed among the
President's national security advisers. But the Presi-
dent, not realizing that the Finding was only a pro-
posal for discussion, read it and signed it, reflecting
his agreement. '■*■*

• Secretary of State Shultz, in fact, had argued at the December
7 meeting against any arms-for-hostages trade.

At the full NSC meeting on January 7 were the
President, the Vice President, Secretaries Shultz and
Weinberger, Attorney General Meese, Casey, Poin-
dexter, and Regan. '""^ While Secretaries Weinberger
and Shultz continued to object strenuously, all others
favored the plan or were neutral.'*® Secretary Wein-
berger, who said he had no advance knowledge about
the subject, found it to be "very much a re-run" of
the December meeting, except that now the President
decided to go forward with the plan:

I made the same points, George Shultz made the
same points. Bill Casey felt that there would be
an intelligence gain, and there was also talk of
the hostages as one of the motivating
factors, . . . but the responses of the President
seemed to me to indicate he had changed his
view and had now decided he wanted to do
this.'*''

There is no record that the Vice President expressed
any views.

At the meeting, Attorney General Meese provided
a legal opinion that the arms sales could be done
legally with Israel making the sales and the United
States replenishing Israel's stocks.'** Secretary Wein-
berger again objected that the proposed transaction
would violate the Arms Export Control Act; the At-
torney General responded that there were mecha-
nisms outside the AECA through which the operation
could proceed legally, including "the President's in-
herent powers as Commander in Chief, the President's
ability to conduct foreign policy. . . ."i*^ Meese
referred to a 1981 written legal opinion by Attorney
General William French Smith stating that the CIA
could legally sell to third countries weapons obtained
from the Defense Department under the Economy
Act. On this authority, he "concurred with the view
of Director Casey that it would be legal for the Presi-
dent to authorize arms transfers pursuant to the Na-
tional Security Act."'^°

Secretary Shultz felt that it was very clear that the
President wanted to go forward with the plan. To the
Secretary of State, the lack of opposition "almost
seemed unreal," and he left the meeting "puzzled,
distressed."'^' What Secretary Shultz did not know
was that the President had signed a Finding on Janu-
ary 6. That act, an indication of the President's re-
solve, was not mentioned.

North Proceeds With Plans for
Replenishment

That day. North called Nir in Israel and said that
the United States was prepared to proceed with Nir's
plan, subject to certain conditions. North said that
both the President and Secretary Weinberger had
agreed to the plan. North gave Nir this encoded mes-
sage:

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Chapter 1 1

1. Joshua [President Reagan] has approved pro-
ceeding as we had hoped.

2. Joshua and Samuel [Secretary Weinberger]
have also agreed on method one [replenishment
by sale, as opposed to "method two," replenish-
ment by prepositioning].

3. Following additional conditions apply to
Albert [Code name for operation?].

A. Resupply should be as routine as possi-
ble to prevent disclosure on our side. May
take longer than two months. However,
Albert says if crisis arises Joshua promises
that we will deliver all required by Galaxie
[apparently C 5A cargo plane] in less than
eighteen hours.

B. Joshua also wants both your govt and
ours to stay with no comment if operation is
disclosed.

4. If these conditions are acceptable to the
Banana [Israel] th[e]n Oranges [U.S.] are ready to
proceed. *^^

Neither of the "additional conditions" proposed by
the U.S. side dealt with the substance of the oper-
ation. North's notes reflect that the purpose for "rou-
tine" resupply spread over a period of months was to
enable the purchases by Israel to be broken "into lots
of less than Cong[ressional] limit" and to avoid "rais-
ing eyebrows." ^^^ The "no comment" proposal
would enable the United States — even after the oper-
ation was publicly exposed — to avoid acknowledging
its central role.

Nir and North also discussed terms for replenish-
ment sales. '^* By this time, the Chief of the Israeli
Procurement Mission in New York and Noel Koch,
Principal Deputy Assistant Secretary of Defense for
International Security Affairs, had been designated as
the Israeli and American contacts for hammering out
the details. '^^ Nir told North that Israel could not
use the money the Iranians had paid for the 504
TOWs shipped in 1985 to buy replacements because
this money was not available. On this point, North's
notes state: "Regarding the first 504, it was agreed
that the $ was used for other purposes." ^^^ Over the
next few days, Nir told North that Israel could pay
only $5,000-55,500 per missile and that the Depart-
ment of Defense, using a replacement cost figure, was
demanding that Israel pay more.''''

On January 9, Nir and North discussed how to use
the money Iran would pay for the TOWs. North
jotted the following calculation:

$10M total

2.5 to Ops

1.5 to Gorba

$6M avail for 4500' ss

The note indicates that Israel was to receive $10,000
per TOW from Iran, or $10 million for the first 1,000
TOWs. From this sum, $2.5 million was to be divert-
ed to "Ops," '^3 which North testified were the joint
Israeli-U.S. covert operations previously discussed
with Nir.'^" Another $1.5 million was to go to Ghor-
banifar. The remaining $6 million would be available
to pay the United States for the replacement TOWs.
If this scheme were followed for each of the four
planned shipments of 1,000 TOWs, $10 million would
go for other covert operations and Israel would have
$24 million to spend on replacement TOWs — enough
to purchase 4,000 missiles at $6,000 each, or 4,500
missiles at a price of $5,333 each.

The next day, January 10, Koch and North con-
ferred about replacement of the Israeli TOWs.
North's notes reflect that one option they considered
was selling Israel Improved TOWs "at cos[t]."'^'
The reference to Improved TOWs is significant be-
cause Israel was planning to send basic TOWs to
Iran. Thus, the proposed transaction would substan-
tially upgrade Israel's arsenal at no cost to that coun-
try. The possibility that this might be an objective of
the operation had caused some CIA lawyers discom-
fort.'62

After this conversation, Koch queried DOD
Deputy Director Rudd about TOW prices. He appar-
ently asked if it would be possible to ship 4,000 Basic
TOWs to Israel or Iran for $12 million, or at a price
of $3,000 per TOW. Rudd later told Koch that while
this quantity was available, the lowest price at which
basic TOWs had previously been sold was $6,800 per
missile.'®^

In addition to the price, Koch was concerned about
secrecy and Congressional notification. He knew that
if the total value of the purchase exceeded $14 mil-
lion, a Congressional notification would be required.
Rudd told Koch a notification that the Israelis were
buying 4,000 basic TOWs would be tantamount to
announcing that the missiles were intended for an-
other purchaser; informed persons would know the
Israelis would have no use for more basic TOWs than
it already had.'^*

Rudd counseled that the best way to get missiles
secretly from the Defense Department to Iran would
be to "go black" — that is, make it a covert operation
with Defense selling the missiles to the CIA under an
Economy Act transfer and the CIA transferring them
to Iran pursuant to an intelligence Finding. Koch
conveyed this conclusion to North and Weinberger's
military aide, Lt. Gen. Colin Powell.'®* "Going
black" appeared to overcome two difficulties in the
replenishment issue: (1) maintaining secrecy and
avoiding Congressional notification, and (2) avoiding
the strictures of the AECA.

On January 12, Koch met the head of the Israeli
Procurement Mission at National Airport in Washing-
ton to continue negotiations on price. Koch reported

204

Chapter 1 1

on this meeting to North and to Powell, who suggest-
ed that Koch meet with Secretary Weinberger. Koch
met with the Secretary the next day. He described the
Secretary as "generally agitated over this" and be-
lieved "this thing . . . was a very foolish undertak-
ing." Koch commented to Secretary Weinberger,
"'Do we have a legal problem with this? Is somebody
going to go to jail?' and [the Secretary's] response
was in the affirmative. But I did not take that serious-

ly.M66

In a subsequent conversation with Koch, North ap-
parently expressed a hope that the matter could be
solved and the initial steps of the operation finished in
time for the President to refer to the freeing of the
hostages in his State of the Union message later in
January. North jotted in his notes: "Try to get results
by State of Union."'®'

Legal Problems Identified With
Replenishment Approach

While North continued to work with the Israelis on
the replenishment problem, CIA lawyers were raising
legal objections. One prepared a memorandum for
Sporkin identifying the restrictions and various notifi-
cation requirements that the Arms Export Control
Act and Foreign Assistance Act placed on third-coun-
try transfers.'^* The lawyers concluded that weapons
that had earlier been acquired from the United States
under either of these acts could not be sold to Iran
without "U.S. consent, notice to Congress, and the
eligibility of the third country recipient for U.S.
aid."'®^ Because the planners had determined there
would be no notice and because Iran's terrorist activi-
ties rendered it ineligible, the Israeli saleAJ.S. replen-
ishment approach was not feasible. '''° However, the
lawyers concluded that a sale of weapons from DOD
stocks to the CIA under the Economy Act, followed
by a CIA sale to Israel or Iran, would be legal. A
Presidential Finding would be required.''"

Ghorbanifar Fails Polygraph

Ghorbanifar returned to Washington in January for
his new polygraph. The examination was conducted
at the CIA on January 11 and lasted five hours. "^
The CIA polygraph operator concluded that Ghor-
banifar lied on 13 of 15 items on which he was ques-
tioned.'^^ According to George, "The only questions
he passed were his name and his nationality."""*

After the test, a CIA officer reported in a memo-
randum to Casey, McMahon, and Clair George:
"Ghorbanifar is a fabricator who has deliberately de-
ceived the U.S. Government concerning his informa-
tion and activities. It is recommended that the
Agency have no dealing whatsoever with Ghorbani-
far.""^ Afterwards, Ghorbanifar showed up at Le-
deen's house "furious" and "hurting" because the
questioning was more expansive than he had expected

and because he claimed to be physically injured by
the examination techniques."®

The following day, the Chief of the CIA's Iran
branch briefed George and the Chief of the Near East
Division (C/NE) on the negative results. They in-
structed him to have no further contact with Ghor-
banifar or Ledeen."'' George viewed the polygraph
results as confirming his view of Ghorbanifar and
declared to Casey that the Operations Directorate
would have nothing more to do with the Iranian. He
told North of this decision on January 13."* A few
days later, the Operations Directorate disseminated a
notice saying the CIA would do no more business
with Ghorbanifar."^

Ghorbanifar's polygraph failure, however, did noth-
ing to squelch his relationship with Casey and the
NSC staff. Indeed, North — who "wanted" Ghorbani-
far to pass'®° — had braced himself for a negative
result. He told Ledeen beforehand that the CIA
would make sure Ghorbanifar flunked because they
did not want to work with him.'*' Casey, notwith-
standing Clair George's advice to terminate the Ghor-
banifar relationship, found a way to deal with Ghor-
banifar outside the normal Operations Directorate
headed by George. Casey ordered Charles Allen, who
was the CIA's senior antiterrorism analyst, to meet
with Ghorbanifar "to determine and make a record of
all the information that he possessed on terrorism,
especially that relating to Iranian terrorism — ^just take
another look at this individual."'*^ In George's view,
Allen virtually became the case officer for Ghorbani-
far.'*^ To George, there could not have been a
"better mismatch" between Allen — who had no expe-
rience managing an agent — and Ghorbanifar — who
was especially "complex" and difficult to control.'*'*

Allen spent five hours with Ghorbanifar at Le-
deen's home on January 13 "to assess Subject's access
to Iranian Government leaders" and to obtain infor-
mation from him on terrorists. Ghorbanifar set out
several areas in which he wished to work with the
U.S. Government and the CIA, including the ongoing
White House effort to gain the release of the hostages
in Lebanon; the blunting of Iranian-, Libyan-, and
Syrian-sponsored terrorism; and assisting in the over-
throw of Qadhafi.'** Allen thought some of Ghor-
banifar's specific proposals worth pursuing, but he
considered several of them outlandish, not worthy of
exploration, and "very, very filled with hyperbo-
le."'*®

During this session, Ghorbanifar told Allen that
funds generated through the projects he was discuss-
ing could be used for "Ollie's boys in Central Amer-
ica."'*'' Allen recorded this remark in his handwrit-
ten notes of the meeting as "can fund Contras."'**
He did not, however, refer to it in his memorandum
to Casey and others on the session.'*' He later ex-
plained that at the time he did not "consider it impor-
tant or even relevant to my particular mission," that

205

Chapter 1 1

he did not discuss it with anyone else, and that he
"promptly forgot it."'*°

On January 14, Allen briefed Casey on his session
with Ghorbanifar. He told Casey that Ghorbanifar
was "very hard to pin down," "very flamboyant,"
"very clever, cunning." Indeed, Allen called him a
"con man," to which Casey jokingly responded:
"Maybe this is a con man's con man then." For the
moment, Allen said, he was given no further assign-
ment concerning Ghorbanifar.'^^

Restructuring the Deal

In mid-January, the plan for the operation was re-
structured in two significant respects. First, weapons
to be shipped to Iran would come from U.S. — not
Israeli — stocks. Second, at the direction of Poindexter,
Casey, and North, Richard Secord was brought into
the operation as a "commercial cut-out": a conduit for
the money to be paid by Iran to the United States for
the missiles. This latter change enabled the "diver-
sion" of funds to support the Contras, which had
already begun in November with the use of a part of
the Israelis' $1 million deposit to Lake Resources, to
continue in a more direct manner.

A one-page, unsigned memorandum dated January
13, 1986, updated Casey on the "TOW for Hostage
deal." The memorandum shows that legal obstacles
and the high cost of Improved TOW missiles were
pushing the planners toward transforming the deal
into one in which the Iranians would receive basic
TOWs sold by DOD to CIA under the Economy
Act. After a review of the problems with other meth-
ods, the memorandum stated:

Therefore they want to use the second option
under which CIA would buy 4,000 basic TOWs
from DOD for $21 million. As far as Defense is
concerned these purchases would be for general
CIA uses. . . . The money for the Iranian ac-
count would be transferred to the Israelis. The
Israelis would transfer that money to a CIA ac-
count to pay for this purchase of the Tows from
DoD, the shippers would move the Tows to the
Israelis who would then move them on to the
Iranians. '^^

North met with Ledeen and Ghorbanifar that
evening to discuss the plan. Ghorbanifar proposed
that he would buy the TOWs from the United
States — rather than from Israel — for $10,500 each. He
said this was the same price he had paid the Israelis
for the 504 TOWs in 1985. Ghorbanifar stated that he
had "officially offered" the same rate to the Israelis
for this deal, but that they now were asking for differ-
ent terms. Ghorbanifar said that he had $40 million
for the 4,000 TOWs, and that out of that sum he
expected to receive— or at least wanted— $500,000.
Ghorbanifar also explained that the total deal, negoti-
ated with Nir before Christmas, called for the Israeli-

U.S. side to provide 4,000 TOWs, the release of 100
Hizballah prisoners held by the Southern Lebanon
Army, and intelligence.'^^

After this meeting, North called Koch and raised
the idea of designating Secord as the person to whom
the United States would sell the TOWs. North's notes
suggest that DOD would sell missiles directly to
Secord with no involvement of the CIA and that
Secord would deliver the TOWs to the Israelis.'®*
On the morning of January 14, North received a call
back from Koch who expressed concern about how
Secretary Weinberger would react to using Secord.
North's notes of the call state: "Secretary will
blanch."'*^

Both Poindexter and Casey, however, approved Se-
cord's pivotal role in the operation. According to
Secord, Poindexter invited him to the White House,
told him the President had approved a renewed arms
transaction with Iran, and asked for his assistance.'®^
On January 14, Casey told North, according to
North's notes, that "Secord Op [is] O.K."'®'

North met with Poindexter that evening. They dis-
cussed inserting Secord into the transaction as an
"agent for the CIA. . . ."'^s Under this arrangement,
the Iranians would receive missiles from Israeli
stocks; and Secord, acting as an agent for the CIA,
would simultaneously buy basic TOW missiles from
DOD and sell and ship them to Israel as replace-
ments. The CIA would not actively participate in the
operation. Poindexter directed North to discuss this
approach with Casey.'®® This plan called for the pri-
vate North/Secord enterprise in lieu of the CIA. The
CIA would have a role in name only. The Economy
Act authorized intergovernmental transfers of weap-
ons, but would not permit DOD to sell directly to
Secord unless he were designated an "agent" of the
CIA.

The barrier to the plan was Secretary Weinberger.
Although Casey was on board. Secretary Weinberger
continued to raise objections both to the plan and to
Secord's involvement. In a PROF message to Poin-
dexter on January 15, North wrote:

Casey believes that Cap [Weinberger] will contin-
ue to create roadblocks until he is told by you
that the President wants this to move NOW and
that Cap will have to make it work. Casey points
out that we have now gone through three differ-
ent methodologies in an effort to satisfy Cap's
concerns and that no matter what we do there is
always a new objection. As far as Casey is con-
cerned our earlier method of having Copp
[Secord] deal directly with the DoD as a pur-
chasing agent was fine. He did not see any par-
ticular problem w/ making Copp an agent for the
CIA in this endeavor but he is concerned that
Cap will find some new objection unless he is
told to proceed. 2°°

206

Chapter 1 1

In the same PROF message, North indicated that
the "most recent proposal" to use Secord as an agent
for the CIA depended on the IsraeHs' agreeing to pay
a higher price than they were then offering the
United States. The message suggests that North,
knowing that Ghorbanifar was wilHng to pay $10,000
a TOW to the Israelis, was seeking to have more of
the residual profit flow to the American side rather
than to Schwimmer and Nimrodi.

Minutes after writing this PROF message, North
met with Sporkin to discuss Secord's role.^°' Sporkin
interrupted this meeting to telephone one of his staff
lawyers, George Clarke, to discuss whether there
would be any "problems or reporting requirements"
with the North/Poindexter proposal to use Secord as
an "agent" of the CIA but to otherwise leave the
CIA out of the operation. ^"^ North came on the line
to exhort Clarke to endorse this approach. ^"^ Ac-
cording to a "memorandum for the record" written
by Clarke, the conversation went as follows:

1. At approximately 1420 hours today I received
a secure line telephone call from the General
Counsel. He wanted to discuss whether I saw
any problems or reporting requirements with a
proposal to have DoD provide weapons to a
CIA "agent" who would pay for the weapons
with money supplied by a friendly third country.
The agent would then supply the weapons to the
intended recipient country. The agent would
have no connection with CIA other than to act
as a "middle man" with our authority.

2. I told the General Counsel that I would feel
more comfortable if CIA were directly involved
in the activity and that it would be essential that
we act in furtherance of a traditional covert
action objective. . . .

3. Despite repeated urgings to concur in vari-
ations that would have DoD provide the weap-
ons without other than token CIA involvement, I
did not do so. . . .^°^"

Sporkin recalled an "argument with one of my
people" about whether there was a way to structure
the transaction without the CIA's getting involved.
"The answer was no way."^"*

After this meeting, Sporkin prepared a paper for
Casey. He advised that the "preferred way to handle
the proposal" was for the CIA to take control of the
materiel through an Economy Act transfer from
DOD before it was moved to the Middle East. Spor-
kin wrote that he could find no precedent for the
purchase of materiel from DOD by someone acting as
a CIA "agent," where the CIA had no other role in
the transaction. Sporkin's paper did not address
whether the CIA, after acquiring the arms from
DOD, could deal with an intermediary, such as
Secord, rather than directly with the foreign country

recipient.^"* One of Sporkin's main concerns was the
question of notifying Congress;

The key issue in this entire matter revolves
around whether or not there will be reports made
to Congress. Each of the Acts involved — the
Foreign Assistance Act, the Arms Export Con-
trol Act, and indeed the National Security Act as
amended — have certain reporting provisions in
them. While the National Security Act provides
for a certain limited reporting procedure, it is my
view that there may be other ways of making a
suitable report by exercise of the President's con-
stitutional prerogatives.

One such possibility would be not to report the
activity until after it has been successfully con-
cluded and to brief only the chairman and rank-
ing minority members of the two Oversight Com-
mittees. This would maximize the security of the
mission and reduce the possibility of its prema-
ture disclosure. ^"^

Later that afternoon. North spoke again with Sporkin,
who urged that the "final proposal" be "run by" the
Attorney General.^'"

At 2:30 p.m. that day. North received a call from
Nir. The conversation again focused on the financial
aspects of the transaction. North's notes refer to a 25
percent cut to be paid to "other Iranians" and a 15
percent cut to "accountant," the code name for
Schwimmer. Most significantly, the two discussed Se-
cord's receiving more for the TOWs than he would
have to pay to DOD. North wrote; "7500 each to
Copp. 5300 each to DOD."208 Using these figures,
and assuming that the deal would involve 4,000
TOWs, Secord would receive $8.8 million over his
cost of buying the missiles from DOD.

The next day, January 16, North continued to try
to find a way to start the part of the operation that
would lead to the release of the American hostages,
namely, the shipment of 1,000 TOWs to Iran. At
Poindexter's request. North first contacted McFarlane
to find out what the understanding had been on re-
plenishment of the first 504 TOWs, an issue that con-
tinued to be a sticking point for Israel. McFarlane
replied that the United States had undertaken to sell,
over time, "requisite TOWs to replace the TOWs that
they sent for Weir.''^"^ In his notes of this phone call.
North wrote; "The objection in law [is] based on
Arms Export Control Act."^'° North passed this in-
formation to Poindexter, along with an explanation
that replenishment had been blocked because the Is-
raelis lacked sufficient funds to purchase Improved-
TOWs and because bureaucratic problems had pre-
vented a purchase of basic TOWs.^"

North came up with a modified plan to get the
operation moving. He proposed to Poindexter that
Nir deal directly with Ghorbanifar and receive $10

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Chapter 1 1

million for the first 1,000 TOWs to be shipped by
Israel. Schwimmer and the Iranian officials would be
"cut-out" from the expected profits, and a much
larger sum would be available to Nir for replenish-
ment or other uses. North also proposed that Secord
purchase 504 TOWs from the United States and ship
them to Israel as replenishment for the 1985 transac-
tions.^'^

That same afternoon, Poindexter convened in his
office a meeting of senior administration officials to
discuss the structuring of the transaction, the continu-
ing objections of Secretary Weinberger, and the pro-
posed Finding.^'^ Present were Secretary Weinberg-
er, Casey, Attorney General Meese, Sporkin, and pos-
sibly North. ^'''* The Attorney General said Israel
should not ship weapons out of its stocks and recom-
mended that the United States instead sell directly to
the Iranians. Restructuring the operation in this way,
he explained, would avoid the restrictions of the
Arms Export Control Act, including Congressional
reporting requirements.^*^

Sporkin recalled that no decision was made at the
meeting and that Secretary Weinberger wanted addi-
tional time to examine the revised structure of the
plan:

[A]s we were breaking up, the Secretary of De-
fense said that I want to review all this. I want to
have my lawyers look at it and to see if that
analysis is correct. And so the meeting broke up
without there being any decision made.

The next day, I received a call from the Direc-
tor— I think it was the next day — in which he
said that he received a call from the — from the
Secretary of Defense, who said that his people
have looked it over and they agree with the
analysis and they have signed off on the
project.^ '^

Secretary Weinberger was unable to recall, or find
anyone at the Defense Department who had per-
formed, any such legal review.

President Signs A New Finding

Poindexter now arranged to get the President to
sign the Finding. At the January 17, 1986 national
security briefing attended by the President, the Vice
President, Regan, Poindexter, and Fortier, Poindexter
discussed the plans and referred to a new cover
memorandum. The President did not read the memo-
randum, but he signed the Finding. To indicate the
President's decision, Poindexter wrote "RR per JMP"

• Poindexter recalled that Shultz was also present. Poindexter
Test., Hearings, 100-8, at 35. Shultz testified that he was not, Shultz
Test., Hearings, 100-9, at .13, and Sporkin testified that he was told
Shultz had been invited but could not make it. Sporkin Test.,
Hearings, 100-6, at 149. Weinberger had no recollection of attend-
ing this meeting. Weinberger Test., Hearings, 100-10, at 141.

on the approval line of the memorandum. At the
bottom of the memorandum, he also wrote: "Presi-
dent was briefed verbally from this paper. VP, Don
Regan and Don Fortier were present."^'''

The January 17 Finding was almost identical to the
draft Finding presented to the President on January 6.
The only change was the insertion of the words
"third parties" in the list of entities to be assisted by
the CIA.^'* The Committees have received from
NSC files a copy of the January 6 version of the
Finding that bears Sporkin's handwritten insertion of
this phrase.^ '^ Sporkin testified that this change was
made merely to make the first paragraph of the Find-
ing symmetrical with the second, which already con-
tained a reference to "third parties." He said that the
term did not refer to Secord but to Ghorbanifar and
other Iranian intermediaries.^^"

The cover memorandum, which North prepared
and Poindexter signed, contained the same summary
of the Nir proposal that North had included in his
January 4 draft cover memorandum. However, the
new memorandum stated that for legal reasons the
operation should not be conducted as Nir proposed
and should instead proceed with sales of arms from
the CIA through an agent directly to Iran. Following
the advice Attorney General Meese had provided the
previous day, the memorandum stated:

We have researched the legal problems of Israel's
selling U.S. manufactured arms to Iran. Because
of the requirement in U.S. law for recipients of
U.S. arms to notify the U.S. government of trans-
fers to third countries, I do not recommend that
you agree with the specific details of the Israeli
plan.

The memorandum outlined the new plan to make
direct sales from the CIA to Iran through Secord,
who was identified only as "an authorized agent":

The objectives of the Israeli plan could be met
if the CIA, using an authorized agent as neces-
sary, purchased arms from the Department of
Defense under the Economy Act and then trans-
ferred them to Iran directly after receiving ap-
propriate payment from Iran.

This new method was to accomplish the 4,000- TOW
transaction that Nir had originally proposed. The
memorandum stated:

Therefore it is proposed that Israel make the
necessary arrangements for the sale of 4000 TOW
weapons to Iran. Sufficient funds to cover the
sale would be transferred to an agent of the CIA.
The CIA would then purchase the weapons from
the Department of Defense and deliver the weap-
ons to Iran through the agent. If all the hostages
are not released after the first shipment of 1000
weapons, further transfers would cease. ^^'

208

Chapter 1 1

As was the case with North's earlier draft, the
cover memorandum to the President from Poindexter
stated that "[t]he Israehs are very concerned [about]
Iran's deteriorating position in the war with Iraq" and
"beheve it is essential that [Israel] act to at least
preserve a balance of power in the region." In fact,
Secretaries Weinberger and Shultz and Deputy Direc-
tor McMahon all subsequently testified that this as-
sessment of the state of the Iran-Iraq conflict was
contrary to U.S. intelligence estimates. Secretary
Weinberger stated:

I certainly did not have the view that Iraq was
winning or anything of that kind. Quite to the
contrary. As a matter of fact, it was basically
Iraqi military strategy not to pursue any kind of
decisive military end. . . .^^^

Secretary Shultz said that while there was an intelli-
gence estimate in mid-1985 suggesting that the Iranian
position was deteriorating, he and others in the State
Department had objected to it and by early 1986
there was a "reassessment" to the effect that Iran was
viewed as "very much the aggressive country in the
war."^^^ McMahon made the same point: "I don't
have the vaguest idea where Poindexter got the idea
that the Iraqis were about to take over Tehran. It just
wasn't in the cards. "^^^

The cover memorandum also gave the President a
lineup of the varying positions of his advisers on the
proposed operation:

You have discussed the general outlines of the
Israeli plan with Secretaries Shultz and Wein-
berger, Attorney General Meese and Director
Casey. The Secretaries do not recommend you
proceed with this plan. Attorney General Meese
and Director Casey believe the short-term and
long-term objectives of the plan warrant the
policy risks involved and recommend you ap-
prove the attached Finding.^^*

Defense Secretary Weinberger testified to the Com-
mittees that he was unaware that a Finding had been
signed. ^^^ However, he recalled that around January
18, Poindexter told him the President had decided to
sell 4,000 TOW missiles to Iran and instructed him to
make the missiles available. ^^''

Secretary of State Shultz testified he was unaware
even of the Presidential decision to sell the weapons.
He recalled a luncheon with the President's other top
advisers on January 17, during which he expressed
opposition to what he thought was still an unap-
proved plan to sell weapons to Iran.^^®

According to the Tower Board, in his diary entry
for January 17, 1986, the President wrote: "I agreed
to sell TOWs to Iran.""9

Conclusion

With the signing of the Finding, the Administration
was embarked on an arms-for-hostages initiative with
Iran in which the United States — not Israel — would
play the lead role. The President set this course over
the continued objections of his Secretaries of Defense
and State, and notwithstanding the CIA's renewed
determination that the Iranian intermediary, Ghorban-
ifar, could not be trusted.

In a change from the 1985 arms deals, Poindexter,
Casey, and North had structured the transactions
planned for 1986 in a manner that would leave the
United States in possession and control of the large
"residuals" that would flow from the sales. Secord
and the Lake Resources Enterprise were established
as a conduit for the money paid for the missiles by
Iran. North and Nir had several ideas about how
these profits would be used. Foremost in North's
mind was the potential for diversions to the Contra
effort.

209

77-02b 0-87

Chapter 1 1

Chapter 11

1. North Notebook, 11/27/85 (misdated 10/27/85),
Q1357.

2. Ledeen Dep., 6/19/87, at 112.

3. Id. at 112.

4. Secord Test., Hearings, 100-1, at 90.

5. North Notebook, 12/1/85, Q1360-Q1361.

6. Secord Test., Hearings, 100-1, at 90.

7. North Notebook, 12/1/85, Q1361.

8. W.

9. Secord Test., Hearings, 100-1, at 90.

10. Israeli Historical Chronology; North Notebook, 12/2/
85, Q1367.

1 1 . Israeli Historical Chronology, to the extent the pas-
sage refers to replenishment of Israeli stocks.

12. Id.

13. Armitage Dep., 7/22/85, at 169, 173.

14. Id at 174.

15. Gaffney Test., Hearings, 100-6, at 65-67; Extract from
Gaffney Work Diary, Ex. DOD-8, Hearings, 100-6; Gaff-
ney-Rudd Dep., 6/22/87, at 2-7.

16. "Prospects for Immediate Shipment of I-HAWK and
I-TOW missiles," Ex. DOD-9, Hearings, 100-6.

17. Gaffney-Rudd Dep., 6/22/87, at 19.

18. Armitage Dep., 7/22/87, at 207.

19. PROF Note, North to Poindexter, 12/4/85 (02:02:55),
Ex. JMP-21, Hearings, 100-8.

20. Id

21. Id.

22. Id

23. Id

24. Clarridge Test., Hearings, 100-11, at 22.

25. Unsigned Paper, "Special Project Re Iran," 12/5/85,
Hearings, Ex. OLN-49, 100-7, Part III.

26. Id. (emphasis added).

27. CIA Cables between Headquarters and CIA Chiefs in
Countries 16 and 18, C5774-5814.

28. CIA Cable from headquarters to CIA Chief in Coun-
try 16, C5805; CIA Cable from headquarters to CIA Chiefs
in Countries 16 and 18, C5810.

29. CIA Cable from Headquarters to CIA Chiefs in
Countries 16 and 18, 12/3/85, C5812.

30. CIA Deputy Chief, Europe, Interview Report, 8/26/
87.

31. McFarlane Test., Hearings, 100-2, at 55, 104-05.

32. Id at 105.

33. Poindexter Test., Hearings, 100-8, at 18, 123.

34. Id at 17-18, 123-25.

35. Poindexter Handwritten Note, 12/5/85, Ex. JMP-20,
Hearings. 100-8.

36. Regan Test., Hearings, 100-10, at 13-14.

37. Poindexter Test., Hearings, 100-8, at 17-18, 125.

38. Id at 273.

39. Id at 19.

40. McMahon Dep., 6/1/87, at 109.

41. Poindexter Test., Hearings, 100-8, at 18-21.

42. Shultz Test., Hearings. 100-9, at 7.

43. Id at 7.

44. Shultz Tower Int., 1/22/87, at 29.

45. Memorandum for the Record by McMahon's Special
Assistant, 11/28/86 (reconstruction of notes from 12/5/85
meeting), 10396-97.

46. Israeli Historical Chronology.

47. North Test., Hearings, 100-7, Part I, at 295.

48. North Test., Hearings, 100-7, Part I, at 106, 294-95.

49. Secord Test., Hearings, 100-1, at 91.

50. North Notebook, 12/6/85, Q1377.

51. The Vice President was not present.

52. McFarlane Test., Hearings, 100-2, at 55.

53. Weinberger Test., Hearings, 100-10, at 135-36.

54. Shultz Talking Points, 12/7/85, Ex. GPS-16, Hearings,
100-9.

55. Weinberger Test., Hearings, 100-10, at 137.

56. Id at 136.

57. Weinberger Tower Int., 1/14/87, at 11.

58. McMahon Dep., 6/1/87, at 124.

59. Id at 127.

60. Allen Dep., 4/21/87, at 169.

61. Shultz Iran Chronology, Ex. GPS-B at 3, Hearings,
100-9.

62. Shultz Test., Hearings, 100-9, at 31.

63. W. at 31-32.

64. Id at 32.

65. Poindexter Test., Hearings, 100-8, at 25.

66. McFarlane Test., Hearings, 100-2, at 56.

67. McMahon Dep., 6/1/87, at 125.

68. Weinberger Test., Hearings, 100-10, at 137.

69. Shultz Test., Hearings, 100-9, at 32.

70. McMahon Dep., 6/1/87, at 127-28; Weinberger Test.,
Hearings, 100-10, at 138.

71. Poindexter Test., Hearings, 100-8, at 26.

72. McFarlane Test., Hearings, 100-2, at 56.

73. Shultz Iran Chronology, Ex. GPS-B at 3, Hearings,
100-9.

74. Id

75. McFarlane Test., Hearings, 100-2, at 56-57; Secord
Test., Hearings, 100-1 at 92.

76. McFarlane Test., Hearings, 100-2 at 57.

77. Id at 103.

78. Id at 57, 180.

79. Memorandum from North to McFarlane and Poin-
dexter, 12/9/85, Ex. OLN-51, Hearings. 100-7, Part III.

80. Id

81. Secord Test., Hearings, 100-1, at 92-93.

82. Allen Dep., 4/24/87, at 255.

83. Memorandum from North to McFarlane and Poin-
dexter, 12/9/85, Ex. OLN-51, Hearings, 100-7, Part III.

84. Id. (emphasis in original).

85. North Test., Hearings, 100-7, Part I, at 285.

86. Memorandum from North to McFarlane and Poin-
dexter, 12/9/85, Ex. OLN-51, Hearings, 100-7.

87. North Test., Hearings, 100-7, Part I, at 282; Memoran-
dum from Casey to Deputy Director of Central Intelli-
gence, 12/10/85, Ex. CG-47, Hearings, 100-11; Regan Test.,
Hearings, 100-10, at 14.

88. Id.; Memorandum from Casey to Deputy Director of
Central Intelligence, 12/10/85, Ex. CG-47, Hearings, 100-
1 1; Poindexter Test., Hearings, 100-8, at 29-30.

89. Id.; McFarlane Test., Hearings, 100-2, at 57; Poin-
dexter Test., Hearings, 100-8, at 26-27.

90. Memorandum from Casey to Deputy Director of Cen-
tral Intelligence, 12/10/85, Ex. CG-47, Hearings, 100-11.

91. McFarlane Test., Hearings, 100-2, at 59.

210

Chapter 1 1

92. Memorandum from Casey to Deputy Director of Cen-
tral Intelligence, 12/10/85, Ex. CG-47, Hearings. 100-11.

93. Id.

94. Poindexter Test., Hearings, 100-8, at 335.

95. State Department Cable, from Armacost to Shultz,
12/11/85. Ex. GPS-17, Hearings, 100-9.

96. CIA Cable, Headquarters to CIA Chiefs in Countries
16 and 18, 12/11/85, Ex. OLN-69, Hearings, 100-7 Part III.

97. Poindexter Test., Hearings, 100-8, at 127-28.

98. North Test., Hearings, 100-7, Part I, at 285.

99. Id.; Poindexter Test., Hearings, 100-8, at 128.

100. Poindexter Test., Hearings, 100-8, at 127-28.

101. Allen Memo, for Record, 12/18/85, Ex. CG-45,
Hearings, 100-11; Allen Dep., 4/24/87, at 229; Ledeen
Dep., 6/22/87, at 166-80, 248-50.

102. Allen Dep., 4/24/87, at 288-89.

103. Ledeen Dep., 6/19/87, at 114; Ledeen Dep., 6/22/
87, at 187-88, 246.

104. Clair George Test., Hearings, 100-11, at 210.

105. Memorandum for Director of Central Intelligence
from Chief, Iran branch. Subject: Meeting with Michael
Ledeen/Manuchehr Ghorbanifar, Ex. CG-49, Hearings, 100-
11.

106. Clair George Test., Hearings, 100-11, at 210.

107. Letter from Casey to the President, 12/23/85,
C4852-53.

108. CIA Fabricator Notice on Ghorbanifar, 7/25/84,
C 1462-64.

109. Israeli Historical Chronology.

110. W.

nx.id.

112. Poindexter Handwritten Notes, 1/2/86, Ex. JMP-23,
Hearings. 100-8.

113. Israeli Historical Chronology.

114. Id.; Poindexter Test., Hearings, 100-8, at 27-29.

115. Poindexter Handwritten Notes, 1/2/86, Ex. JMP-23,
Hearings, 100-8.

116. W.

117. W.

118. W.

1 19. Poindexter Test., Hearings, 100-8, at 57.

120. North Test., Hearings, 100-7, Part I, at 296. The
Israeli Chronologies do not corroborate this version.

121. Poindexter Handwritten Note, 1/2/86, Ex. JMP-23,
Hearings, 100-8.

122. Poindexter Test., Hearings, 100-8, at 130.

123. Sporkin Test., Hearings, 100-6, at 129.

124. Roseman Dep., 6/10/87, at 8-9, 18.

125. Draft Covert Action Finding, 1/2/86, Ex. SS-6,
Hearings. 100-6.

126. Draft Covert Action Finding (Sporkin-redraft), 1/3/
86, Ex. SS-8, Hearings, 100-6; Sporkin Test., Hearings, 100-6,
at 133-134.

127. Id at 135-136.

128. W. at 136.

129. Id.; North Test., Hearings, 100-7, Part I, at 289; Draft
Covert Action Finding (North redraft), 1/3/86, Ex. SS-9,
Hearings, 100-6.

130. Id

131. Sporkin Test., Hearings, 100-6, at 136.

132. Memorandum from North to Poindexter, Subject:
Covert Action Finding on Iran, 1/4/86, Ex. OLN-52, Hear-
ings, 100-7, Part III.

133. Unsigned Memorandum for the President from Poin-
dexter, prepared by North, undated, Ex. OLN-52, Hearings,
100-7, Part III.

134. Id

135. Id

136. Sporkin Test., Hearings, 100-6, at 139-142.

137. Id at 142-144.

138. Unsigned Memorandum for the President from Poin-
dexter, Prepared by North, undated, N 1323-25

139. North Test., Hearings, 100-7, Part I, at 289; North
Calendar, 1/6/86, N11822; Jensen Dep., 7/6/87, at 19-33.

140. Meese Test., Hearings, 100-9, at 196.

141. Jensen Dep., 7/6/87, at 27.

142. Poindexter Test., Hearings, 100-8, at 30.

143. NSC Meeting Chronology, unsigned and undated,
N7718.

144. Poindexter Test., Hearings, 100-8, at 30.

145. NSC Meeting Chronology, unsigned and undated,
N7718.

146. Shultz Test., Hearings. 100-9, at 33.

147. Weinberger Test., Hearings, 100-10, at 138-40.

148. Poindexter Test., Hearings, 100-8, at 31.

149. Weinberger Test., Hearings, 100-10, at 139.

150. Meese Test., Hearings, 100-9, at 197.

151. Shultz Test., Hearings. 100-9, at 33.

152. North Notebook, 1/7/86, Ex. OLN-69A, Hearings,
100-7, Part III.

153. Id

154. Id

155. Id

156. Id. The Israeli Historical Chronology does not sup-
port this note.

157. North Notebook, 1/9/86, Ex. OLN-69 A, Hearings,
100-7, Part III; Israeli Historical Chronology.

158. North Notebook, 1/9/86, Ex. OLN-69 A, Hearings,
100-7, Part III.

159. Id

160. North Exec. Sess. Test., 7/9/87, at 10.

161. North Notebook, 1/10/86, OLN-69A, Hearings, 100-
7, Part III.

162. Memorandum for the Record, George W. Clarke, 1/
15/86, Ex. SS-17, Hearings, 100-6.

163. Koch Test., Hearings, 100-6, at 71-72; Rudd Dep., 6/
16/87, at 16-19.

164. Koch Test., Hearings, 100-6, at 72.

165. Id at 72-73.

166. Id. at 14-11. Weinberger did not recall such a discus-
sion.

167. North Notebook, 1/13/86, Ex. OLN-69 A, Hearings,
100-7, Part III.

168. CIA Legal Staff Memorandum, Subject: Third
Country Transfer of Equipment Provided Under the For-
eign Assistance or Arms Export Control Acts, Ex. SS-20,
Hearings, 100-6.

169. CIA Legal Staff Memorandum, Subject: Proposed
Iran Finding, 1/7/86, Ex. SS-13, Hearings, 100-6.

170. Id
111. Id

172. CIA Memorandum on Ghorbanifar Polygraph, 1/13/
86 (incorrectly dated '85), C6092-95.

173. Id

174. George Test., Hearings, 100-11, at 159.

211

Chapter 11

175. Routing and Record Sheet from Chief of the Near
East Division of the CIA to various CIA officials, 1/13/86,
C6089.

176. Ledeen Dep., 6/22/87, at 260-61.

177. Chief of CIA Iran branch Int., 4/13/87.

178. North Notebook, 1/13/86, Ex. OLN-69A, Hearings,
100-7, Part III; George Test., Exec. Sess., Hearings, 100-11,
at 159-60.

179. Id. at 160.

180. George Test., Exec. Sess., Hearings, 100-11, at 159.

181. Ledeen Dep., 3/11/87, at 100-01.

182. Allen Dep., 4/24/87, at 312.

183. George Test., Exec. Sess., Hearings, 100-11, at 161.

184. Id.

185. Allen Memorandum for the Record, 1/29/86, Ex.
CG-5\, Hearings, 100-11.

186. Allen Dep., 4/24/87, at 324-35.

187. Memorandum for Carroll L. Hauver from Charles E.
Allen, February 13, 1987, CI 84-85.

188. Allen Handwritten Notes of Meeting with Ghorbani-
far, 1/13/86, CI 80.

189. Allen Memorandum for the Record, 1/29/86, Ex.
CG-5\, Hearings, 100-11.

190. Allen Dep., 6/4/87, at 323-27.

191. W. at 339-40.

192. Unsigned Memorandum, 1/13/86, Ex. OLN-55,
Hearings, 100-7, Part III.

193. North Notebook, 1/13/86, Ex. OLN-69A, Hearings,
100-7, Part III.

194. North Notebook, 1/13/86, Ex. OLN-69A, Hearings,
100-7, Part III.

195. North Notebook, 1/14/86, Ex. OLN-69A, Hearings,
100-7, Part III.

196. Secord Test., Hearings, 100-1, at 96-97.

197. North Notebook, 1/14/86, Ex. OLN-69A, Hearings,
100-7, Part III.

198. Id.

199. Id.

200. North PROF, 1/15/86, 13:02:18, Ex. OLN-57, Hear-
ings, 100-7, Part III.

201. Sporkin Calendar, 1/15/86, C1780; North Calendar,
1/15/86, N11824.

202. Memorandum for the Record, George Clarke, 1/15/
86 (1440 Hours) Ex. SS-17, Hearings, 100-6.

203. Id.; Clarke Dep., 6/3/87, at 66-67.

Senate Select Committee on Intelli-

1/15/

203a. Ex. SS-17.

204. Sporkin Test.,
gence, 12/3/86, at 77.

205. Talking Points prepared for Casey by Sporkin,
86, Ex. SS-16, Hearings. 100-6.

206. Sporkin Talking Points for Casey, 1/15/86, Hearings,
Ex. SS-16, Hearings. 100-6.

207. North Notebook, 1/15/86, Ex. OLN-69A, Hearings,
100-7, Part III.

208. North Notebook, 1/15/86, Ex. OLN-69A, Hearings,
100-7, Part III.

209. North Notebook, 1/16/85 (misdated 1/15/86), Ex.
OLN-69A, Hearings, 100-7, Part III.

210. Id

211. PROF Note, North to Poindexter, 1/16/86
(13:39:54), Ex. OLN-57, Hearings, 100 7, Part III.

212. Id

213. Sporkin Test., Hearings, 100-6, at 149; Poindexter
Test., Hearings, 100-8, at 35; PROF Note, North to Poin-
dexter, 1/15/86 (18:37:47), Ex. OLN-57, Hearings, 100-7,
Part III.

214. NSC Meeting Chronology, N7718; Poindexter Test.,
Hearings, 100-8, at 35.

215. Poindexter Test., Hearings, 100-8, at 128.

216. Sporkin Test., Hearings, 100-6, at 149-50.

217. Memorandum for the President from Poindexter, 1/
17/86, Subject: Covert Action Finding Regarding Iran, Ex.
JMP-28, Hearings, 100-8; Iran Finding, 1/17/86, Hearings,
Ex. JMP-29D, Hearings. 100-8.

218. Iran Finding, 1/17/86, Hearings, Ex. JMP-29D,
Hearings, 100-8.

219. Iran Finding, 1/6/86 (Draft with Sporkin handwrit-
ten edits), Ex. SS-15, Hearings, 100-8.

220. Sporkin Test., Hearings, 100-6, at 153.

221. Memorandum for the President from Poindexter, 1/
17/86, Ex. JMP-28, Hearings. 100-8.

Weinberger Test., Hearings, 100-10 at 146.
Shultz Test., Hearings, 100-9 at 159.

224. McMahon Dep., 9/2/87 at 68.

225. Memorandum for the President from Poindexter, 1/
17/86, Ex. JMP-28, Hearings, 100-8.

226. Weinberger Test., Hearings, 100-10. at 242.

227. Weinberger Test., Hearings, 100-10, at 381-383.

228. Shultz Test., Hearings, 100-9, at 187-188.

229. Tower Report at III-12.

222.
223.

212

Chapter 12

Arms Sales to Iran: The United States Takes

Control

The President's decision to sign the Finding on
Friday, January 17, 1986, marked the beginning of
U.S. control over the Iran arms sales initiative. In
November 1985, the United States had acted as a
necessary and supporting player to the Israeli plan to
ship weapons; the January 17 Finding established that
weapons from U.S. stocks would be transported and
sold under U.S. control.

The Finding also brought the Central Intelligence
Agency (CIA) into the initiative in a more substantial
way than it had been in the prior shipment. Yet de-
spite the Finding, the CIA would continue to play
only a supporting role to the National Security Coun-
cil (NSC)-sponsored initiative. While providing logis-
tic and technical support — and a mechanism for get-
ting the weapons from the Department of Defense
(DOD) under the Economy Act — the CIA deferred
to the NSC staff in evaluating the reliability of the
intermediaries and the likelihood of success of the
initiative.

Over the next few months, negotiations among the
Iranian representatives, the intermediary, and the
American officials continued. The pattern established
in the 1985 sales would continue. In February, the
United States sold 1,000 TOW missiles to Iran and no
hostages were released. Instead, the Iranians insisted
on the sale of HAWK spare parts and the United
States agreed.

Although the arms sales were a failure in achieving
the goals set forth in the Finding, they were success-
ful in another way. The Iranians were willing to pay
substantially more for the military goods than they
cost, and part of the excess filled the bank account of
the Enterprise. As North testified, the possibility of
using these profits to aid the Contras provided addi-
tional incentive to pursue the Iranian initiative.

The Finding Is Implemented

On January 18, CIA General Counsel Stanley Spor-
kin, CIA Deputy Director for Operations Clair
George, and the CIA Deputy Chief of the Near East
Division (DC/NE) met in the White House Situation
Room with National Security Adviser John Poin-
dexter, Oliver North, and Richard Secord to define
the Agency's responsibilities. Poindexter and North

told the CIA representatives that the Finding had
been signed and discussed with them the CIA's role in
the arms sales initiative. The CIA's "point man," DC/
NE, was to arrange for the Agency to acquire 4,000
TOW missiles from the DOD for sale to Iran. He was
also instructed to establish a CIA account through
which funds could be delivered to the Department of
Defense for purchase of the missiles.' Although the
Finding was directed to the CIA, the Agency's re-
sponsibilities as outlined at the meeting put it in a role
of lending logistic support for the NSC staff, which
would be principally conducting the negotiations.

DC/NE recalled that the group discussed a provi-
sion in the Finding that instructed the CIA Director
not to notify Congress of the covert activity:

I think Admiral Poindexter did say that this was
a very sensitive undertaking . . . and that the
President felt very strongly that the Congress
would not be notified until a later date. I took
that later date to mean after the hostages were
released . . . that after the delivery of the first
shipment of TOWs the hostages would be re-
leased, meaning all of the American hostages in
Lebanon. So we were looking at this ... as a
fairly short- termed thing. ^

At the January 18 meeting, George met Secord for
the first time when Secord was introduced as a con-
sultant to the NSC'' George knew of Secord's past
association with Edwin Wilson, the former CIA offi-
cer who was then serving time in a Federal prison for
a variety of offenses. George was concerned about
Secord's involvement and following the January 18
meeting advised Director Casey of his opinion.*
George cautioned Casey: "If they are going to ship
arms to Iran for hostages . . . don't use Secord."^

George expressed even greater disapproval when
he discovered that Iranian intermediary Manucher
Ghorbanifar was to be involved. The exact point at
which George became aware of Ghorbanifar's role in
the Iran initiative is unknown, although he implied in
testimony that he knew either as a result of, or short-
ly following, the January 18 meeting. Shortly after
Ghorbanifar failed a CIA polygraph test on January

213

Chapter 12

11, 1986, George issued a "field notice"* to senior
CIA officials in Europe instructing them to avoid
dealing with Ghorbanifar. Only a few days later
while in the White House, George was "given the
Finding to which, surprise, surprise, the guy I am
going to be dealing with or supporting the National
Security Council to deal with, is Ghorbanifar."®

Prior to the signing of the January 17 Finding,
George advised North of Ghorbanifar's polygraph
test results. He also recalled warning Casey against
dealing with Ghorbanifar, but "before I could go
through one more fight about Mr. Ghorbanifar, [the
CIA] received a Presidential order which . . . ended
up meaning we were dealing with Mr. Ghorbanifar."
Eventually, Casey designated Charles Allen to over-
see Ghorbanifar's activities.'

North told the CIA officers that the arms sales
were imminent. DC/NE moved quickly to implement
the plan: on January 20, he instructed the CIA Direc-
tor of Finance to designate a Swiss bank account that
could be used immediately for a large deposit. The
finance officer identified a Swiss account number,
which DC/NE later forwarded to the NSC. A
"clean," or unused, account was originally requested
to avoid commingling funds from the sale of TOWs
with those used for other Agency purposes. Because
the Agency's finance officers needed several days to
open a clean account, DC/NE decided to use an
existing CIA account customarily available for large
transactions.*

DC/NE told his finance officers to expect a deposit
of $30 million. He based this figure on an estimate he
had received from DOD of approximately $6,000 per
TOW and indicated that the deposit would come
from a "private source."^

DC/NE asked North for a contact at DOD with
whom he could arrange to obtain the TOWs. North
told DC/NE to contact Secretary Weinberger's mili-
tary aide, then-Maj. Gen. Colin Powell. When DC/
NE telephoned Powell several days later, the general
explained that he was aware of the sensitivity of the
operation, knew where the weapons were to be deliv-
ered, and knew the covert activity was supported by
a Finding. Powell named Lt. Gen. Vincent M. Russo
as the CIA's contact at DOD.'°

Russo told DC/NE originally that the price would
be around $6,000 per TOW, a price with which
North had problems. DC/NE recalled North's reac-
tion to that figure:

The initial price was precisely — it was Russo tell-
ing me it was going to be something around
6,000 per. And I recall telling North that and he
recalled — it doesn't make any difference to me
[DC/NE] whether they charge three or six or

*A "field notice" is a fabricator warning issued to specific CIA
stations, as opposed to a "burn notice," which receives world-wide
CIA distribution.

nine — I recall North saying, 'well, that is too
high, they must be giving you a brand new mis-
sile replacement cost figure, and they should be
charging for the oldest model TOW in stock. We
don't care if these things in fact work real well.
Tell the Army that we want the oldest thing they
can find in the warehouse.' So I went back to
Russo and said, let me make clear that we don't
need the very best, latest thing right off the fac-
tory line.

The eventual price was approximately $3,400 per
TOW, including freight costs."

North's attitude that he did not "care if these things
in fact work real well" is inconsistent with the goals
of opening a broader initiative with Iran and freeing
the hostages. Demonstrably antiquated or unworkable
merchandise most likely would promote distrust;
indeed, the controversy over the November 1985
HAWK shipment had been caused in part by the
Iranians' claim that the 18 HAWKs did not meet their
expectations.

DC/NE next directed a CIA logistics officer to
coordinate through the Defense Department for the
TOW purchases. DC/NE told the officer that the
weapons transfer was a direct arms-for-hostages ex-
change that would occur soon. The officer stated that
the proposed price of the TOWs — $6,000 each — was a
reasonable cost for the improved version of the mis-
sile. Upon contacting Russo, however, he learned that
the CIA could obtain the basic TOW, the oldest one
in the Army's stocks, for approximately $3,400 per
missile. ^^

On January 20, North noted: "Price must be firm
for Defense [Department] — Must be less than 6K."
Under the figure showing 4,504 TOWs, North jotted,
"Nir knows lOK upper limit — Dick [Secord] arrange
w/Nir".i3 The notes suggest that Nir and North had
agreed that the TOWs sold to Iran must not exceed
$10,000 per unit but that the CIA would not pay
more than the original DOD price of $6,000 per
TOW. In the plan to sell 1,000 of the missiles to Iran
in February, North and Nir were expecting to obtain
$4 million above the cost of the missiles. When North
learned he could obtain the basic TOW for substan-
tially less, the anticipated profit for the Enterprise
increased.

The Army Executes the Tasking

On January 18, Powell telephoned Gen. Maxwell
R. Thurman, Vice Chief of Staff of the Army, with a
secret, "close hold" assignment for the Army: to pre-
pare 4,000 basic TOW missiles to be shipped to the
CIA.'* Within a week, the number was increased to
4,508 to cover the 508 missiles'^ Israel had shipped in
September that McFarlane had agreed to replenish.
Thurman, who was not told the ultimate destination

214

Chapter 12

of the missiles or the purpose of the shipment, dele-
gated the responsibility down the chain of com-
mand'® and ultimately to Maj. Christopher Simp-
son. ■ ''

The instructions were to maintain a degree of secre-
cy unusual even for weapon transfers to the CIA: no
notes; communications only by secure telephone or
face to face; and the number of people privy to the
operation kept to a minimum. The imposition of such
extraordinary secrecy led the Army to bypass its
normal system for interagency transfers, with that sys-
tem's safeguards against underpricing, depleting stock-
piles, and affecting defense readiness.'* Even though
the secrecy guidelines were strictly observed, an ap-
parently accidental error in the price became crucial.
By inadvertently using the wrong stock number for
the TOW, the Army underpriced the missile and cre-
ated a price differential broad enough to generate a
significant surplus of funds for the Enterprise.

Pricing the TOW Missiles

Simpson went directly to the TOW Project Manag-
er at the Army Missile Command at Redstone Arse-
nal in Huntsville, Alabama. Powell had been asked to
provide a "basic," or "vanilla," TOW — one that had
not been manufactured since 1975. The basic TOW,
however, had experienced mechanical problems that
required the Army to make design modifications.'^
The TOW Deputy Project Manager informed Simp-
son he had sufficient basic TOWs to meet the order
but that the TOWs needed the safety modification,
which would add to the expense.^"

Simpson set about pricing the TOWs in what
seemed to be a logical manner — he checked the
Army's catalogue of inventoried items, complete with
national stock numbers and prices. Simpson found the
price to be $3,169 for a basic TOW, to which he
estimated an additional $300 for the safety modifica-
tion— a total of $3,469 per missile. Simpson quoted
that price to the CIA.^'

There were, however, eight different models of
TOWs listed in the catalogue. Unknown to Simpson,
when safety modifications became a required feature,
the Army created a new stock number for the basic
TOW with the modification and a corresponding
new, and much higher, price. Using the correct stock
number, the Army should have provided the CIA a
cost of $8,435 per missile. ^^

Although Simpson's testimony is inconsistent on the
question of whether he was aware that the Army
catalogue price for the basic TOW with modifications
was $8,435, there are indications that some officials in
the Army became aware of the erroneous price. The
original paperwork providing for the transfer of the
TOWs from their storage depot carried the correct
price, $8,435, not the $3,469 price that Simpson had
computed. As the TOWs traveled from the depot to
Redstone Arsenal, the price was dropped from the

accompanying documentation. By the time the CIA
received the first shipment of missiles, the receipt
reflected Simpson's price of $3,469. Indeed, while the
transfer documents accompanying the first and third
shipments from the Army and the CIA carried the
Simpson price, the receipts for the second shipment
did not reflect any price. Testimony from Army offi-
cials about the changing prices in these documents has
been inconsistent and inconclusive.

Amid the pricing confusion, the CIA received a
better missile than it had bargained for. While the
Army had basic TOWs in stock, it did not have
sufficient parts to perform the safety modification. It
tried to sell the CIA a more expensive and later
version of the TOW, the improved TOW, or "I-
TOW," which did not require modification. However,
the CIA would not pay more than the quoted price of
$3,469. As a result, the Army had to alter the TOW
package, selling the I-TOW launch motor with the
basic TOW warhead, which produced a superior
product. ^^

Army officials included in these pricing decisions
have denied any intent to lower the price of the
TOWs, and the Committees have found no evidence
to the contrary. What is apparent, however, is that in
fulfilling the CIA request for TOWs in early 1986, the
Army bypassed its usual method of obtaining, pricing,
and transferring weapons. The emphasis on keeping
the transaction secret, even from those involved in
the process, led to a significant pricing error, one that
North exploited to the advantage of the Enterprise.
Without this pricing error, there would have been a
much smaller difference between the $10,000 per
TOW Ghorbanifar was willing to pay and the actual
cost of the TOWs — and the diverted profits to the
Enterprise would have been minimal.

The London IMeeting

Armed with a low, firm price for the TOWs,
North, Secord, and Amiram Nir, an adviser to Israeli
Prime Minister Shimon Peres, met with Ghorbanifar
in London on January 22, their first meeting follow-
ing the President's approval of the Finding. North
expressed reservations about the operation, explaining
that the United States desired a more moderate Irani-
an regime, a cessation of terrorism by Iran, and the
return of the American hostages. In his notes of that
date. North recorded a plan that included, in addition
to TOWs and intelligence, the release of Hizballah
prisoners held by the Southern Lebanon Army for
hostages:

Phase I

A-Provide small piece of Intel

B-Iranian Govt will release $40M

C-$10M sent to (blank)

D-1000 TOWs, Basic Intel Package,

215

Chapter 12

Hizb[allah] Prisoners from [Southern Lebanon
Army] = hostage release.^**

North testified that he was dissatisfied with the
notion of selhng weapons to Iran until this meeting
with Ghorbanifar.2^ North's stated reluctance is in-
consistent with the testimony of Sporkin and others,
who described North as a strong advocate for the
plan and a leader in getting it adopted by the Presi-
dent.^^ Nevertheless, according to North, the induce-
ment that caused him to embrace the plan was a
suggestion by Ghorbanifar to divert profits from the
arms sales to the Contra forces.

North described his conversation with Ghorbanifar
during a lull in the London meetings:

Mr. Ghorbanifar took me into the bathroom and
Mr. Ghorbanifar suggested several incentives to
make that February [TOW] transaction work,
and the attractive incentive for me was the one
he made that residuals could flow to support the
Nicaraguan resistance. He made it point blank
and he made it by my understanding with the full
knowledge and acquiescence and support, if not
the original idea of the Israeli intelligence serv-
ices, the Israeli Government ... I think you have
seen it in my messages to my superiors, I was not
entirely comfortable with the arrangements that
had been worked in the summer of 1985 and in
the autumn and winter of 1985. I made it very
clear. I was after all the person who had the
responsibility for coordinating our counterterror-
ist policy. I had written for the President's
words, "We will not make concessions to terror-
ists." For the very first time in January, the
whole idea of using U.S. weapons or U.S. -origin
weapons or Israeli weapons that had been manu-
factured in the United States was made more
palatable. I must confess to you that I thought
using the AyatoUah's money to support the Nica-
raguan resistance was the right idea and I must
confess to you that I advocated that.^'

The tape recording of that meeting does not reflect
the private conversation which North described. In-
stead, it reveals that Ghorbanifar discussed assisting
the Contras openly, in the presence of North, Nir,
and Secord:

GHORBANIFAR: "I think this is now, Ollie,
the best chance because we never would have
found such a good time, we never get such good
money out of this. [Laughingly] We do every-
thing. We do hostages free of charge; we do all
terrorists free of charge; Central America for you
free of charge; American business free of charge;
[First Iranian Official] visit. Everything free."

NORTH: "I would like to see, . . . some point
this, uh, idea, and maybe, y'know, if there is
some future opportunity for Central America.

You know that there is a lot of Libyan, a lot of
Libyan and Iranian activity with the Nicara-
guans."^*

McFarlane had been disgusted with Ghorbanifar's
direct linkage of hostages to arms in the December
1985 London meeting. The trading was even more
explicit in January 1986. The tape reflects that Ghor-
banifar demanded that 100 prisoners held by the
Southern Lebanon Army be released as part of the
quid pro quo for the American hostages. When Nir
explained that the Southern Lebanon Army held
fewer than 50 prisoners, Ghorbanifar demanded that
50 be released even if more prisoners had to be taken
in order to release that number. ^^

Poindexter declared that he first learned of the pos-
sibility of diverting arms sales proceeds from North in
early February 1986. He said that following North's
meetings in London, North briefed him on progress
being made domestically by CIA and DOD in pro-
curing TOW missiles. Poindexter recalled North casu-
ally mentioning, "Admiral, I think I have found a
way that we can provide some funds to the democrat-
ic resistance [Contras] through funds that will accrue
from the sale of arms to the Iranians." Poindexter
claimed that he considered the diversion to be "a
very good idea" that he approved orally after only a
few minutes conversation.^"

Poindexter stated that the diversion was merely an
implementation of the President's policy and a deci-
sion Poindexter had authority to make without con-
sulting the President. Nevertheless, Poindexter admit-
ted knowing that public revelation of the diversion's
approval by him would result in his leaving the Ad-
ministration, although he said that he "probably un-
derestimated" the effect public knowledge of the op-
eration would eventually have on the Administra-
tion.^' Poindexter stated that he made the diversion
decision without consulting the President in order to
give the President "deniability." He acknowledged,
however, that he had never acted that way before
and that he had a reputation for keeping his superiors
informed. ^^

What had begun as an initiative to obtain the re-
lease of the American hostages had now assumed a
second, inherently conflicting goal. The Finding set
forth a policy of selling weapons in order to obtain
the release of hostages and to secure an opening to
Iran. Use of the arms sales to aid the Contras created
an incentive to charge the highest price the Iranians
would pay while selling the least expensive equip-
ment, a policy unlikely to win Iranian confidence or
the hostages' freedom.

On January 24, North prepared a sophisticated "no-
tional timeline" for Poindexter under the name "Oper-
ation Recovery," which proposed the transfer of
TOW missiles and intelligence information to Iran in
exchange for the release of the American hostages.

216

Chapter 12

"Operation Recovery" reflected the ambitions of the
planners who recently met in London. An agreement
was reached that the TOWs were to be shipped to
Iran in four increments of 1,000 missiles, with an
additional 508 TOWs delivered to Israel as replenish-
ment for that country's stocks. On February 8, the
Southern Lebanon Army was to release 25 Hizballah
prisoners after Iran received the first 1,000 TOWs. On
February 9, "all U.S. Hostages [were to be] released
to the U.S. /British or Swiss Embassy" and "a second
group of Hizballah [was to be] released by [the South-
ern Lebanon Army]." The following day, as prepara-
tions were underway to deliver the second increment
of TOWs to Iran, Hizballah was to release certain
other hostages. The notional timeline also made refer-
ence to another ambition of the planners: "February
11, Khomeini steps down." Following this sequential
release of prisoners for arms, the United States would
deliver the final two increments of missiles. The last
deliveries were to be in exchange for hostages of
other nationalities and the recovery of hostage Wil-
liam Buckley's remains. ^^

Logistical arrangements for the TOW shipment
soon began to materialize: North communicated with
DC/NE about DOD pricing, and Secord evaluated
technical requirements for the Southern Air Transport
707s for transporting the arms to Israel. On January
27, North received confirmation of a TOW price
from DC/NE which covered the shipment of 1,000
TOW missiles: "$3,469 per item for all units — load out
cost: for all costs: $3,700,000."34

On the evening of January 29 in the Old Executive
Office Building, North held his first meeting of indi-
viduals involved in the Iran initiative: Noel Koch of
DOD, Allen and DC/NE of CIA, and Richard
Secord. DC/NE had thought he was the sole CIA
contact in the NSC operation, but he learned at the
meeting that another CIA officer, Allen, was already
involved. The discussion turned to logistical require-
ments. The CIA was responsible for transporting the
TOWs from domestic storage facilities to Kelly Air
Force Base in Texas, where Secord would accept
delivery and fly them via Southern Air Transport in
two separate shipments to Israel. Secord would ar-
range for Southern Air Transport personnel to fly the
cargoes on Israeli chartered aircraft from Tel Aviv to
Bandar Abbas, Iran, as originally agreed with the
Government of Iran.^^

Both North and Secord described Secord's role as a
"commercial cut-out." As North testified, Secord:

. . . negotiat[ed] prices, delivery schedules, ar-
rangements, and General Secord then became the
person who went back and paid the Government
of the United States, through the CIA, exactly
what the Government of the United States
wanted for the commodities that it provided . . .
General Secord was an outside entity who had
been established as an outside entity many, many

months before in order to support the Nicaraguan
resistance.''^

DC/NE agreed with using Secord as the cut-out
because "I wasn't particularly anxious for an Israeli
Government entity to know what my account was."
But DC/NE said that he did not know that using the
"cut-out" created an opportunity for siphoning funds
to unrelated projects.^''

The February Shipment

In the delivery schedule agreed upon in the London
meeting. North noted, "10 days from money - move
TOWs." The same schedule indicated that a deposit
of $10 million would occur on January 29. ^^ The
deposit was not made, and on January 31, DC/NE
and Secord met with North to develop another sched-
ule based on an anticipated bank transfer to the CIA
account on February 4.^^ However, on that day,
North jotted in his notes, "Gorba going to bank to
make transaction tomorrow," indicating another delay
in the transaction.*"

On February 10, $1,850,000 was wire-transferred to
the CIA Swiss account from the Enterprise's Credit
Suisse account. Lake Resources. The following day,
another $1,850,000 was wire-transferred to the CIA
account "by the order of one of our clients" without
further explanation or identification. CIA headquar-
ters then arranged through the Treasury Department
to pay $3,700,000 to DOD for 1,000 TOW missiles.* >

On February 13, North sent a PROF note advising
Poindexter of the transfer of 1,000 TOWs to Kelly
Air Force Base. He also discussed the final arrange-
ments for delivering arms in exchange for American
hostages, who were expected to be released on Febru-
ary 23:

Operation RESCUE is now under way. 1000
items are currently enroute from Anniston Ala-
bama. Copp is enroute to Ben Gurion Apt [air-
port] to conduct final briefing for his flight crews
who arrived today and commenced fam flights
on the two Israelis 707s. All 1000 items will lift
off from Kelly AFB at 1400 on Saturday. 500
will be delivered to Bandar Abbas to arrive at
dawn on Monday. The meeting we had wanted
to pass the second set of intel has now been
slipped to Weds by Gorba. ** Second 500 will go
to Bandar Abbas on Friday vice Thurs. ** If all
goes according to plan, [the Southern Lebanon
Army] will release 25 Hizballah shortly after **
hopefully on Friday. This will keep our schedule
for releasing the Americans on for Sunday, Feb.
23. Something to pray for at church that day.*^

The PROF note reviewed two aspects of the plan:
first, that there would be a shipment of weapons to
Iran prior to the release of any hostages; and second,

217

Chapter 12

that part of the plan included the release of 25 Hizbal-
lah prisoners held by the Southern Lebanon Army.

Possession of the 1 ,000 TOWs was transferred from
DOD to CIA once DOD received notice that CIA
had the money to cover the cost of the TOWs.
Thereafter, on February 15 and 16, separate flights of
Southern Air Transport aircraft departed Kelly Air
Force Base, each carrying 500 TOWs to Tel Aviv.
Upon arriving in Israel, the cargo was unloaded from
the planes and stored by Israeli military officials for
transshipping to Iran. On February 17, the first Israeli
charter plane delivered 500 TOWs to Bandar Abbas.
Before departing Iran, the aircraft was loaded with 17
I-HAWK missiles which had been rejected by Iranian
Defense officials following the November 1985 ship-
ment. The Israeli aircraft returned on the next day to
Tel Aviv.*^

That day, Secord transmitted a KL-43 message to
North describing the delivery and noting a recent
conversation with Ghorbanifar. North quickly pre-
pared a memorandum for Poindexter:

MEMORANDUM FOR JOHN M. POIN-
DEXTER

FROM: OLIVER L. NORTH

SUBJECT: Operation Recovery

The following is text of encrypted message from
Copp at 0830 this morning:

Aircraft returned safely to Ben Gurion this morn-
ing at 0730 EST. Seventeen missiles aboard.
Gorba called one hour ago. [The Second Iranian
Official] will head Iranian side of meeting in Ger-
many along with five others. Iranians will pro-
vide all names after we give names and titles to
them through Gorba . . . Iranians have asked for
second delivery of 500 TOWs on Friday a.m.
They say they will release all hostages, if repeat,
if intelligence is good. They say we will get
hostages Friday or Saturday. They envision a
future meeting in Iran with us to consider next
steps while we are delivering balance of TOWs
(3,000). Gorba repeatedly stressed need for good
current intelligence. . . .They want focus on cur-
rent fighting. We have already rejected embassy
as meeting site. . . .

. . . Based on the above, the CIA (Clarridge) has
been asked to produce documents identifying
Adams as DIA [Defense Intelligence Agency] to
avoid having Copp use his own passport. To
date, CIA has refused to provide him with any
alias documentation. Albert Hakim is VP of one
of the European companies set up to handle aid
to resistance movements. He is fluent in farsi and

would need one time alias documentation as a
DIA official.

It is recognized that there is a significant problem
with the intelligence issue in general. However,
we appear to be much closer to a solution than
earlier believed. [The Second Iranian Official's]
attendance at the Frankfurt meeting tends to sup-
port our hope that this whole endeavor can suc-
ceed this week, if we appear to be forthcoming.

RECOMMENDA TION

That you urge Director Casey to provide [intelli-
gence] on Thursday in Frankfurt. ''■'

Based on his meetings with Ghorbanifar, DC/NE
understood that upon the delivery of 1,000 TOWs to
Iran, all American hostages would be released. Ses-
sions with Iranian delegates would follow, and these
could lead to a strategic U.S. -Iran meeting in a neu-
tral location. After the strategic meeting, the remain-
ing 3,000 TOWs would be delivered-^^ All of these
arrangements had been made using Ghorbanifar as the
interlocutor. Despite having shipped 18 HAWK mis-
siles and 1,004 TOWs, North and Secord had yet to
meet an Iranian official. Rather, they had relied solely
on Ghorbanifar to present the Iranian demands and to
convey the U.S. response. The American understand-
ing— that delivery of 1,000 TOWs would cause the
release of all the hostages — was contrary to the
advice of the CIA professionals. As Clair George
later told these Committees: "Under no conditions
would the Government of Iran ever allow all the
hostages to be released . . . because the only leverage
that those who held the hostages have is the hostages,
so why would they give them up."*^

The First Frankfurt Meeting

On February 19, 1986, the U.S. delegation arrived
in Frankfurt, West Germany, for what was to be its
first opportunity to meet with a representative of the
Iranian Government. When the Second Iranian Offi-
cial failed to appear, Ghorbanifar began to offer ex-
cuses for his absence. Nevertheless, North decided to
return to the United States until the Second Iranian
Official arrived in Frankfurt.''''

Albert Hakim, Secord's associate, had joined the
U.S. delegation from Geneva. Earlier in February,
Secord had told Hakim that his translating skills
would be required at a meeting with Ghorbanifar and
an Iranian Government official. Hakim said that
Ghorbanifar, when he learned of Hakim's participa-
tion, objected violently and branded Hakim "an
enemy of the State." Hakim said he eventually joined
the meeting in disguise and under the name "Ibrahim
Ibrahim" without Ghorbanifar knowing his true iden-
tity.*8

218

Chapter 12

On the return trip to the United States from the
aborted Frankfurt meeting, North announced that
Hakim would be the translator because he distrusted
Ghorbanifar. When DC/NE objected to the use of so
many "outsiders" for a covert activity. North pro-
fessed his trust in both Secord and Hakim and attested
to their expertise. DC/NE later ordered a name trace
on Hakim, which revealed allegations of illegal for-
eign sales of U.S. equipment.*^

The Meeting With An Iranian Official

On February 25, the Second Iranian Official arrived
in Frankfurt at the Airport Sheraton Hotel and the
U.S. delegation promptly returned for the meeting.
The first session with him "was a disaster."^" Hakim
said the discussion began to deteriorate when Ghor-
banifar misled both the Iranian and the Americans in
his translation of conversation. After several minutes
of discussion, Hakim knew that the two sides were on
"different frequencies," with little hope of successful-
ly communicating. Ghorbanifar tried to placate both
sides, even though their objectives were entirely dif-
ferent.''^

DC/NE similarly noticed the different expectations
each side had brought to the meeting. While the
Second Iranian Official pressed for the purchase of a
specific missile, North argued for an arrangement to
gain the release of hostages:

[T]he Iranian said . . .'Mr. Ghorbanifar has told
me that you promised to deliver a lot of Phoenix
missiles.' The Phoenix is an air-to-air missile. I
had never heard that before, that Phoenix missiles
had ever been raised. Colonel North said that he
had never heard anything about Phoenix mis-
siles.*^

The delegations met again the following day in the
Second Iranian Official's hotel suite at the Sheraton.
The Iranian continued to argue for the purchase of
Phoenix missiles, advising the Americans that if Phoe-
nix missiles were made available, "then we will start
on the hostages . . . you might not get them all
immediately, but we will at least start on it." The
parties eventually agreed that the delivery of 1,000
TOWs would be immediately followed by the release
of "a couple of hostages." The remaining hostages
would be released after a meeting among high-level
officials at Kish Island off the coast of Iran. When the
hostage "problem" was resolved, the United States
would deliver the remaining 3,000 TOWs.*^

Following the Frankfurt meeting, the Second Irani-
an Official asked Hakim to advise the President of the
United States that "money was no problem" if certain
weapons would be sold through him to Iran. Hakim
attributed this bribe offer to the Iranian's ignorance
that the accepted custom of "baksheesh," or kick-
backs, in Iran did not apply in the United States.

Hakim said that he and Secord found the offer of
"baksheesh" to President Reagan to be quite amusing,
but Hakim could not recall conveying the message to
any Government official because Hakim never took
the offer seriously. *''

With their first meeting with the Second Iranian
Official behind them, certain members of the NSC
staff felt they had established formal communications
with Iran. This line of communication consisted of the
Second Iranian Official as the representative of Iran's
government and Ghorbanifar as the intermediary for
the two governments. Nir remained an active partici-
pant in the first channel proceedings, particularly in
monitoring Ghorbanifar's activities.

The Second Installment Of TOWs Is
Delivered

On February 27, North and DC/NE met with
Casey, Poindexter, and George at the Old Executive
Office Building to report on the meeting with the
Second Iranian Official. They anticipated the immi-
nent release of as many as two hostages and arrange-
ment for a strategic Iran-U.S. conference. Ghorbani-
far's unreliability, which had been noted by the
Second Iranian Official as well as the Americans in
Frankfurt, was discussed. DC/NE noted that Hakim
telephoned the Iranian following the Frankfurt meet-
ing in an attempt to exclude Ghorbanifar from future
negotiations.**

DC/NE later complained to George about using
Secord and Hakim as U.S. negotiators. DC/NE rec-
ommended replacing Hakim as a translator with
George Cave, a former CIA officer still on contract
with the Agency and whose knowledge of Iran and
command of the Farsi language were well-known. In
a second effort to remove "outsiders" from political
negotiations, DC/NE urged George to propose that
Secord be eliminated from any future meetings with
Iranian officials.*®

Also on February 27, Israeli charter aircraft deliv-
ered the second load of 500 TOW missiles from Tel
Aviv to Bandar Abbas. Again, Secord coordinated
the flight using a Southern Air Transport crew.*' In
a KL-43 message, Secord discussed a meeting he at-
tended with Hakim, Ghorbanifar, and the Second Ira-
nian Official after all other Frankfurt participants had
departed. Secord revealed that, once again, a ship-
ment of weapons would not gain the release of any
hostages. Instead, a new condition — the meeting at
Kish Island — would first have to be met:

Met with Nir and Gorba this a.m. . . . Subse-
quently I met with the [Second Iranian Official]
for about one hour. . . . the [Second Iranian
Official] emphasized need for quick meeting at
Kish and said he would possibly, repeat, possibly
surprise us by getting some hostages released

219

Chapter 12

before meeting. . . . [SJuggest you make con-
tingency plan to accommodate early release (i.e.,
as early as Sunday). So, bottom line is on to Kish
ASAP to seize the potential opening now cre-
ated. Regards, Richard.^*

North reported on his Frankfurt meeting with the
Second Iranian Official to McFarlane, who had re-
mained interested in the arms sales initiative following
his departure from the National Security Council in
December 1985. McFarlane had agreed earlier to
meet with Iranian Government officials at a designat-
ed location, possibly Kish Island. First, North as-
sessed the meeting:

Just returned last night from mtg w/[Second Ira-
nian Official] in Frankfurt. If nothing else the
meeting serves to emphasize the need for direct
contact with these people rather than continue
the process by which we deal through interme-
diaries like Gorbanifahr. . . .

Throughout the session, Gorbanifahr intentional-
ly distorted much of the translation and had to be
corrected by our man on occasions so numerous
that [Second Iranian Official] finally had Albert
translate both ways. Assessment of mtg & agree-
ment we reached as follows: — [Second Iranian
Official] has authority to make his own decisions
on matters of great import. — He does not have to
check back w/Tehran on decisions take. — The
govt, of Iran is terrified of a new Soviet threat. —
They are seeking a rapprochment but are filled
w/fear & mistrust. — All hostages will be released
during rpt during the next meeting. — They want
next mtg urgently and have suggested Qeshm Is.
off Bandar Abbas. — They are less interested in
Iran/Iraq war than we originally believed. —
They want technical advice more than arms or
intelligence. — Tech advice shd be on commercial
& military maintenance — not mil tactics — They
committed to end anti-U.S. terrorism. — They
noted the problems of working thru intermediar-
ies & prefer dir. contact-[the Second Iranian Offi-
cial] noted that this was USG/GOI contact in
more than 5yrs. Vy important — [the Second Ira-
nian Official] recognizes risks to both sides -
noted need for secrecy. — [the Second Iranian Of-
ficial] stressed that there were new Sov. moves/
threats that we were unaware of While all of this
could be so much smoke, I believe that we may
well be on the verge of a major breakthrough —
not only on the hostages/terrorism but on the
relationship as a whole. We need only to go to
this meeting which has no agenda other than to
listen to each other to release the hostages and
start the process. Have briefed both JMP and
Casey — neither very enthusiastic despite [DC/
NE] North summary along lines above. Believe
that you shd be chartered to go early next wk or

maybe this weekend — but don't know how to
make this happen. Have not told JMP that this
note is being sent. Help. Pis call on secure yr
earliest convenience. Warm, but fatigued regards,
North.59

McFarlane replied:

Roger Ollie. Well done — if the world only knew
how many times you have kept a semblance of
integrity and gumption to US policy, they would
make you Secretary of State. But they can't
know and would complain if they did — such is
the state of democracy in the late 20th century.
But the mission was terribly promising. As you
know I do not hold Gorbanifar in high regard
and so am particularly glad to hear of [the
Second Iranian Official's] apparent author-
ity . . .60

That evening, North sent a message to McFarlane
detailing his success in winning support for the con-
tinuation of the initiative:

NOTE FROM: OLIVER NORTH

Subject: Exchanges

Since the missive of this morning, met w/Casey,
JMP, [DC/NE], Clair George and all have now
agreed to press on. Believe we are indeed headed
in the right direction. Just finished lengthy ses-
sions w/JMP he indicated that he has passed
substance to you and has given me dates that you
are not avail.

Will endeavor to sched. mtg so that these do not
conflict but noted to JMP that it was their call as
to date of mtg. Just rec'd msg fm Secord via
secure device we are using. [Second Iranian Offi-
cial] has again reaffirmed that once we have set a
date we shall have a very pleasant surprise. Dick
[Secord] & I believe that they may be preparing
to release one of the hostages early. Dick also
indicated that yr counterpart at the mtg wd be
Rafsanfani. Nice crowd you run with! God will-
ing Shultz will buy onto this tomorrow when
JMP brief him. With the grace of the good Lord
and a little more hard work we will very soon
have five AMCITS [American Citizens] home
and be on our way to a much more positive
relationship than one which barters TOWs for
lives.

I value our friendship and confidence very highly
and did not mean to infer that you had revealed
these exchanges. By asking that you not indicate
some to JMP I was only informing that I had not
told him anything of it so as not to compromise
myself at a point in time when he needs to be
absolutely certain that this can work. He is, as

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Chapter 12

only you can know, under tremendous pressure
on this matter and very concerned that it go
according to plan. My part in this was easy com-
pared to his. I only had to deal with our enemies.
He has to deal with the cabinet. Many thanks for
yr trust. Warm regards, North. ^*

McFarlane's reply records his impressions of the
Cabinet level response to the initiative:

No sweat GI. I just sent a separate note about
not sharing with John because I had forgotten to
put it in the other note. And I fully understand
the narrow path he is trying to walk between
those who want to go balls out for the wrong
reasons (Regan) and those who don't want to do
it at all (GPS and Cap). So play it any way you
must. . . ."^

As these messages make plain, within one month of
the Finding's approval, the assumption behind that
document had been discarded. The memorandum to
the President accompanying the Finding had stated
that the initiative was to terminate if the United States
delivered 500 TOWs and no hostages were released.
Yet, North and his colleagues continued to develop
contact with the Iranian and hoped to meet on Kish
Island while Americans were still held hostage.

In February, it was apparent that the hostage prob-
lem would not be resolved quickly. In mid-February,
the United States had shipped 500 TOWs to Iran. The
Second Iranian Official, however, did not attend the
first scheduled meeting. Several days later, when he
did meet with the Americans, he promised to release
hostages only after a meeting among high-level offi-
cials at some unspecified time in the future. On that
promise alone, the United States immediately sent an
additional 500 TOWs to Iran.

The American participants could attribute the fail-
ure to obtain the release of any hostages after the
November 1985 HAWK transaction to the Iranians'
apparent anger over the outdated missiles they re-
ceived. No similar justification could explain the lack
of action by the Iranians after they received 1,000
TOWs. The Americans kept their part of the bargain
and shipped the weapons; the Iranians broke their
promise and delivered no hostages. Instead, the
United States received only another promise, not of
hostages, but of another meeting.

The Diversion Continues

The sale of the 1,000 TOWs was successful in one
respect. The "attractive incentive" that North had
seen in the arms sales materialized — profits to be used
for the Contras.

The February TOW shipment had generated a $10
million payment to Secord. After Secord paid $3.7
million to the CIA's Swiss account. North discussed
the use of residuals with Secord: "I described for

General Secord the purposes to which I thought that
money ought to be applied .... There were points in
time when we discussed these activities. I had to tell
him what the government was going to charge for
various commodities, but ultimately the decision (pric-
ing) was his."®^ North said that the purpose of the
residuals was "to sustain the Iranian operation, to
support the Nicaraguan resistance, to continue other
activities which the Israelis very clearly wanted, and
so did we, and to pay for a replacement for the
original Israeli TOWs shipped in 1985."^* The Janu-
ary 17 Finding, however, made no mention of support
to the Contras or of other intelligence activities as
goals of the covert action.

North said that residuals intended for the Contras
were a small segment of a larger, comprehensive
covert activity support plan. The decision on how to
apply the residuals was stated by North: ". . . residu-
als from those transactions would be applied to sup-
port the Nicaraguan Resistance with the authority
that I got from my superiors. Admiral Poindexter,
with the concurrence of William J. Casey and, I
thought at the time, the President of the United
States."^^ Those superiors, according to North, also
approved the use of Iranian arms sales proceeds to
compensate Secord:

The arrangement that I made with General
Secord starting in 1984 recognized that those
who were supporting our effort were certainly
deserving of just and fair and reasonable compen-
sation .... It was clearly indicated [by] Mr.
McFarlane and Admiral Poindexter and in fact
almost drawn up by Director Casey, how these
would be outside the U.S. Government, and that
I told them right from the very beginning that
those things that he (Secord) did deserved fair
and just compensation.*®

Poindexter recalled no such authorization. Al-
though he felt that Secord was deserving of "reasona-
ble compensation," Poindexter testified that the sub-
ject "never came up." Poindexter was unaware of any
particular profits Secord and others realized from the
arms sales.*''

North left further definition of "fair and just com-
pensation" up to Secord. He claimed that he did not
review the records of the Enterprise, rarely knew
how much money had actually been transferred for
the Contras, and never knew how much of the profits
had gone to Secord and Hakim.** Secord and Poin-
dexter also testified that they were unaware of
Hakim's method of controlling the accounts.*^

The Initiative Continues

Even though the sale of 1,000 TOWs had not pro-
duced a single hostage, the initiative went forward.
But Nir became concerned that he would be excluded

221

Chapter 12

from further meetings and that Israeh interests would
be ignored. Within days after the meeting with the
Second Iranian Official in Frankfurt, Israeli Prime
Minister Peres wrote to President Reagan summariz-
ing the results of the Frankfurt meeting and discussing
the next steps.'"

The February decision to supply U.S. intelligence
information to the Iranian delegation concerned CIA
officials. The NSC staff forwarded to the CIA the
Iranians' request for a map depicting Iraqi battle posi-
tions at its border with Iran. When CIA Deputy Di-
rector John McMahon learned of this request, he
cabled Casey who was traveling overseas:

1. A new dimension has been added to this pro-
gram as a result of meeting held in London be-
tween North and Ghorbanifar. We have been
asked to provide a map depicting the order of
battle on the Iran/Iraq border showing units.
Troops, tanks, and what have you. . .

3. Everyone here at Headquarters advises against
this operation not only because we feel the prin-
cipal involved is a liar and has a record of deceit,
but, secondly, we would be aiding and abetting
the wrong people. I met with Poindexter this
afternoon to appeal his direction that we provide
this intelligence, pointing out not only the fragili-
ty in the ability of the principal to deliver, but
also the fact that we were tilting in a direction
which could cause the Iranians to have a success-
ful offense against the Iraqis with cataclysmic
results. I noted that providing defensive missiles
was one thing but when we provide intelligence
in the order of battle, we are giving the Iranians
the wherewithal for offensive action.

4. Poindexter did not dispute our rationale or our
analysis, but insisted that it was an opportunity
that should be explored. He felt that by doing it
in steps the most we could lose if it did not reach
fulfillment would be 1,000 TOWs and a map of
order of battle which is perishable anyway.

6. I have read the signed Finding dated 17 Janu-
ary 1986 which gives us the authority to do what
the NSC is now asking. Hence, in spite of our
counsel to the contrary, we are proceeding to
follow out orders as so authorized in the find-
ing.'"

Casey did not order McMahon to do otherwise.
Once again, concerns voiced by career officials at the
CIA were brushed aside and the intelligence was pro-
vided.

As the Americans prepared for the trip to Kish
Island, North received discouraging signals from Iran

through Secord and Hakim. The Iranians were stall-
ing on the meeting while pushing again for the pur-
chase of Phoenix missiles. North's notebook on March
2 reflected, "Meeting w/Secord & Albert [Hakim].
Albert talked to [the Second Iranian Official] . . .
situation is not right for meeting in Kish . . . [the
Second Iranian Official] wants Phoenix [missiles]."
North's response was, once again, to direct Nir to
contact Ghorbanifar and urge him to "pull out all
stops. "''^

By early March, career officials at the CIA were
pressing their doubts that Ghorbanifar and his princi-
pals could deliver on their promises to free the hos-
tages. Iran had not demonstrated any ability to gain
release of hostages since early September 1985, nearly
six months earlier. On March 7, DC/NE expressed
his doubts in a memorandum to his supervisor, the
Chief of the Near East Division in the Operation
Directorate:

Ghorbanifar insisted on another meeting after
which the Keesh Island matter will be set. North
is prepared to stonewall in Paris. There will be
no more "slices of salami" handed out. However,
our other friend, NEER [sic], will also be
present. We sense strongly . . . that he is unilat-
erally providing additional arms as an incentive
to the Keesh Island. I have briefed Ed Juch-
niewicz on the above. I tried to get into McMa-
hon, but he did not have time. I will be back
Saturday PM and will give you a ring. What we
may he facing is evidence that [the Second Iranian
Official] does not have the authority in Tehran to
make it work.'''-^ [Emphasis added.]

Cave Joins the Team

By March 5, the CIA prevailed in its bid to have
intelligence professional George Cave replace Hakim
as the interpreter. At CIA Headquarters that day,
Cave was briefed by DC/NE, George, and Allen.
DC/NE asked Cave if he would travel to Tehran to
translate during a meeting with the Iranian Speaker of
Parliament, Rafsanjani. Cave had prior experience
with Ghorbanifar and had been involved in the 1984
decision to issue a worldwide "burn notice" on him.
Cave was appalled that a sensitive operation would
depend so heavily on a man with a long record of
self-serving lies and distortions. Cave was equally
concerned that the Israelis had such a prominent role
in the affair, because Israeli and American goals in the
region were not always compatible.''''

Nevertheless, Cave agreed to participate. He con-
sidered the initiative to be a high-risk operation and
strongly recommended against the CIA involving
"serving officers" in the operation. Cave noted that,
as an annuitant, he avoided jeopardizing his career
should the operation fail. Cave quickly replaced DC/
NE as the CIA's operational "point man," reporting

222

Chapter 12

on his activities to DC/NE and "in many cases direct-
ly to Director Casey."''*

North, DC/NE, and Cave flew to Paris on March
7 to meet with Ghorbanifar and Nir. Ghorbanifar told
the Americans that the Second Iranian OfTicial's inter-
nal political position had not been improved by the
Frankfurt meeting. Upon examining their military
stockpiles, Iranian military representatives felt that
they needed no additional TOWs; instead, they
wanted the Americans to sell them 240 types of spare
parts to repair the HAWK missiles in Iran's stocks.
Nir encouraged the U.S. delegation to pursue this
avenue, contending that such a sale would result in
the release of all American hostages."' Before con-
cluding the Paris meeting, Ghorbanifar told the
Americans that the Kish Island site was unacceptable
to the Iranians, who would agree only to meet in
Tehran.''^ The altered meeting site created further
delays.

North's notes of the Paris meeting reflect fear that
his channel to Iran might be seriously flawed. He
commented that all prior effort focused on the pur-
chase of arms rather than political change and that
"we cannot verify that there is anyone else in G.O.Ir
[Iran] aware or even interested in talking to USG.""*
In spite of these concerns. North continued to pursue
the plan.

In a report for Casey after the Paris meeting. Cave
addressed several points raised by Ghorbanifar during
the meeting. The last paragraph set forth Ghorbani-
far's suggestion to divert profits from the sale of arms
to Iran to aid the Contras: "He also proposed that we
use profits from these deals and others to fund [other
operations]. We could do the same with Nicara-
gua."''^ Charles Allen read Cave's memorandum, but
dismissed the statement as a typically expansive
remark by Ghorbanifar."" Yet, this was not the first
time that Allen had learned that Ghorbanifar was
attempting to use North's interest in the Contras to
"sweeten the pot" for the Americans. During a meet-
ing between Alien and Ghorbanifar in January 1986,
Ghorbanifar had mentioned the possibility of using
monies generated from various projects to aid "Ollie's
boys in Central America."**'

New Doubts About Ghorbanifar

Several PROF notes between North and McFar-
lane indicated North's frustration following his Paris
meeting with Ghorbanifar:

Per request from your old friend Gorba, met w/
him in Paris on Saturday. He started w/a long
speech re how we were trying to cut him out.
How important he is to the process and how he
cd deliver on the hostages if only we could
sweeten the pot w/some little tidbits — like some
arms, etc. After his speech I allowed as how he

was not getting the message, but that I wd reiter-
ate:

— The hostages are a serious impediment to seri-
ous govt-to-govt discussions and this must be re-
solved before we can discuss any further transac-
tions.— We remain ready to go to Kish or any-
where else to discuss issues of mutual concern as
long as the hostages are going to be released
during or before this meeting. . . ."'■^

In a late-night response, McFarlane offered his
opinion on continuing with Ghorbanifar:

Gorba is basically a self-serving mischief maker.
Of course the trouble is that as far as we know,
so is the entire lot of those we are dealing with
.... But it is going to take some time to get a
feel for just who the players are on the contem-
porary scene in Teheran. So the sooner we get
started the better.*^

North's return PROF reveals that he was not opti-
mistic that the initiative had reached Iranian officials
who cared about anything other than arms sales and
personal financial gain:

In re the Gorba prob: He is aware of the Kish
mtg and is basically carrying our water on the
mtg since he is still the only access we have to
the Iranian political leadership. It wd be useful, I
believe, for you to talk w/George Cave, the
Agency's Iran expert. He shares our concern that
we may be dealing only w/those who have an
interest in arms sales and their own personal fi-
nancial gain and believes the "Russians are
coming" approach is about the only way to
broaden the perspective.*''

The NSC staff had advocated arms sales as a way
of creating an opening with Iran as well as obtaining
the release of the hostages. By mid-March, though,
arms sales by the United States had produced no
hostages. Further, NSC staff members were not even
sure they were dealing with anyone who was interest-
ed in a broader initiative.

Allen had also recommended continuing to work
with Ghorbanifar on terrorism issues "regardless of
whether we find his information at this stage credi-
ble."** Despite this concern, Allen argued that Ghor-
banifar was the only channel available to Iran "^
Secord commented that a new channel should be
sought because the Ghorbanifar channel was "obvi-
ously flawed."*'' Cave's view of Ghorbanifar re-
mained unchanged:

The Israelis, particularly Nir, insisted on Ghor-
banifar, for one thing. I was at the other end,
insisting he couldn't be trusted. There were other
people that felt you had to keep him in . . .
because he would blow the whole thing. He was

223

Chapter 12

investing a lot of money in this operation, so that
he had to be kept in it. I was more concerned
that, knowing Ghorbanifar, that Ghorbanifar
worked for Ghorbanifar, period, which is basical-
ly what we found when we got to Tehran.^*

Ghorbanifar realized that the meeting between the
Americans and the Second Iranian Official had ren-
dered him superfluous. After the Frankfurt meeting in
late February, Hakim had called the Iranian official to
recommend that Ghorbanifar be bypassed in further
negotiations. As a result, at the early March meeting
in Paris, Ghorbanifar had continually emphasized to
the Americans that he was essential, a position he
would continually restate.

To placate Ghorbanifar, North invited him to
Washington in late March. In a telephone call several
days prior to Ghorbanifar's arrival, Nir told Allen of
Ghorbanifar's concerns and advised that any attempt
to eliminate Ghorbanifar from the negotiations was
"unwise . . . because of the hold that [Ghorbanifar]
has over the [Second Iranian Official]. "^^

While Nir was promoting Ghorbanifar to the CIA,
Nir and North were discussing how to divide up the
profits from the sale of HAWK spare parts. An entry
in North's notebooks related a conversation with Nir:
"price data on 240 . . . timing per acquisition . . .
need to know residuals on — price per unit ($6068),
price in Aaron's place, how much is left for use by
Israelis."*" "Aaron" was the code name for DOD
official Noel Koch; "Aaron's place" was, presumably,
the Pentagon. The conversation reflects the Israelis'
desire to know how much of the residuals would be
available to finance the Israelis' purchase of the 504
replacement TOWs.®*

Ghorbanifar Visits Washington

On April 2, 1986, Ghorbanifar and an Israeli official
met in London to discuss financial arrangements for
shipping the HAWK spare parts.*^ Ghorbanifar flew
to Washington the next day and met with the CIA
Chief of the Near East Division (C/NE)* Cave, and
North at a hotel in Herndon, Virginia. They discussed
the availability of the HAWK spare parts on the list
that Ghorbanifar had earlier supplied. CIA logistics
personnel then attempted to locate the items, many of
which were not in production or not available.

C/NE remembered Ghorbanifar saying that the Ira-
nians had agreed to release all American hostages as
soon as the U.S. delegation arrived in Tehran. Based
on Ghorbanifar's prior performance, the CIA officers
were skeptical.*^ Two days later. Cave drove Ghor-
banifar to Dulles International Airport outside Wash-
ington. During the drive, Cave reminded Ghorbanifar
that all hostages had to be released before any of the

•DC/NE was promoted in May 1986 and thereafter continued to
participate in only a support role.

HAWK spare parts would be delivered. Cave said
that Ghorbanifar "took the statement under advise-
ment."*''

Cave's report after the meeting shows that despite
his contempt for Ghorbanifar, he hoped that the Ira-
nian might yet deliver:

we discussed the schedule in some detail, we
proposed arriving about 7-8 days after the money
is deposited, this would give us time to have the
plane load of spares positioned in europe. we
then haggled for hours about what was included
and what would be negotiated in tehran. we
stuck to our position that once the release takes
place we would order plane to launch and it
should arrive in bandar abbas with 8 hours, it
would then turn around and bring in the rest of
the spares, we are tentavilye [sic] committed to
deliver the $3,000 volswagons [sic] [3,000 TOWs]
about 30 days later, gorba pressed for new addi-
tions . . . gorba kept' insisting that we bring
some of spares with us and we kept insisting that
we wouldn't although a small sample is an
option.

6. possibly the best indication that we might be
getting somewhere is that towards the end, gorba
began discussing his cut. goode [North] told him
that he could add on whatever he thinks right for
his cut to the final price, he said that he had
spent 300,000 dollars already to grease the skids
etc. it would appear that he now feels that the
deal is entering its final stages.

8. gorba claims that the Iranian side is devot-
ing considerable time to this, the whole thing
is being masterminded by rafsenjani behind the
scenes . . .*^

Following the April meeting with Ghorbanifar,
North and Nir continued to discuss the arms sales and
the use of the residuals. On April 7, North received
an update on Nir's most recent contact with the
Second Iranian Official and Ghorbanifar. Without fur-
ther explanation. North jotted in his notebook on that
date, "Merchant [Ghorbanifar] needs $1.5M from
HAWKs." Nir commented that the Second Iranian
Official did not trust Ghorbanifar and trusted the
United States even less. Nir was still concerned that
he might be left out of the negotiations. North noted:
"Nir very upset that Israel might be 'cut out' of the
Iran trip . . . very bad blood if cut out ... If this
deal falls through Israel will sell HAWK parts to
finance (illegible)".** Israel remained concerned about
how the replenishment of the 504 TOWs would be
financed.

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Chapter 12

Planning The Tehran Mission

During March and April, U.S. planners considered
dispatching an advance U.S. party to meet with Irani-
an officials equivalent to NSC staff representatives.
Specifically, Casey, Poindexter, and others contem-
plated Cave and North traveling with Ghorbanifar to
Iran in advance of the McFarlane visit. Even before
the meeting had been moved from Kish Island to
Tehran, Cave believed that an advance trip was a
practical step. He pointed out, "With all my Iranian
experience and my distrust for Ghorbanifar, I thought
there was an awful lot of personal risk in us going in
[to Tehran without an advance trip]."^'

Secord later reflected that a trip without advance
work was a mistake:

It was strongly recommended by three of us —
Nir, myself, and North — were all recommending
that a preparatory meeting take place. There was,
after all, as far as I knew, no agenda agreed to
for this meeting (McFarlane's), and so it seemed
to me at least — and I think to the others — to be
not well organized. In fact, I have been to many,
many international meetings, and I don't think I
have ever been to one where there wasn't some
preparatory work done in advance. However, the
position was taken that there would be no ad-
vance preparatory meeting, that the terms and
conditions that had been agreed to in Frankfurt
were sufficient . . . and that the Iranian side
would simply have to deal with that, and so there
was no advance meeting and that was a big mis-
take.**

Poindexter ruled out the possibility of an advance
trip by North and others, claiming "that was more
dangerous and that if we had a more senior person
there with the group that there was less risk to the
whole group."** According to North, Poindexter's
view was echoed by Director Casey, who argued:

This advance trip is so hidden, we are going to
use non-U. S. Government assets throughout, Eu-
ropean or Middle Eastern airlines, no U.S. Air
registration, air flights. You might never be heard
from again. The Government might disavow the
whole thing. '°°

North's Diversion Memorandum

Around April 4, 1986, North prepared an extensive
report for Poindexter entitled "Release of American
Hostages in Beirut."'°' In the memorandum. North
summarized the Iran initiative, beginning with a June
1985 meeting between certain "private American and
Israeli citizens." Under the report's subheading, "Cur-
rent Situation," North detailed the agreement reached
at the most recent meeting between Ghorbanifar and
U.S. officials:

Subject to Presidential approval, it was agreed to
proceed as follows:

— By Monday, April 7, the Iranian Government
will transfer $17 million to an Israeli account in
Switzerland. The Israelis will, in turn, transfer to
a private U.S. corporation account in Switzerland
the sum of $15 million.

— On Tuesday, April 8 (or as soon as the transac-
tions are verified), the private U.S. corporation
will transfer $3,651 million to a CIA account in
Swizterland. CIA will then transfer this sum to a
covert Department of the Army account in the
U.S.

— On Wednesday, April 9, the CIA will com-
mence procuring $3,651 million worth of HAWK
missile parts (240 separate line items) and trans-
ferring these parts to [a CIA storage facility].

This process is estimated to take seven working
days. 102

The "Current Situation" section included a timetable
that placed McFarlane and his team of negotiators in
Tehran on April 19 to meet with Rafsanjani. It also
forecast that all of the American hostages would be
released sometime following sequential arms deliveries
to Iran.i°3

Under a second subheading, "Discussion," North
listed nine points to be discussed with the Iranian
Government through Ghorbanifar. The ninth topic
follows:

— The residual funds from this transaction are
allocated as follows:

- $2 million will be used to purchase replacement
TOWs for the original 508 sold by Israel to Iran
for the release of Benjamin Weir. This is the only
way that we have found to meet our commitment
to replenish these stocks.

-$12 million will be used to purchase critically
needed supplies for the Nicaraguan Democratic
Resistance Forces. This materiel is essential to
cover shortages in resistance inventories resulting
from their current offensives and Sandinista
counter-attacks and to 'bridge' the period be-
tween now and when Congressionally-approved
lethal assistance (beyond the $25 million in 'de-
fensive' arms) can be delivered.'"*

The last page of the report contained a recommen-
dation that the President approve the plan:

That the President approve the structure depict-
ed above under "Current Situation" and the
Terms of Reference at Tab A.

Approve — Disapprove —

225

Chapter 12

North transmitted a PROF message on April 7 to
McFarlane stating that North had prepared the
memorandum at Poindexter's request for "our boss";

Met last week w/ Gorba to finalize arrangements
for a mtg in Iran and release of hostages on or
about 19 Apr. This was based on word that he
had to deposit not less than $15M in appropriate
acct. by close of banking tomorrow . . . Per re-
quest of JMP have prepared a paper for our boss
which lays out arrangements. Gorba indicated
that yr counterpart in the T. mtg wd be Rafsan-
jani. If all this comes to pass it shd be one hell of
a show.'°^

During her testimony, Fawn Hall, North's secre-
tary, expressed familiarity with the early April memo-
randum. She recalled typing it as North stood behind
her and dictated.'"^ She also believed that one of the
drafts of this memorandum was edited by Poindexter
and returned to her for typing correction.'"'' She
testified that Poindexter never suggested that the
memorandum was improper in any fashion nor did he
ever suggest the outlined policy not be pursued. '°^
Further, Hall stated that her understanding of the
phrase "our boss" in the April 7 PROF referred to
President Reagan.'"^ Poindexter testified that he did
not recall seeing any memorandums discussing the
diversion of funds to the Contras until the day before
he resigned in late November 1986. '"'

In testifying about the diversion of funds, North
stated that he believed his superiors had approved all
his actions during the Iran initiative. He said that he
may have written as many as five or six memoran-
dums in which he asked for the President's approval
for the diversion of profits from the sale of weapons
to Iran. North explained that each of the memoran-
dums was prepared for Presidential approval when a
proposed sale of weapons to Iran neared its final
stage. ' ' '

Even though North said he prepared "diversion"
memorandums for five or six transactions, there were
only three successful shipments of arms during the
initiative: "It is my recollection I sent each one up the
line, and that on the three where I had approval to
proceed, I thought that I had received authority from
the President." North stressed that, unlike other mem-
orandums he had submitted for Presidential approval,
he never saw a memorandum about diversion reflect-
ing the President's initials in the "Approval" space.
He denied receiving instructions from Poindexter to
discontinue the drafting of such memorandums. ' ' ^

North initially said that he could not recall Poin-
dexter specifically asking him to prepare a "diver-
sion" memorandum for the President's approval."^
When shown his April 7 PROF message to McFar-
lane, however. North remembered that Poindexter re-
quested drafting of the April memorandum about di-
version. North also said that the words, "our boss,"

used in the PROF message was his phrase for the
President.''*

Poindexter's recollection differed sharply. He said
that North first discussed with him the idea of using
the proceeds of the arms sales to support the Contras
in late January or early February 1986. He could not
remember ever receiving a written memorandum call-
ing for the President's approval and never directed
North to prepare such a memorandum. ' ' ^ According
to Poindexter, he directed North to put nothing in
writing about the diversion,"^ a direction North
denied receiving."'' Poindexter admitted leading
North to believe that the President had approved the
plan, but he denied ever discussing it with the Presi-
dent.

Poindexter testified that his decision not to tell
North that he had hidden the diversion from the
President was risky in light of his "plausible deniabi-
lity" plan. Without Poindexter's knowledge. North
told both McFarlane and Casey about the diversion.
North's associate, Robert Earl, also knew. Not know-
ing of Poindexter's supposed plan to give the Presi-
dent "plausible deniability," any of them may have
spoken to the President about the diverted funding for
the Contras.' '*

The diversion to the Contras was not the only use
of funds that North had in mind in April. On April
15, he received a call from Nir about joint covert
operations to be conducted by the Americans and the
Israelis. According to North, the operations — named
TH-1 and TH-2 — were to be financed out of the pro-
ceeds of the arms sales. None of them progressed
beyond the planning stages, but North was prepared
to dedicate funds from the Enterprise to those covert
operations. ' ' ^

Complications

Around April 22, 1986, CIA officers reviewed in-
formation noting that Ghorbanifar complained bitterly
of his arrest by Swiss police. Ghorbanifar had alleged-
ly funded a transaction that violated certain U.S. Fed-
eral laws and was coordinated by Cyrus Hashemi, an
Iranian arms dealer. '^° This incident was the first
these CIA officers knew of a U.S. Customs "sting"
operation targeting a group of individuals who had
allegedly attempted to sell U.S. arms to Iran. Allen
avoided discussing the subject with Ghorbanifar.
However, Allen believed that the arrest would have
little effect on the NSC operation:

This was a separate activity. It was viewed as
Mr. Ghorbanifar perhaps being involved in an-
other financial deal. It appeared that he had other
deals under way with a variety of elements. So
the fact that he might have been involved in
some form of arms transaction with Cyrus Ha-
shemi certainly was not beyond question and we
were not surprised.'^'

226

Chapter 12

Pricing the HAWK Parts

Near the end of April, the CIA received authority
from the NSC staff to forward 508 TOWs to Israel to
replenish stock sent in 1985 to Iran. George Cave
recalled that CIA costs for procurement, packaging,
security, and transportation of the missiles, plus simi-
lar expenses for the 240 HAWK spare parts, boosted
the Defense Department price to $6 million instead of
the $4 million originally quoted by the CIA logistics
office. Cave maintained that North was solely respon-
sible for forwarding the DOD cost of the shipment to
Nir. However, he denied knowing of North's involve-
ment in suggesting a price to be charged Ghorbanifar
or the Iranian Government. '^^

Cave denied knowing of pricing specifics for the
240 spare parts until after the Tehran trip, even
though he routinely reviewed all reports regarding
the initiative. Beginning in early April, it was report-
ed that the Iranians were supposed to pay nearly five
times the amount CIA was to receive for the 240
spare parts. On three separate occasions prior to the
Tehran trip, reports reviewed by Cave specifically
indicated that the Government of Iran was to pay
Ghorbanifar $22,471,000 for "spare parts," for which
the CIA later received approximately $4,500,000.^23
Yet Cave claimed that he was unaware that the trans-
action would yield a huge profit for the middlemen —
Ghorbanifar and Secord-'^*

New Demands

In late April and early May, Allen continued to com-
municate with Ghorbanifar to gauge any changes in
Iran's position on the long-promised meeting in
Tehran. Following the February delivery of 1,000
TOWs, the Second Iranian Official had promised that
the hostages would be released if the Americans
agreed to a meeting with top-level Iranian officials.
By mid-April, the requirement of a sale of HAWK
spare parts was added. On April 14, Ghorbanifar
called Allen with new demands. In that conversation,
Ghorbanifar relayed an Iranian proposal for the se-
quential release of hostages following the arrival of
the Americans in Tehran and the delivery of the spare
parts. The Iranians were withdrawing their original
promise to release the American hostages upon the
arrival of the American delegation and instead de-
manded additional arms sales. During his conversation
with Allen, Ghorbanifar recommended that North
reject the Iranian proposal. '^^

The following day, Allen prepared a memorandum
outlining what he perceived to be obstacles in the
initiative and his own recommendations. Allen recog-
nized that unless the United States was willing to
provide additional weapons, it had no alternative but
to wait, a decision that would lead to "additional
hostages and threat of exposure." He cautioned.

"Every day that passes, raise' the risk of embarrassing
disclosures." Allen also suggested "sweetening the
pot" by an act of U.S. omission, that is, permitting the
Israelis to become an arms supplier to Iran, a position
the Israelis were "anxious" to take because "they
would like to see Iran prevail." '^^ Allen recognized
that without a sweetener, the Iranians had little moti-
vation to fulfill their bargain to release the hostages.
Poindexter responded sharply to the new Iranian
proposal, purporting to communicate the President's
own frustrations with the operation. In a PROF mes-
sage to North written shortly before a meeting in
Frankfurt among North, Cave, Nir, Ghorbanifar, and
the Second Iranian Official, Poindexter issued North
specific instructions:

You may go ahead and go [to the meeting in
Frankfurt], but I want several points made clear
to them. There are not to be any parts delivered
until all the hostages are free in accordance with
the plan that you layed (sic) out for me before.
None of this half shipment before any are re-
leased crap. It is either all or nothing. Also you
may tell them that the President is getting very
annoyed at their continual stalling. He will not
agree to any more changes in the plan. Either
they agree finally on the arrangements that have
been discussed or we are going to permanently
cut off all contact. If they really want to save
their asses from the Soviets, they should get on
board. I am beginning to suspect that [the Second
Iranian Official] doesn't have such authority. '^'^

Poindexter later sent a similar note to McFarlane,
who was still awaiting his trip to Tehran:

Here is the update we discussed on Saturday.
[The Second Iranian Official] wants all of the
parts delivered before the hostages are released. I
have told Ollie that we can not do that. The
sequence has to be 1) meeting; 2) release of hos-
tages; 3) delivery of HAWK parts. The President
is getting quite discouraged by this effort.

This will be our last attempt to make a deal with
the Iranians. Next step is a Frankfurt meeting
with Gorba, [The Second Iranian Official], North
and Cave. Sorry for the uncertainty. '^^

McFarlane agreed: "Roger John. Your firmness
against the recurrent attempts to up the ante is cor-
rect. Wait them out; they will come around. I will be
flexible." '29

The Israelis also came to believe that the Ghorbani-
far channel might be doomed. Secord conveyed this
message to North: "I talked to Adam [Nir] this a.m.
He [is] quite pessimistic re Gorba/[Second Iranian
Official] cabal. He know[s] time is nearly over."'^"

In mid-April, North wrote in his notebooks that he
had received "1st acknowledgement that Iranians are

227

Chapter 12

committed."*^' While this encouraged North, it sug-
gested that the American demands would not be met.
In light of Poindexter's concern that the Second Irani-
an Official might lack sufficient authority, the Ameri-
cans could not be certain that the Iranian delegation
would be able to secure the release of the hostages.

Allen's April 15 memorandum noted that one of
Ghorbanifar's efforts to have the Americans "sweeten
the pot" for Iran included the sale to Iran of two
U.S. -made radar systems. Even though the radars
were a subject of prior negotiations, North had treat-
ed them as separate from the spare parts sale. In a
PROF note on April 29, North sought Poindexter's
approval to sell the radars during the upcoming
Frankfurt meeting. In the process. North pressured
Poindexter for an immediate decision on this addition-
al concession to the Iranian demands. '^^

On May 2, Nir telephoned Allen to discuss his most
recent contact with Ghorbanifar. Nir stated that he
had advised Ghorbanifar of the U.S. desire to proceed
to Tehran without a preliminary meeting. Nir told
Allen that in his opinion it was essential for both sides
to have complete assurance regarding the "terms of
the arrangements" prior to the primary meeting. '^^
With no advance meeting, the Americans would have
to rely even more heavily upon Ghorbanifar as an
intermediary.

In contrast to North, Allen was pessimistic about
progress made by the Second Iranian Official and
Ghorbanifar toward the release of American hostages.
In a formal memorandum to Casey on May 5, Allen
detailed his interpretation of events in Iran:

1. [Most recent information] suggests that the
White House initiative to secure release of Amer-
ican hostages in Lebanon remains dead in the
water. We surmise . . . that [the Second Iranian
Official] is unable to provide the assurances and
to make the arrangements demanded by our side.
Ghorbanifar has not deposited the funds neces-
sary to move the spare parts.

2. We believe that the Iranian government has
not been able to convince the holders of the
hostages to release them to Iranian custody. This
belief is fortified by the experience of [another
government]. Ghorbanifar's failure to deposit the
necessary funds indicates that he has doubts
about [the Second Iranian Official's] ability to
obtain the release of the hostages. Ghorbanifar is
in a bind and he knows that once he deposits the
money he cannot get it back. He also is aware
that we have insisted that the spare parts will [be]
delivered eight hours after the release of the hos-
tages and only after the release of the hos-
tages. *'■*

Allen's memo must have been alarming. He ques-
tioned whether the Iranian Government had the abili-
ty to convince those who held the hostages to release

them. In doing so, he cited the experience of another
government. Although it is clear that U.S. officials
were increasingly concerned with the Iranian govern-
ment's inability to release the hostages, there is no
indication that this concern was communicated to the
President.

The State Department Hears Rumors

While North and CIA operatives were wrestling
with details of the meetings and hostage exchange,
other U.S. Government officials were conferring
about the broader goals and policy. On February 28,
Poindexter had briefed Secretary of State George
Shultz on the hostage situation. Poindexter told
Shultz that the Iranians "wanted a high-level meeting,
and if there were a proper high-level meeting discuss-
ing our future relationships, that would be the occa-
sion in which the hostages would be released."'^*
Poindexter said that the White House had selected
Robert McFarlane to conduct the high-level meet-
ijjg 136 Secretary Shultz responded that although the
Iranian position "sounds almost too good to be true,"
he would favor the meeting, providing McFarlane
acted under written instructions. Secretary Shultz was
subsequently shown such written instructions (or
"terms of reference"), which he "thought were fine"
because they mentioned arms sales as only a future
prospect, in the event of a new relationship between
the United States and Iran, an "end to the Iran-Iraq
war and an end to terrorism coming from Iran and so
on."i"

Poindexter did not inform Secretary Shultz that the
agenda for the proposed meeting between McFarlane
and the Iranians would include current deliveries of
U.S. arms; and the written instructions reinforced
Secretary Shultz's view that the meeting would in-
clude no such agenda.'^® Poindexter also did not tell
the Secretary that only one day before their conversa-
tion the United States had completed a shipment of
1,000 TOWs to Iran.

By March 11, Poindexter called Secretary Shultz
and told him that the proposed high-level meeting
"was off" as was the Iran initiative itself '^^ Yet, an
event in London among a group of international arms
dealers 2 months later showed that the meeting and
the initiative were very much "on" and that Poin-
dexter had been less than truthful with the Secretary.

In early May, Saudi businessman Adnan Kha-
shoggi, Nir and Ghorbanifar met with Tiny Row-
lands, a British entrepreneur, and sought to enlist him
in a plan to sell arms and other materials to Iran, a
plan they maintained had been endorsed by the U.S.
Government. According to Rowlands, Nir described
a program to transfer large amounts of grain, military
spare parts, and weapons to Iran. Nir proposed that
Rowland's company, Lonrho, serve as an umbrella
for managing future sales to Iran. Khashoggi exhibit-

228

Chapter 12

ed receipts of large-scale transfers of cash to Swiss
banks, indicating that large amounts of money were
involved in the transaction. Moreover, in attempting
to recruit Rowlands, Nir and Khashoggi told him that
not only were a number of businessmen already in-
volved in the deals, but also that the sales "had been
cleared with the White House" and that Poindexter
was the "point man." Rowlands learned that "only
four people in the U.S. Government are knowledgea-
ble about the plan [and that] the State Department
[had] been cut out."''"'

Following this meeting, Rowlands reported what
had transpired to a U.S. Embassy official in London,
and Ambassador Charles H. Price was promptly in-
formed. The Ambassador reported the incident to
Under Secretary of State Michael Armacost, and later
briefed Poindexter by secure phone in Tokyo, where
Poindexter was attending the economic summit.'*'
Poindexter acknowledged "a shred of truth" in Nir's
allegation of White House involvement in the plan
but contended that the involvement was minimal and
that, in effect, Nir was "up to his own games." Poin-
dexter told Ambassador Price that the U.S. Govern-
ment had become involved the previous year when it
"caught the Israelis red-handed delivering arms to
Iran." He maintained that the story Price had heard
was "all out of perspective" and advised that Row-
lands be told to stay out of the plan. Poindexter
assured Ambassador Price that he would "put things
back the way they should be."'*^

The same day. Secretary Shultz, who was also at-
tending the economic summit, received a cable from
Armacost which detailed the Rowlands information.
Shultz "expressed strong opposition on legal and
moral grounds, as well as concern for the President"
and the potential damage to his credibility that would
result from exposure of the plan.'*'

Upon receiving the cable, Shultz immediately
sought out Poindexter. Unable to find him, he con-
fronted White House Chief of Staff Donald Regan
and objected strongly to any such plan going
foward.'** Regan expressed alarm and promised to
raise the matter with the President.'** When Secre-
tary Shultz found Poindexter, Poindexter denied any
U.S. Government involvement in the deal, saying,
"We are not dealing with these people. This is not
our deal." Poindexter further said he had informed
Ambassador Price that there was "only a smidgen of
truth" in the report he had heard from Tiny Row-
lands.'*^ Regan later reported to Secretary Shultz
that the President became upset when learning of the
matter. As a result, the Secretary concluded that
whatever transaction had been discussed with Row-
lands, "this is not our deal," meaning that "the repre-
sentations [that] this is something that has been explic-
itly endorsed by the U.S. Government were
wrong."'*'

When Poindexter denied to Secretary Shultz that
the United States was selling arms to Iran, he avoided

telling the Secretary of State that McFarlane's pro-
posed meeting with "high level" Iranians had been
rescheduled for Tehran. Neither did he mention that
plans for the meeting were rather well-advanced, nor
that it would include a shipment of HAWK spare
parts.'**

On the same day that Armacost cabled Secretary
Shultz, Poindexter sent a PROF message to North,
informing him of Ambassador Price's phone call
about the Rowland-Nir-Ghorbanifar-Khashoggi meet-
ing. Poindexter blasted Nir, telling North, "We really
can't trust those SOB's."'*^

In his reply to Poindexter, North agreed, "We
cannot trust anyone in this game." North recalled that
he had briefed Poindexter a year before on efforts to
get Rowlands involved. At that time, Rowlands had
reported back to Casey that the entire matter
"smelled very badly."'*" North then informed Poin-
dexter that the story he had heard from Ambassador
Price was "the one made up by Nir to cover the
transaction" and that it had been reported to North a
few weeks before by Clair George. North concluded,
as a result of the disclosure by Ambassador Price, that
the "bottom line" was that "this typifies the need to
proceed urgently to conclude this phase of the oper-
ation before there are further revelations. We all
know that this has gone on too long and we do not
seem to have any means of expediting the process
short of going to Iran."'*'

As these events occurred. North was preparing to
meet Ghorbanifar in London. On May 5, 1986, the
day after Poindexter told Secretary Shultz there was
no truth to the report from the U.S. Embassy in
London, Poindexter ordered North not to let anyone
know he was going to London and not to have any
contact with the U.S. Embassy there. '*^ In reply to a
May 17 PROF note from North questioning whether
Secretaries Shultz and Weinberger and Director
Casey should be involved in a "quiet meeting" with
the President and McFarlane before McFarlane's trip
to Tehran, Poindexter stated that he did not want
such a meeting.'*' By that decision, Poindexter en-
sured that Secretary Shultz would remain in the dark
about the Tehran mission, and that McFarlane would
fly to Iran for an expected high-level meeting with
the Iranians without any consultation with the Secre-
tary of State.

Another Meeting In London

On May 6, North, Nir, Cave, and Ghorbanifar met
at the Churchill Hotel, London. The meeting focused
on pricing of the spare parts shipment. Cave denied
discussing the issue, noting that North, Nir, and
Ghorbanifar were always careful to exclude him from
such conversations.'**

In discussing the upcoming meetings in Tehran,
Ghorbanifar named Iranian Government representa-

229

Chapter 12

lives whom the Second Iranian Official said would
meet the American delegation: Prime Minister
Musavi, Speaker Rafsanjani, and President Khameni,
with a possible visit by the Imam's son, Ahmed Kho-
meini.'**

Cave had his first telephone conversation with the
Second Iranian Official while he was in London. He
described a "major snag" that arose regarding the
sequence of the spare parts delivery. The Second Ira-
nian Official was allegedly adamant that all the parts
be delivered simultaneously with the arrival of
McFarlane in Tehran. The Second Iranian Official
finally agreed that when the American delegation ar-
rived in Tehran with as many spare parts as the
aircraft could hold, an Iranian delegation would be
dispatched to Lebanon to barter for the release of the
hostages. When the hostages were released, the re-
maining spare parts were to be delivered. An Israeli
present during the meeting later confirmed this agree-
ment.'*®

Once again, the American position had slipped.
Poindexter's firm resolve only weeks earlier to refuse
to deliver any parts until the hostages were released
had eroded. The Iranians were insisting on complete
delivery and the American negotiators began to
relent.'*'

North recorded many details of the London negoti-
ation, and his notes reflect the pricing of both the
spare parts and the radars. The first set of figures
came from pricing suggestions by Nir, North, and
Ghorbanifar:

Total cost of 236 parts

235 Items

209 fully supported

14 partially supported

5 not avail

5 can't I.D.

2 never (illegible)/disc(ontinued)

225 delivered

Cost = $13,415,876.00

Radars = $9,652,500.00

Packing/Handling = $433,725.00

Misc. xport(radars) = 37,500

C-141 to Eur.(Radars) $104,300.00

$23,663,91 1.00' *8

The second set of figures reflected the DOD cost
of the same materials:

RADARS

$6,177,600 for two radars
22,884 testing/eval
100,000 P/C/H/I
78,000 trans via C-141
$6,299,984 COST $6,3

240 PARTS: 4,182,923.40

P/C/H 146,000

Trans 8,000

$4,377,426

TOWs $1,762,252

Trans 7,500

Overrun 241,011

$2,010,763
Grand Total to CIA $12,688,173.00'*^

Cave Becomes Concerned About Pricing

Several days following the London meeting. Cave
received information that he claimed was the first
time he had heard of price manipulation by Ghorbani-
far. Cave recalled his shock when he learned of
Ghorbanifar's exorbitant price. Concerned that such
pricing could jeopardize the operation. Cave ap-
proached North. Cave said that North expressed
alarm at the price and may have indicated that he
would speak to Nir about it.'^°

According to Cave, Ghorbanifar's pricing of the
May shipment was confusing. During the May meet-
ing in London, Ghorbanifar complained about having
spent $1 million of his own money to support the
NSC operation. This complaint, coupled with CIA's
knowledge of Ghorbanifar's legal concerns following
his arrest and probable loss of funds through the U.S.
Customs "sting" operation, caused some CIA partici-
pants to conclude that Ghorbanifar was simply trying
to raise as much money as possible from the transac-
tion.'*' C/NE rationalized that the price of the
radars, an additional $6.2 million, could have account-
ed for the inflated figure. According to their testimo-
ny, neither C/NE, Cave, nor Allen associated the
inflated price with an effort by North and others to
obtain profits in support of Contra activities.

During March and April the intelligence informa-
tion gathered on the initiative was available to a re-
stricted group at the CIA. Cave routinely examined
the information, which was controlled by National
Intelligence Officer Charles Allen. Casey, Gates, Clair
George, C/NE, and the Chief/Iran Branch were
among others to whom the intelligence reports were
disseminated.'®^ At least three reports showed that
the Iranians were paying an exorbitant price for the
spare parts. Information showed an attempt by the
Second Iranian Official and Ghorbanifar to raise $21
million to purchase the two radars and over $20 mil-
lion for the spare parts. Seven highly placed CIA
officials thus had access to information that showed a
huge mark up in the price of the spare parts and radar
shipments. Yet all of them denied suspecting a diver-
sion of funds until much later.

230

Chapter 12

The Meeting Is Set

By May 6, North told Poindexter that he had
achieved what Poindexter demanded — all hostages
would be released before the parts were delivered. He
reported this to Poindexter in a hopeful PROF note;

I believe we have succeeded. Deposit being made
tomorrow (today is a bank holiday in Switzer-
land). Release of hostages set for 19 May in se-
quence you have specified. Specific date to be
determined by how quickly we can assemble req-
uisite parts. Thank God — he answers prayers.
V/R, North. '63

Following the London meeting, North and North's
deputy, Robert Earl, met with Clair George, C/NE,
and Cave of the CIA to review the status of the
initiative. From that meeting, North produced a
memorandum setting forth the unresolved issues. The
memo specifically noted that Clair George "wanted
to ensure that Secretary Weinberger, Casey, and Sec-
retary Shultz would all be briefed on the project." '^^

As a first step in moving the HAWK parts, Secord
was to receive $15 million in Iranian funds. Only then
would Secord transfer Enterprise funds to the CIA
and begin acquiring parts. But Ghorbanifar had diffi-
culty in transferring the money. Instead of receiving
$15 million in deposit, Secord had to settle for $10
million as the first step. Secord sent a KL-43 message
to North on May 14:

1. We have just received lOM in the lake via a
contorted process but our lawyer says it is good
and he is now moving it out of the lake to an-
other acct. Still no sign of the remaining 5M but
I assume it is enroute.

2. I will advise Adam ASAP. . . .'^^

On May 12, C/NE had advised the CIA Office of
Finance that they should expect a deposit of $13
million to the CIA account in Switzerland. The de-
posit would allow the CIA to purchase the 240
HAWK spare parts and two radars from DOD.*^^
Two days later, C/NE changed the amount the
Office of Finance should expect to $10 million. Final-
ly, on May 16, 1986, the CIA Swiss account received
a deposit of $6.5 million from "Hyde Park
Square."'®' C/NE advised North of the deposit and
recalled North's comments: "Yes, 6.5. is in and the
remaining 6.5 is going to come later [for the
radars]."'®* Iranian funds were never sent for the
radars. Additionally, C/NE was not certain of ar-
rangements to pay for the 508 TOWs and had as-
sumed that the Israeli Government handled that ex-
pense in a separate transaction.'®^

The National Security Planning Group
Meeting

Also on May 16, Poindexter and North attended a
National Security Planning Group meeting chaired by
the President. They discussed solicting financial sup-
port from third countries to support the Nicaraguan
Resistance. Poindexter recalled that Secretary of State
Shultz said that Congress would probably not renew
funding for the Contras as early as Administration
officials had hoped. To develop "bridge funding" for
the Contras, Poindexter asked Secretary Shultz to
prepare a list of countries for the President to consid-
er for solicitation. '■'"

Following the meeting, Poindexter received a
PROF message from North declaring, "There is now
$6M available to the resistance forces."''" This mes-
sage was sent the same day one of the Enterprise's
Swiss accounts received a deposit toward the pur-
chase of spare parts. Poindexter testified that he un-
derstood the $6 million had come from the diver-
sion;'''^ however, the National Security Adviser
claimed he did not tell the President of the sudden
availability of "bridge funds." Generally, according to
Poindexter, when opportunities arose for him to dis-
cuss the diversion with President Reagan, he avoided
doing so in order to permit the President to be able to
deny knowledge of the issue. Poindexter claimed that
he never volunteered to the President that diverted
funds were available to "bridge" the Contra financial
requirements.'''^

Final Planning for Tehran

With the 1-week delay in receiving the deposit
from Ghorbanifar, participants in the initiative adjust-
ed their schedules. North notified Poindexter on May
17 of travel plans for the Americans going to Tel
Aviv and Tehran. Additionally, he requested a mili-
tary aircraft for the trip to Israel and a last-minute
meeting among McFarlane, the President, Casey,
Shultz, and Weinberger."'* Poindexter opposed both
ideas:

I have problems with this plan. An A/C request
is too closely linked to what is happening. I don't
see how we can use a military A/C. Why do you
have to stay so long in Israel? I had in mind you
would travel separately, rdvu[rendezvous] in
Israel at a covert location, and proceed to Iran. I
don't want a meeting with RR, Shultz, and Wein-
berger. ' ' ^

North's reply was a comprehensive schedule of
events that detailed the American travel itinerary
with the commercial delivery of military materials for
Iran. Even though the delegation's flight arrange-
ments were later altered, the military arms were
shipped as noted below: — \

231

Chapter 12

Thursday: May 22

1000 - 240 items + 508 TOWs moved ... to Kelly

AFB by CIA

1100 - Commercial 707 (#1) arrives Kelly to load

most of 240 items

1700 - Commercial 707 (#1) Dep Kelly for Israel

w/bulk of 240 items aboard

Friday: May 23

1400 - Commercial 707 (#2) Dep Kelly AFB w/

508 TOWs for IDF [Israeli Defense Force] enr

Israel

1400 - Commercial 707 (#1) Arr Israel w/bulk

of 240 items; commence xfr to lAF 707s prior to

commencement of Sabbath

Saturday: May 24

1700 - Commercial 707 (#2) Arrives
w/508 TOWs & remainder of 240 items; com-
plete xfr of 240 items to lAF 707s after sunset
(end of Sabbath)

2200 - bulk of 240 items transloaded fm Commer-
cial 707 (#2) to lAF 707 (#B)'^6

The final travel itinerary was eventually outlined
by North, After Poindexter asked North to consider
using a CIA proprietary for a segment of the flight to
Israel, North responded that he would make arrange-
ments that did not include military aircraft. His final
recommendation included the use of a Democracy,
Inc. aircraft to fiy the delegation to Rhein Main,
Germany.'"

On May 22, a Southern Air Transport 707 airplane
delivered 13 pallets of HAWK missile spare parts to
Israel. The following day. Southern Air Transport
flight crews arrived in Israel for the trips to
Tehran.'''*

On May 24, a second 707 arrived in Israel with 508
TOW missiles to replace the Israeli arms issued to
Iran in 1985. After an examination by Israeli Defense
Force personnel, the weapons were judged to be in
"poor condition" and were rejected."^ One pallet of
HAWK parts and the Tehran delegation departed on
May 25 aboard a disguised Israeli Government air-
craft. Another Israeli plane loaded with the remaining
12 pallets of HAWK spare parts was ready for imme-
diate departure to Tehran.'*"

U.S. War Readiness Suffers

The CIA obtained the 13 pallets of HAWK missile
spare parts using much the same procedures employed
to obtain the TOWs a few months earlier. Once again,
the usual method of dealing with CIA requests for
weapons from DOD was ignored. Bypassing the
system in February created a large enough pricing
error to make the diversion of excess profits feasible.
Bypassing the system in obtaining the HAWK spare

parts was equally serious, this time affecting U.S. war
readiness.

When the Army received from the CIA the list of
HAWK spare parts the Iranians were demanding,
Major Simpson began to fill the order. But the Irani-
ans had prepared the list using outdated documents
and obsolete stock numbers, making it difficult for the
Army to identify the parts; indeed, HAWK Project
officials could not identify 1 1 of the items on the list.

Out of 148 items, only 99 existed in the Army's
stocks in sufficient quantities such that the transfer to
Iran would have no readiness impact.'*' In the case
of 15 items. Army stocks would be completely deplet-
ed if the Army provided all quantities requested. Sup-
plying 1 1 items would have depleted more than half
the available stocks.'*^

Simpson was able to adjust the quantities on many
of the items requested. On April 23, however, he
instructed his subordinates to ship all of the items on
the revised list.'*^ Readiness impact remained critical
for 10 to 12 of the parts.'** The parts were ordered
to be shipped even though U.S. HAWK missile bat-
teries would be deficient if they were needed.'*^

The availability of one part was particularly acute.
The Iranians had requested a quantity of one particu-
lar part used in the HAWK radar. If the part fails, the
system does not work; if there are no replacements,
the system remains useless,'*® The Army had only a
limited supply of this part. Shipping the parts would
put the readiness impact in the "high risk" category.
Simpson protested to his superiors that the Army's
stock of this part could not be depleted. The CIA
insisted on delivery, and all of the parts were
shipped.'*'' U.S. readiness was thus adversely affect-
ed.'**

Conclusion

The President's decision to sign the Finding in mid-
January 1986 carried with it a decision not to notify
Congress of the covert operation. As the participants
recalled, the scheme contemplated a quick sale of
weapons and an immediate release of all the hostages.
Indeed, the memorandum accompanying the Presiden-
tial Finding provided that the initiative would be
closed down if the hostages were not released after
the first 1,000 TOWs were sold.'*^

By the end of May, the Americans had seen one
pledge after another evaporate. When the first sales
took place in mid-February they were not followed
by a hostage release. Iran was subsequently rewarded
with the promise of the sale of HAWK parts, but the
Americans insisted that all the hostages first had to be
released. That American demand was abandoned as
well, however, as the McFarlane delegation prepared
for their trip to Tehran in an airplane containing a
quantity of HAWK spare parts.

232

Chapter 12

While freedom for American hostages had not ma- sale to Iran of both the TOW missiles and the

terialized, a funding mechanism to support various HAWK spare parts had been diverted to support the

clandestine programs was flourishing. By the time Nicaraguan Resistance movement. The remainder of

McFarlane and North were preparing for their jour- the profits were stored in secret Swiss bank accounts

ney to Tehran, part of the profits obtained from the to support "off-the-shelf clandestine operations.

233

Chapter 12

Chapter 12

1. DC/NE Dep., 4/22/87, at 74-75

2. Id., at 82.

3. George Test., Hearings 100-11, 8/6/87, at 102.

4. Id., at 109.

5. Id, at 1 10.

6. Id., at 146.

7. Id, at 154.

8. DC/NE Dep., 4/22/87, at 83.

9. Id. CIA finance officers noted that deposits to the CIA
accounts always originated from the Department of the
Treasury or other Federal agencies. The officers claimed
that, to their knowledge, the financial process established
for the Iran initiative marked the first occasion in which
funds were accepted by the Agency from a private source.
Interview, CIA Finance Officers, 3/26/87.

10. DC/NE Dep., 4/22/87, at 84.

11. W., at 102-103.

12. Interview with CIA logistic officer, 6/15/87.

13. North, Personal Notes, 1/21/86.

14. Thurman Dep., 6/12/87, at 6.

15. The United States thought that Israel had shipped 508
TOWs the previous September. Because of packing require-
ments, only 504 had actually been shipped.

16. Thurman Dep., 6/12/87, at 11-12.

17. McDonald Dep., 8/14/87, at 30.
18. /rf.,at 11.

19. Simpson Dep., 6/1/87, at 70-71.

20. Id, at 70, 73.

21. Id, at 74.

22. Coward Dep., 8/10/87, at 13, 21. Simpson Dep., at
10.

23. Simpson Dep., 6/1/87, at 90-93, 97-99.

24. North, Personal Notes, 1/22/86.

25. North Test., Hearings, 100-7, Part I, 7/8/87, at 107.

26. Sporkin Test., Hearings, 100-6, 6/24/87, at 140-142.

27. Norih Test., Hearings, 100-7, Part I at 106-107.

28. Oliver Norih Tape Recording, 1/22/86.

29. Id

30. Poindexter Test., Hearings, 100-8, 7/20/87, at 36.

31. Poindexter Dep., 5/2/87, at 179-80.

32. Id. See Chapter 15 for a full description of the Diver-
sion.

33. Ex. DRC-15, Hearings, 100-11.

34. Norih Personal Notes, 1/27/86.

35. DC/NE Dep., 4/22/87, at 91-92.

36. North Test., Hearings, 100-7, Part I, 7/8/87, at 113-14.

37. DC/NE Dep., 4/22/87, at 104.

38. Norih, Personal Notes, 1/22/86.

39. Id, 1/31/86.

40. Id, 2/5/86.

41. Interview with CIA Finance Officers, 3/17/87.

42. North PROF Note, 2/13/86.

43. Secord Test., Hearings, 100-1, 5/l/%l, at 106.

44. N9884, 2/18/86.

45. DC/NE Dep., 4/22/87, at 1 10.

46. George Test., Hearings, 100-11, 8/6/87, at 70-71.

47. DC/NE Dep., 4/22/87, at 111.

48. Hakim Test., Hearings, 100-5, 4/3/87, at 225.

49. DC/NE Dep., 4/22/87, at 93-97. North testified that
Hakim was used in February as an interpreter for the
Frankfurt meetings because the CIA had no Farsi transla-
tors available. North Test., Hearings, 100-7, Part II,

7/10/87. at 4. Secord stated that the only Farsi translator
available from the CIA was a female employee, who would
have been unacceptable to the Iranians because of her gender.
Secord Test,, Hearings, 100-1, 5/7/87, at 107. During the
meeting in Frankfurt, a former CIA operative and Farsi
interpreter, George Cave, was in Europe. Cave stated that
he could have been available to translate for the meeting in
a matter of hours had his Agency received such a request
from the NSC. Cave Dep., 9/29/87, at 2.

Following the February 24 meeting in Frankfurt, North
told McFarlane in a PROF message that he had turned to
Hakim after the CIA had refused to provide an interpreter;
the decision to use Hakim as a translator developed: "Be-
cause CIA would not provide a translator for the sessions,
we used Albert Hakim, an AMCIT (American Citizen) who
runs the European operation for our Nicaraguan resistance
support activity. DC/NE accompanied so that I would
have someone along who would provide an 'objective' ac-
count." (North PROF, 2/22/86).

50. DC/NE Dep., 4/22/87, at 115.

51. Hakim Test., Hearings, 100-5, 6/3/87, at 226-27.

52. DC/NE Dep., 4/22/87, at 113.

53. Id

54. Hakim Test., Hearings, 100-5, 6/3/87, at 287-89.

55. DC/NE Dep., 4/22/87, at 119-21.

56. Id, at 93-94.

57. Secord Test., Hearings, 100-1, 5/7/87, at 109.

58. Secord KL-43, 2/27/86, to Norih, Subj: "Meeting at
Kish Island."

59. North PROF, 2/27/86 8:54 a.m.

60. McFarlane PROF, 2/27/86, 4:02 p.m.

61. North PROF, 2/27/86, 8:11 p.m.

62. McFarlane PROF, 2/27/86, 9:37 p.m.

63. North Test., Hearings, 100-7, Part I, 7/8/87, at 113-
114.

64. Id

65. North Test., Hearings, 100-7, Part I, 7/8/87, at 115.

66. Id, at 116-17.

67. Poindexter Test., Hearings, 100-8, 7/21/87, at 150.

68. North Test., Hearings, 100-7, Part I, 7/8/87, at 117-18.

69. Secord Test., Hearings, 100-1, 5/6/87, at 154-58.

70. J7431, 2/28/86.

71. CIA Cable, 1/25/86, McMahon to Casey.

72. North, Personal Notes, 3/2/86.

73. DC/NE Interoffice Memo, 3/7/86, to C/NE: Subj:
"NSC Operation."

74. Cave Int., 4/15/87.

75. Cave Dep., 9/29/87, at 5.

76. DC/NE Dep., 4/22/87, at 125.

77. Secord Test., Hearings, 100-1, 5/6/87, at 111.

78. North, Personal Notes, 3/7/86.

79. Cave Memo, undated, to DC/NE: Subj: "Results of
Ghorbanifar Meeting".

80. Allen Dep., 4/24/87, at 407 08.

81. Allen Memo., 2/13/87.

82. North PROF, 3/10/86, 9:10 p.m.

83. McFarlane PROF. 3/10/86, 10:14 P.M.

84. North PROF, 3/11/86, 7:23 A.M.

85. Allen Memo., 3/21/86: Subj: "Conversation with Sub-
ject."

86. Id

234

Chapter 12

87. Secord Test., Hearings, 100-1, 5/6/87, at 111.

88. Cave Dep., 4/17/87 at 36.

89. Allen Memo., 4/2/86: Subj: "Conversation with Sub-
ject."

90. North, Personal Notes, 3/28/86.

91. Israeli Financial Chronology.

92. Israeli Historical Chronology.

93. DC/NE Dep., 4/22/86, at 136-39.

94. Cave Dep., 4/17/87, at 52.

95. Cave Memorandum, 4/3/86 to C/NE: Subj: "Meeting
with Gorba 3 April."

96. North, Personal Notes, 4/7/86.

97. Cave Dep., 4/17/87, at 42.

98. Secord Test., Hearings, 100-1, 5/6/87, at 122.

99. Poindexter Test., Hearings, 100-8, 7/21/87, at 178.

100. North Test., Hearings, 100-7, Part I, 7/8/87, at 136.

101. North Test., Hearings, 100-7, Part I, 7/7/87, at 14.

102. North Memo, undated, to Poindexter, Subj; "Release
of American Hostages in Beirut," N28835.

103. Id.

104. Id.

105. North PROF, 4/7/86.

106. Hall Test., Hearings, 100-5, 6/8/87, at 79.

107. Id

108. Id, at 115.

109. Id, at 114.

110. Poindexter Test., Hearings, 100-8, 7/20/87, at 45.

111. North Test., Hearings, 100-7, Part I, 7/7/87, at 11.

112. W., at 12-13.

113. W.. at 13.

114. M, at 13-14.

115. Poindexter Dep., 5/7/87, at 188.

116. Poindexter Test., Hearings, 100-8, 7/20/87, at 47-48.

117. North Test., Hearings, 100-7, Part I, 7/10/87, at 299-
300.

118. Poindexter Test., Hearings, 100-8, 7/21/87, at 182-83.

119. North, Personal Notes, 4/15/86.

120. Cyrus Hashemi is discussed in greater detail in Chap-
ter 9.

121. Allen Dep., 4/24/87, at 422.

122. Cave Dep., 4/17/87, at 54-55.

123. Information indicated that Iran was to pay $21.5
million for the purchase of two U.S. radars. DOD's price
for the radar units, accurately noted in North's notes, was
approximately $6.3 million. However, since Iranian funding
for the radars failed to materialize, the Enterprise missed an
opportunity for a second $18 million profit.

124. Cave Dep., 9/29/87, at 83-88.

125. Allen Memo., 4/16/86, Subj: "Conversation with
Subject."

126. Allen Memo., 4/27/86, Subj: "Conversation with
Subject."

127. Poindexter PROF, 4/16/86.

128. Poindexter PROF, 4/22/86.

129. McFarlane PROF, 4/22/86.

130. Secord KL-43, 4/21/86, to North.

131. North, Personal Notes, 4/22/86.

132. As North wrote to Poindexter in the PROF message:
"We are seeing increasing evidence of Libyan efforts to buy
the hostages and other signs of increasing disarray inside
Lebanon. Further, there is increasing indication of seepage
around the edge of our hostage project. Bottom line: [the
Second Iranian Official] knows this and wants to proceed
quickly with a release." North PROF, 4/29/86.

133. Allen Memorandum for the Record, 5/5/86.

134. Allen Interoffice Memo, 5/5/86, to DCI/DDCI:
Subj: "Comments on the Ghorbanifar Operation."

135. Shultz Test., Hearings, l(X)-9, 7/23/87, at 18.

136. Id

137. Id, at 19.

138. Id

\39.Id, at 20; Ex. GPS-B

140. Ex. GPS-20.

141. Shultz Test., Hearings, 100-9, at 189-90.

142. Ex. JMP-43, Poindexter Dep., 5/7/87.

143. Ex. GPS-20, Hearings, Vol. 100-9, 7/24/87.

144. Shultz Test., Hearings, 100-9, 7/23/87, at 21-22.

145. Id, Ex-GPS-8.

146. Shultz Test., Hearings, 100-9, 7/23/87, at 70.

147. Id, at 22-23.

148. Id, at 24.

149. Ex. JMP-42, Hearings, 100-8.

150. W.

151. W.

152. Ex. GPS-21, Hearings, 100-8, 7/23/87.

153. Ex. GPS-25, Hearings, 100-8, 7/23/87, at 26.

154. Cave Dep., 9/29/87, at 88.

155. Cave Dep., 4/17/87, at 63.

156. Israeli Historical Chronology.

157. The second area in which the United States resolved
not to give in to additional Iranian demands concerned the
HAWK radars. The radars were separately offered for sale
during the negotiations because of a technical quirk involv-
ing the Department of State. The radars, valued at approxi-
mately $6.3 million by DOD, had been purchased by the
Government of Iran during the Shah's reign. Having been
undelivered prior to the fall of the Shah, the radars re-
mained in a Pennsylvania warehouse, under State Depart-
ment control, as property to be negotiated between the U.S.
and Iran. The Iranian Government was unaware that the
NSC intended to sell Iran radars previously paid for by the
Shah. Again acting through DOD, the CIA managed to
obtain permission to purchase the radars without the State
Department knowing of the true customer's identity. Even
though an avenue to purchase the radars had been opened,
the CIA eventually discontinued its efforts when Iranian
funding failed to materialize. (DC/NE Dep., at 148)

158. North, Personal Notes, 5/6/86.

159. North, Personal Notes, 5/6/86.

160. Cave Dep., 4/17/87, at 66-68.

161. Id

162. Cave Dep., 9/29/87, at 82-83.

163. North PROF, 5/6/86.

164. NSC Document, 5/9/86.

165. Secord KL-43, 5/14/86, to North. The Enterprise
received the remaining $5 million on May 16, 1986.

166. DC/NE Dep. 4/22/87, at 149-50.

167. Int., CIA Finance Officers, 4/29/87.

168. DC/NE Dep. 4/22/87, at 150.

169. W., at 151.

170. Poindexter Test., Hearings, 100-8, 7/20/87, at 66.

171. Ex. JMP-51, Hearings, 100-8, 7/20/87, at 66.

172. Poindexter Test., Hearings, 100-8, 7/15/87, at 65.

173. Id, at 66.

174. North PROF Note, 5/17/86.

175. Poindexter PROF Note, 5/19/86.

176. North PROF Note, 5/19/86.

177. North PROF Note, 5/20/86.

235

Chapter 12

178. Israeli Chronology.

179. Those 508 TOWs would remain, however, in Israel
even though the Israelis never accepted them into their
military stocks. They were eventually shipped to Iran in
late October 1986 in exchange for the release of Jacobsen.
Secord Test., Hearings, 100-1, 5/6/87, at 124.

180. Id.

181. DO A Inspector General Report, 2/5/87, at 43.

182. Id., at 43.

183. Simpson Dep., 6/1/87, at 63.

184. Id, at 53.

185. In April, the CIA asked the Army for two HAWK
radars. The Army viewed the request as distinct from the
request for HAWK spare parts for one major reason: the
request for the parts came from the White House; the re-
quest for the radars came only from the CIA. As a result,
the Army handled the request through the usual proce-
dures.

The results were dramatically different. The Army de-
termined that they had insufficient information to make a
competent legal review and that, regarding three of the line
item repair parts requested along with the radars, to supply
everything requested would entirely deplete available
stocks. The Army Genera! Counsel was notified, and she
recommended that the Secretary of the Army decline to
transfer the items.

186. Chapman Dep., 8/10/87, at 10-11.

187. Simpson Dep., 6/1/87, at 64-65.

188. Administration statements of record do not agree
with this conclusion regarding the adverse readiness impact
of the HAWK parts transfer. The Department of Army
Inspector General's Report, for example, concluded: "The
sale of HAWK ground support equipment repair parts to
the CIA did not reduce the readiness of U.S. Army air
defense forces." [DOA Inspector General Report, 2/5/87,
at 45.] A careful reading of the Report, however, suggests
Army investigators may have been unaware of the actual
status of Army stocks regarding one critical common use

part used in the HAWK radar. Moreover, while one Army
official involved in the process testified that there was
"some discussion" with Army investigators about the readi-
ness impact of the HAWKs, he told the Committees "they
didn't ask as many detailed or probing questions as we've
had [during the deposition] today. . . ." [Chapman Dep.,
8/10/87, at 21.]

When Admiral Crowe learned of the transfers in mid-
1986, he did examine the readiness question, but confined
his review to the TOWs, not the HAWK repair parts,
because he "really didn't feel that the HAWK parts were
going to be that crucial or critical one way or another."
[Crowe Dep., 6/18/87, at 18] Upon being apprised of
HAWK repair part readiness data in his deposition, Crowe
conceded those data had not been brought to his attention,
and had they been, it would have been "a rather significant
finding." [Id., at 38] General John A. Wickham, Jr., then-
Chief of Staff of the Army, testified that had he known the
facts as presented to him during his deposition, it would
have concerned him, adding, "And that is the kind of thing
that we would have gone to Will Taft about it and said,
look, we've got a requirement here you've laid on us, but
now we have some serious implications and we recommend
strongly against it. [Wickham Dep., 8/14/87, at 46.]

Finally, Secretary Weinberger testified publicly that
there was no adverse readiness impact from the arm sales to
Iran, but his testimony was confined solely to TOWs. When
first asked about readiness, the Secretary testified: "We had
a very, very large stocks of those old obsolete TOW mis-
siles ... so that there would not be any appreciable effect
on our readiness." [Weinberger Test., Hearings, 100-10, at
399-400.] Later in his testimony Weinberger referred to the
TOWs as "obsolete weapons . . . our stocks were perfectly
sufficient," [Id., at 219], but he never addressed himself to
the question of readiness vis-a-vis the HAWK repair parts
transfer.

189. Ex. OLN-60, Hearings, 100-7, Part III.

236

Chapter 1 3
Deadlock in Tehran

The Presidentially approved McFarlane mission to
Tehran in the spring of 1986, was intended to crown
a 9-month effort to free the hostages and estabhsh a
dialogue with Iran. McFarlane likened the mission to
Henry Kissinger's historic secret meeting with Pre-
mier Chou En-lai that paved the way to U.S. -China
reconciliation.' Eight years after an Iranian Prime
Minister, Mehdi Bazargan, was dismissed for meeting
with President Carter's National Security Adviser,
McFarlane was to meet with Speaker Rafsanjani,
Prime Minister Musavi, and President Khamenei, the
three most powerful leaders in Iran under Ayatollah
Khomeini.^ What is more, McFarlane believed that
the hostages were to be released upon his arrival and
that the HAWK parts were not to be delivered until
the hostages were safe. Hopeful of success. North
arranged logistical support for the return of the hos-
tages and prepared a press kit for the White House. ^
North added his own flourish: He ordered a choco-
late cake from an Israeli baker as a gift for the Irani-
ans.*

The Iranians had very different ideas — centering on
arms and Da'wa prisoners. As a result, the Tehran
mission ended in acrimonious confrontation with the
hostages still in captivity.

Preparing for the Mission

The American delegation consisted of McFarlane,
North, former CIA official George Cave, then-NSC
staff member Howard Teicher, Amiram Nir, adviser
to the Israeli Prime Minister on combatting terrorism,
and a CIA communicator who was to remain on the
plane and forward messages via secure means to Poin-
dexter in Washington and Secord in Tel Aviv.
McFarlane included Nir at the request of the Israelis
who viewed this as a joint U.S. -Israeli operation. All
members of the delegation used aliases and Nir passed
himself off as an American.^

The delegation took one pallet of HAWK parts
with them in the aircraft. The remaining 1 1 pallets of
parts were left in Israel with Secord, who was poised
to deliver them upon the release of the hostages.*

The Tehran trip was both an extraordinarily heroic
and a very foolish mission for McFarlane and his
companions. As the immediate predecessor of the Na-

tional Security Adviser, McFarlane knew many of the
Nation's most sensitive secrets. North was privy to
some of them as well, as was Teicher. Yet, the plan
called for them to go to Tehran under false passports
and pseudonyms without even safe conduct docu-
ments from the Iranian Government. Ghorbanifar and
the Second Iranian arranged the visit. Ghorbanifar
was a private citizen and the Second Iranian, was,
according to Ghorbanifar, the person responsible for
the kidnapping of CIA agent William Buckley.' The
Iranian government had demonstrated during the U.S.
Embassy seizure that it could not prevent the holding
of diplomats as hostages by its Revolutionary Guards.
The State Department was unaware of the mission
because Poindexter had told Shultz back in March
that a proposed high-level meeting between McFar-
lane and the Iranians had been cancelled, never in-
forming Shultz that it had been rescheduled.^ Fur-
ther, Poindexter had rejected North's suggestion that
Shultz, Poindexter, and McFarlane meet before the
trip.^ And friendly governments with embassies in
Iran were not alerted. McFarlane and his party were,
in effect, on their own in Tehran — even subject to
legitimate arrest for entering under false passports and
with missile parts.

Moreover, the plan contemplated that after the hos-
tages were freed, McFarlane and the delegation
would remain in Tehran until the promised HAWK
parts were delivered.'" The former National Security
Adviser and ranking members of the NSC staff were,
in effect, to substitute themselves for the hostages. In
fact, the delegation had cause for concern during the
negotiations when the Iranians repeatedly delayed re-
fueling the aircraft.'' The original plan for the mis-
sion entailed less risk. It called for the meeting to be
on Kish Island within reach of U.S. naval forces.'^

Even some of the proponents of the Iran initiative
thought the mission to Tehran was premature. Secord
testified that there should have been a preliminary
meeting between McFarlane and the Iranians to pre-
pare a realistic agenda for Tehran;'^ he believed that
misunderstandings were creating false expectations on
both sides. Nir also favored a preliminary meeting.'*
Cave believed that he and North should have under-
taken a preliminary mission to Tehran before McFar-
lane went.'^ Poindexter testified that he considered a

237

Chapter 13

preliminary mission to be too dangerous and thus
ruled it out.'®

Even the timing of the trip was wrong. As North
and McFarlane soon discovered, the trip took place
during a holy period in the Islamic calendar, and
Muslim officials were not fully available. The Iranian
officials had to fast throughout the negotiations.'''

Arrival in Tehran

The mission arrived in Tehran on the morning of
May 25 and the first signs of failure were evident
almost immediately. McFarlane expected to be greet-
ed at the airport by Speaker Rafsanjani or some other
high official. The Americans waited more than an
hour, but no one showed up to greet them.'* Then,
only Ghorbanifar and the Second Iranian arrived."
McFarlane described his reactions in a cable he sent
soon after arrival:

It may be best for us to try to picture what it
would be like if after nuclear attack, a surviving
tailor became Vice President; a recent grad stu-
dent became Secretary of State; and a bookie
became the interlocutor for all discourse with
foreign countries. While the principals are a cut
above this level of qualification, the incompe-
tence of the Iranian government to do business
requires a rethinking on our part of why there
have been so many frustrating failure[s] to deliver
on their part.^°

As events proved, however, the Iranians were
tough, competent negotiators.

Under the pre-Tehran timetable, no HAWK parts —
including the pallet on the plane — were to be deliv-
ered until the hostages were freed. ^' But even before
the American delegation left the airport, the Iranians
had removed the pallet. ^^ The Iranians were never-
theless disappointed, for the Second Iranian had told
his superiors that at least 50 percent — not merely 1
out of 12 pallets^^ — of the parts would be delivered.

The Misunderstanding

The McFarlane delegation went from the airport to
the Independence Hotel (the Hilton in pre-Revolution
days), where the entire top floor was assigned to
them. 2* In 4 days of talks, virtually the only points on
which the Americans and the Iranians could agree
were generalities such as the United States' accept-
ance of the Iranian Revolution and Iran's sovereignty,
and common fear of the Soviet Union, including their
intervention in Afghanistan. On concrete issues such
as the hostages and arms sales, the parties were poles
apart.

In accordance with his instructions and the agree-
ment that he believed had been made with the Irani-
ans in Frankfurt, McFarlane insisted that the hostages
be released before the HAWK parts were delivered.

The Iranians took the opposite position: TTie HAWK
parts had to be delivered first and then the release of
the hostages would be negotiated. The Iranians main-
tained that they had not agreed in Frankfurt to a
release of the hostages upon the arrival of the McFar-
lane delegation. ^^ Yet Poindexter had rejected the
Iranian position before the President authorized the
mission and had so instructed McFarlane:

[The Iranian official] wants all the HAWK parts
delivered before the hostages are released. I have
told OUie that we cannot do that. The sequence
has to be (1) meeting; (2) release of hostages; (3)
delivery of HAWK parts. The President is get-
ting quite discouraged by this effort. This will be
our last attempt to make a deal with the Irani-
ans.^®

The Americans made contemporaneous notes and
reports of the discussions that provide a full account
of what happened at Tehran. The key points are sum-
marized here.

Days 1 and 2— Marking Time

For the first 2 days. May 25 and 26, no high-level
Iranian official appeared. The Second Iranian and
other "third and fourth level officials" in the Prime
Minister's office represented Iran. 2'' With no Iranian
decisionmaker present, the discussions consisted
mainly of exchanges of platitudes, a "diatribe" by the
Iranians against the Americans for not bringing
"enough" HAWK parts, and protests by McFarlane
about the Iranians' failure to produce the hostages.^*
Ghorbanifar tried to reassure the U.S. delegation that
the hostages would be released, ^^ but the Americans
had lost confidence in his promises. McFarlane's
anger flared. McFarlane regarded the meeting with
low-level Iranians as a waste of time and a degrading
breach of protocol. He stated that he had come to
"meet with Ministers." The Second Iranian promised
to produce an official at the sub-Minister level but
McFarlane was still dissatisfied, saying:

As I am a Minister, I expect to meet with deci-
sion-makers. Otherwise, you can work with my
staff 3 0

True to his word, McFarlane withdrew from the
discussion and left the staff to meet with the Iranians,
including the Prime Minister's designee, a member of
the Majlis and foreign affairs adviser to Rafsanjani
(the "Adviser") who arrived at 9:30 p.m. on the
second day and became the leader of the Iranian
delegation. Because the Adviser had not attended any
prior meetings. North reiterated the U.S. position:

If your government can cause the release of the
Americans held in Beirut 10 hours after they are
released, aircraft will arrive with the HAWK

238

Chapter 13

missile parts. Within 10 days of deposit [of
money], two radars will be delivered. After that
delivery, we would like to have our logistics and
technical experts sit down with your experts to
make a good determination of what is needed.^'

If the initial discussions hinted at the misunder-
standing about the terms of the meeting, the Second
Iranian made it unambiguous. He rebuffed North's
request for a meeting between McFarlane and minis-
ters, saying "We did not agree to such meetings for
McFarlane."^^ He added that McFarlane would meet
with no higher official than the Adviser; and the
Adviser stressed to North that the immediate delivery
of the HAWK parts and other arms was crucial to the
success of the mission:

There is a $2.5 billion deal ... we want TOWs,
especially with technicians. Easier to operate
than MILAN. We would appreciate your advice
on F/14 phoenix and harpoon missiles. ^^

He stated that the:

Iman has said we are ready to establish relations
with all the world except Israel. But you have to
remove the obstacles. . . . Speed up what has
been agreed. ... A few 747's can carry a lot in
one day. We would be very pleased to discuss
our specific needs. ^*

From the first discussions with the Iranians in De-
cember, the Americans had described the hostages as
the "obstacles" to better relations. Now the Iranians
borrowed the term. In their view, the failure of the
United States to ship the rest of the HAWK parts and
to sell more arms were the obstacles both to a mean-
ingful dialogue and to the release of the hostages. The
different meanings that each side gave to the word
obstacles symbolized their different objectives; for the
Iranians it meant arms, for the Americans, the other
hostages. As the discussions with the Adviser and his
colleagues ended on the second day. North said he
would urge McFarlane to meet the Adviser the next
day."*^

North reported to McFarlane that evening. In a
message sent to Poindexter that night describing the
day's events, McFarlane, relying on North's assess-
ment, stated that the Adviser was "a considerable cut
above the Bush Leaguers we had been dealing with."
He went on to assure Poindexter that:

. . . with regard to the hostages, we have and
will continue to make clear that their release is
the sine qua non to any further steps between us
and if that has not happened by tomorrow night,
they are aware that we will leave and that the
balance of the shipment will not be delivered. ^^

The Final Days— McFarlane Remains
Firm

For the American delegation and the Iranian repre-
sentatives. May 27 was a long day. The discussions,
termed "marathon" by Cave, lasted from 10 a.m. until
2:10 a.m. on May 28. They began with North, Cave,
and Teicher holding a preliminary meeting with the
Adviser and the other Iranians. The Adviser deliv-
ered bad news about the hostages:

Our messenger in Beirut is in touch with those
holding the hostages by special means. They
made heavy conditions. They asked for Israel to
withdraw from — the Golan Heights and South
Lebanon. Lahad must return to East Beirut, the
prisoners in Kuwait must be freed, and all the
expeses paid for hostage taking. They do not
want money from the U.S. Iran must pay this
money. ^''

The Adviser, held out hope, however, particularly
if the HAWK parts were delivered. He told North
that the Iranians were negotiating to scale down the
captors' demands. However, "only a portion of the
240 spare parts had been delivered. The rest should
come. This is an important misunderstanding."^*

McFarlane then met with the Adviser, one on one,
for 3 hours. He sent a message to Poindexter immedi-
ately afterward that included the following:

He [the Adviser] reported that Hizballah had
made several preconditions to the release: (1)
Israeli withdrawal from the Golan; (2) Israeli
withdrawal from Southern Lebanon; (3) Lahad
movement into East Beirut; and (4) someone (un-
defined) to pay the bills the hostages have accu-
mulated. How's that for Chutzpa. ... He hur-
riedly added [before I unloaded on him] that
these demands are not acceptable and we are
negotiating with them and believe that the only
real problem is when you deliver the items [the
HAWK parts and the radar] we have requested.

I then carefully recounted . . . that he [the Presi-
dent] had only reluctantly agreed to this meeting
under a very clear and precise understanding of
the arrangements. I then went over in detail what
those arrangements were: 1. the U.S. would send
a high-level delegation to Tehran. They would
bring with them a portion of the items they had
requested and paid for (which we had done); 2.
upon our arrival, they had agreed to secure the
release of the hostages promptly, upon release of
the hostages to our custody, we would call for-
ward the balance of items that had been paid for

239

Chapter 13

and those that had not been paid for would be
dispatched as soon as payment had been received.

At this point he became somewhat agitated want-
ing to know just who had agreed to these terms.
(I fingered Gorba and the Second Iranian). He
stated that these were not the terms as he under-
stood them. The basic difference was that they
expected all deliveries to occur before any release
took place.

He was obviously concerned over the very real
possibility that his people (Gorba and the Second
Iranian) had misled him and asked for a break to
confer with his colleagues. I agreed noting that I
had to leave tonight. (Actually I don't have to
leave tonight but recognizing that we have been
here for three working days and they have not
produced I wanted to try to build a little fire
under them . . . . )

I tend to think we should hold firm on our inten-
tion to leave and in fact do so unless we have
word of release in the next six or seven hours. I
can imagine circumstances in which if they said
tonight that they guarantee the release at a pre-
cise hour tomorrow. We would stand by but not
agree to any change in the terms or call the
aircraft forward.

My judgment is that they are in a state of great
upset, schizophrenic over their wish to get more
from the deal but sobered to the fact that their
interlocutors may have misled them. We are stay-
ing entirely at arms length while this plays out.
We should hear something from them before
long.^®

McFarlane's threat to leave had its intended effect.
Several hours later, the Adviser reported that the
Hizballah had dropped all their demands except for
the release of the Da'wa terrorists held prisoner in
Kuwait:

The only remaining problem is Kuwait. We
agreed to try to get a promise from you that they
would be released in the future.*"

The request for U.S. intervention with Kuwait flew
in the face of U.S. policy. The Da'wa had been con-
victed in Kuwait for a number of terrorist acts, in-
cluding the bombing of the U.S. Embassy. Kuwait
had stood up to threats of reprisal from Da'was for
imprisoning the terrorists, and the U.S. had supported

Kuwait. The United States wanted other countries to
follow Kuwait's example. American policy was clear:
Terrorists should be punished — not freed, as the Irani-
ans were now asking.

Accordingly, McFarlane offered no hope of U.S.
intervention with Kuwait on behalf of the convicted
Da'wa prisoners, saying that U.S. policy was to re-
spect the judicial policies of other nations.**

McFarlane adhered to his instructions. The Adviser
then tried to cajole McFarlane to send the other
HAWK parts prior to any hostage release:

Since the plane is loaded why not let it come.
You would leave happy. The President would be
happy. We have no guilt based on our under-
standing of the agreement. We are surprised now
that it has been changed. Let the agreement be
carried out. The hostages will be freed very
quickly. Your President's word will be honored.
If the plane arrives before tomorrow morning,
the hostages will be freed by noon. We do not
wish to see our agreement fail at this final
stage. *^

McFarlane responded, "We delivered hundreds of
weapons. You can release the hostages, advise us, and
we will deliver the weapons."*^ Given McFarlane's
firmness, the Adviser suggested another way of break-
ing the impasse: the U.S. and Iranian representatives
should meet without McFarlane to try to formulate
an agreement on the hostages and HAWK parts,
which could be presented to both sides. McFarlane
consented with the caveat that "staff agreements must
be approved by our leaders."**

The NSC staff and the Iranians met for several
hours until near midnight. The group hammered out a
proposal that provided that Secord's aircraft with the
remaining HAWK parts would take off for Tehran
but turn around in midflight if the hostages were not
released by morning:

(1) The United States Government will cause a
707 aircraft to launch from a neutral site at 0100
in the morning to arrive in Tehran, Iran at 1000
on the morning of May 28 the seventh day of
Khordad. This aircraft will contain the remainder
of the HAWK missile parts purchased and paid
for by the Government of Iran, a portion of
which was delivered on May 24.

(2) The Iranian Government, having recognized
the plight of the hostages in the Lebanon, and in
the spirit of humanitarian assistance, agrees to
cause the release and safe return of the living
American hostages and the return of the body of
the deceased American and that this release will
be completed not later than 0400 Tehran time.

(3) It is further agreed by both sides that if by
0400 Tehran time, the hostages are not safely in

240

Chapter 13

the hands of U.S. authorities the aircraft with the
HAWK missile parts will be turned around and
will not land in Iran and the U.S. delegation will
depart Tehran immediately. If, however, the hos-
tages are released at 0400, as indicated above, the
U.S. delegation will remain in Tehran until 1200
Noon on May 28, 1986.

(4) The Government of the United States com-
mits to deliver to Bandar Abbas, Iran, two phase
one IHIPIR radar sets, fully compatible with the
HAWK missile system now in the possession of
the Iranian government. This delivery to take
place after the arrival of the hostages in U.S.
custody and within ten days after the receipt of
payment through existing financial channels for
these radar systems. It is further agreed that the
government of the United States will make every
effort to locate and identify those items from the
original list of 240 parts which were not immedi-
ately available, and to provide those available as
soon as possible after payment is received and the
hostages are in U.S. custody.

(5) Both Governments agree to a continuation of
a political dialogue to be conducted in secrecy
until such time as both sides agree to make such a
dialogue public. It is agreed by both sides that
this dialogue shall include discussions on the
Soviet threat to Iran, the situation in Afghanistan,
Nicaragua, and other political topics as many be
mutually agreed. Both sides agree in advance that
these discussions will include consideration of
further defense needs of Iran.

(6) Both Governments recognize that the lack of
a clear channel of communications has contribut-
ed to misunderstanding and confusion in the past
and agree that this problem is best resolved by
having the United States provide a secure chan-
nel of communications between our two govern-
ments by placing a secure satellite communica-
tions team, and appropriate equipment secretly in
Tehran. The Government of Iran agrees that the
U.S. communicators will be accorded normal dip-
lomatic privileges and immunity on an informal
basis and without attribution. ^^

The Adviser pressed North for concessions on the
Da'wa. North, more flexible than McFarlane, pro-
posed a statement such as:

The U.S. will make every effort through and
with international organizations, private individ-
uals, religious organizations and other third par-
ties in a humanitarian effort to achieve the release
of and just and fair treatment for Shi'ites held in
confinement as soon as possible.''^

The Iranians had another problem. The Adviser
said that Iran could not arrange the release of the

hostages by 4 a.m. He pleaded with McFarlane for
more time. McFarlane was in no mood to compro-
mise. However, he gave the Adviser until 6:30 a.m. to
arrange for the release of the hostages. If the Iranians
did not guarantee their freedom by then, the U.S.
delegation would leave Tehran.'"

Departure

Prior to the 6:30 a.m. deadline, the Second Iranian
returned to the hotel with an eleventh-hour compro-
mise. He offered to release two hostages immediately
and two more after the HAWK parts were delivered.
McFarlane refused, strictly observing his instructions
that all the hostages had to be released before any
parts could be delivered.'**

Eager to keep the Iran initiative alive. North rec-
ommended that McFarlane accept the two-hostage
compromise. He testified that McFarlane overruled
him, and that he "saluted smartly and carried it
out."*^ McFarlane testified that North was so deter-
mined to accept a compromise that, while McFarlane
was asleep. North violated McFarlane's orders and
directed Secord to send the plane from Israel with the
remaining HAWK parts.'^" Upon awakening, McFar-
lane ordered the plane, midway in its voyage, to
return to Israel. ^^ North denied this allegation, and
contended that McFarlane had approved sending the
plane subject to its recall. ^^ Secord testified that it
was always part of the plan to send the plane. ^^ Cave
testified that he was unaware that the plane had taken
off^* In any event, the 6:30 a.m. deadline passed
without any indication that any hostages had been
released.

The Iranians made last-minute efforts to sell the
compromise and obtain the HAWK parts. At 8 a.m.,
just before the delegation left the hotel, the Adviser
arrived and repeated the two-hostage proposal.
McFarlane rejected it out of hand: "You are not
keeping the agreement. We are leaving."^^

Even at the Tehran airport, the Second Iranian
tried to persuade McFarlane to change his mind. But
there was no reprieve. McFarlane had come to
Tehran with instructions and on the understanding
that no more HAWK parts would be delivered unless
all of the hostages were freed. He had expected the
hostages' release upon his arrival. He had allowed the
Iranians to temporize for 3 days. He once again re-
jected the last-minute compromise and ordered the
plane airborne. As McFarlane left, he asked the
Second Iranian to tell his "superiors that this was the
fourth time that they had failed to honor an agree-
ment. The lack of trust will endure for a long
time."^®

The plane left Tehran at 8:55 a.m. and landed in
Tel Aviv several hours later. During the layover
there. North consoled McFarlane with the news that
the efforts with Iran had produced one benefit: some
of the proceeds of the arms sales were being used for

77-026 0

87

241

Chapter 13

the Contras.^'' McFarlane assumed that Poindexter
had approved this use of the money, ^^ and that, be-
cause of the magnitude of the decision, it was not
something that Poindexter would have undertaken on
his own authority. ^^ McFarlane testified that he,
therefore, never raised the "diversion" with Poin-
dexter or the President when he reported on the
trip. 60

Why the Tehran Mission Failed

The participants had different explanations for why
the Tehran mission failed. Secord testified that
McFarlane, who had demonstrated firmness, was re-
sponsible for the failure by insisting on release of all
the hostages:

But as far as I know and this will surprise some
people I guess, but as far as I know, there was no
Iranian agreement to produce all the hostages at
the time of the meeting in Tehran ... I don't
know how exactly that expectation got into
McFarlane's head.®'

Hakim, who had been the interpreter at Frankfurt,
agreed:

I cannot recall any time that was spoken that all
hostages would be released. That must have been
[a] misconception by someone at sometime some-
where. ^^

McFarlane testified that he was "surprised" at Se-
cord's statement: "[I]n talking to my own staff at the
time, Colonel North and others, all of them recon-
firmed, yes, we do expect and have all along the
complete release of the hostages." '^^ And North's
messages and reports to Poindexter before the Tehran
mission confirm that the President and Poindexter
shared that understanding. *'' Indeed, in conveying the

President's approval for the mission, Poindexter made
clear to North that he would tolerate no more back-
ing down on the conditions. He wrote North more
than a month before the trip;

You may go ahead and go, but I want several
points made clear to them [the Iranians]. There
are not to be any parts delivered until all the
hostages are free in accordance with the plan that
you layed out for me before. None of this half
shipment before any are released crap. It is either
all or nothing. Also you may tell them that the
President is getting very annoyed at their contin-
ued stalling.®^

North and Cave blamed the misunderstanding, and
the consequent failure of the mission, on Ghorbanifar.
North testified that "it turns out that the Iranians did
not" agree to the release of all the hostages, even
though Ghorbanifar said they had.*® In his report on
the trip. Cave stated that Ghorbanifar was a "dishon-
est interlocutor," who "gave each side a different
picture of the structure of the deal." But Cave was
confident that greed would overcome the problems,
and he favored continuing the initiative: "Since both
Gorba and the Second Iranian stood to make a lot of
money out of the deal, they presumably will work
hard to bring it off"®''

Based on long experience with Iranians, Cave was
not wholly optimistic. He detected in the Tehran dis-
cussions a new dimension to the problem. He con-
cluded that the Kuwaitis held the key to the impasse,
and that the American hostages would not be released
until Kuwait released the Da'wa prisoners.®* He
grounded his conclusion on the independence of the
hostage-holders in Lebanon.®^ Until then, he believed
that the Hizballah would not release all the hos-
tages.'" The Iran initiative now threatened to move
from an arms-for-hostage exchange to an arms-and-
prisoners-for-hostages trade.

242

Chapter 13

Chapter 13

1. The Washington Post. 11/13/86, at A21.

2. Memorandum of Conversation with Ghorbanifar,
4/16/86. C 9419.

3. N 12537.

4. Teicher, Tower Board Test., 12/19/86. at 10.

5. Cave. Tower Board Test., 1/5/87, at 11.

6. Secord Test., 5/6/87, at 74-75.

7. CIA Cables on Ghorbanifar, C 1502-15.

8. Shultz Test., 7/23/87, at 20, 26; Ex. GPS-B.

9. Ex. OLN 193.

10. 7/22/86 Memorandum from North to Poindexter,
Subject: Hostage Recovery Plan, N 1495 at N 1503.

11. Cave Int.. 9/29/87, at 15. McFarlane and North testi-
fied that their own safety was a secondary consideration.
Aware that Buckley had been tortured for information,
McFarlane, as a precaution, took along prescription medi-
cine in case he was seized. Casey told North that he should
be prepared to take his own life if he traveled to Tehran.
North Test., 7/8/87, at 93. However, Cave testified that he
himself did not have a poison pill and that he knew of no
one else in the delegation who was issued one. Cave Int.,
9/29/87, at 20.

12. Secord Test., 5/6/87, at 62-63.

13. Secord Test., 5/6/87, at 70-71.

14. Id.

15. Cave Dep., 4/17/87. at 41-42.

16. Poindexter Dep., 5/2/87, at 224-25.

17. Cave Int.. 9/2/87, at 11-12.

18. Message from McFarlane to Poindexter, 5/27/86, N
1334-36.

19. Id.

20. Id

21. N 1495 at N 1503.

22. Cave Int., 9/29/87, at 14.

23. Memorandum of 5/25/86 Conversations with Iranian
Officials, N 49463 at 49467.

24. Cave Memorandum Concerning the Tehran Trip. N
1271.

25. 5/27/86 Message from McFarlane to Poindexter, N
1337-39.

26. Ex. 46-A.

27. N 1334.

28. N 1334.

29. N 1335.

30. Memorandum of 5/26/86 Conversations with Iranian
Officials, N49468-70.

31. Memorandum of 5/26/86 Conversations with Iranian
Officials, N 49471-78 at N 49472.

32. Id.

33. Id. at N 49477.

34. Id

35. Id at N 49477.

36. N 1334 at N 1335.

37. Memorandum of 5/27/86, Conversations with Iranian
Officials, N 49479.

38. Id

39. 5/27/86. Message from McFarlane to Poindexter, N
1337 at N 1338.

40. Memorandum of 5/27/86 Conversations with Iranian
Officials, N 49481.

41. /(^. at N 49482.

42. Id

43. Id.

44. Id

45. N 1490-92.

46. N 49485. Cave's memorandum of the meeting states
that North insisted during the negotiations that "the United
States would not mterfere in the internal affairs of Kuwait."
However, the memorandum further notes that North stated
that the U.S. was prepared to seek the assistance of interna-
tional organizations such as the Red Cross to better the
conditions of the Shiite prisoners. N 1483 at N 1485.

47. N 1483 at N 1485.

48. Id at N I486.

49. North Test.. 7/10/87. at 36-38.

50. McFarlane Test., 5/12/87, at 79.

51. Id

52. North Test., 7/9/87, at 113-15.

53. Secord Test., 5/6/87, at 77.

54. Cave Dep., 4/17/87, at 85-86.

55. N 49487.

56. N 49487.

57. McFarlane Test., 5/12/87, at 161.

58. McFarlane Test., 5/12/87, at 165.

59. McFarlane Test., 5/14/87, at 4.

60. McFarlane Test., 5/12/87. at 162.

61. Secord Test.. 5/6/87, at 76.

62. Hakim Test., 6/4/87, at 84.

63. McFarlane Test., 5/12/87, at 161.

64. Ex. OLN 279; N 1495.

65. Ex. OLN 276.

66. North Test., 7/9/87, 110-111.

67. N 1483 at N 1487.

68. Cave Int., 9/29/87, at 21-22.

69. Id

70. Id

243

Chapter 1 4

"Taken to the Cleaners":
The Iran Initiative Continues*

The United States had taken a firm position in
Tehran. Ahhough offered two hostages, McFarlane
had refused to dehver the remaining HAWK parts
unless all the hostages were released first. But this
was to be the last show of toughness by the United
States: just 2 months later, the United States delivered
the same HAWK parts after obtaining the release of
only one hostage.

The Iran initiative continued until public reaction
following its exposure in November 1986 forced its
cancellation. Before then, some of the players had
changed: a new channel to Iran (the "Second Chan-
nel")' with a new Iranian emissary was found; Nir
was cut out of the negotiations; and Secord and
Hakim took his place. More missiles were sent to
Iran, where they went to the radical Revolutionary
Guard. But fundamental problems remained, and the
Second Channel turned out to represent the same
Iranian leaders as did the First Channel. In the end,
the United States secured the release of another hos-
tage but three more were seized, at least one allegedly
at the instigation of one of the Iranians with whom
the U.S. negotiators had dealt earlier. Despite this,
however, the U.S. negotiators agreed not only to se-
quential release of the hostages but also to seeking the
freedom of the convicted Da'wa terrorists from
prison in Kuwait.

The Bartering Continues

The deadlock in Tehran did not end Manucher Ghor-
banifar's role as an intermediary. A strange interde-
pendence had developed among the parties: Iran still
wanted the remaining HAWK parts and other high
technology weapons from the United States; the
United States wanted the hostages; Israel wanted
direct or indirect relations with Iran; and Ghorbanifar
wanted to be paid.

Ghorbanifar had borrowed $15 million from Saudi
entrepreneur Adnan Khashoggi to finance the
HAWK parts shipment and Khashoggi, in turn, had
borrowed the money from his financiers. But only
one pallet of HAWK parts had been delivered in

*"Our guys . . . they got taken to the cleaners." Secretary of
State. George P. Shultz, testifying at the pubhc hearings. 7/2.^/87, at
184.

Tehran and Iran refused to pay. Ghorbanifar could
repay his debt to Khashoggi only by inducing the
United States to ship the rest of the parts.

Only days after the Tehran mission ended, Ghor-
banifar was on the phone with an Israeli official seek-
ing a meeting. Ghorbanifar blamed the failure of the
Tehran trip on internal rivalries within the Iranian
Government and complained about Robert McFar-
lane's refusal to accept the offer to release two hos-
tages for the HAWK parts. The Israeli official restat-
ed the U.S. position: there could be no further discus-
sions unless all the hostages were released first. ^

Shortly afterward, CIA consultant George Cave
was in communication with the Second Iranian, who
also wanted the remaining HAWK parts delivered.
The Second Iranian claimed that Iran controlled the
hostages and that if all the parts were delivered, two
hostages would be released. When the HAWK radars
were delivered, the two remaining hostages would be
freed. ^ The parts, however, would have to be deliv-
ered first and the hostages would follow — the mirror
image of the U.S. position. Cave rejected this proposi-
tion— all the hostages would have to be released
before any of the parts could be delivered.* The par-
ties remained far apart.

Iran Discovers the Overcharge

By the end of June, Iran had raised another reason for
refusing to pay Ghorbanifar and release the hostages:
The Iranians had obtained a "[m]icrofiche of factory
prices" that "does not compare w/ prices charged."^

On June 30, Cave spoke by telephone to the
Second Iranian who complained that the Iranians had
a microfiche price list showing the (rue price of the
HAWK parts and that they had been overcharged by
600 percent.® The same day, Ghorbanifar called CIA
official Charles Allen and told hini that while he was
being blamed for the overcharge, his markup was
only 41 percent.''

The sensitivity of the Iranians to overcharging had
been known to the Americans for some time. In a
December 4, 1985 PROF note to John Poindexter,
Oliver North warned that the Iranians were unlikely
to release the hostages in a "single transaction" be-
cause they had been "'scammed' so many times in the

245

Chapter 14

past that the attitude of distrust is very high on their
part."*

Trying for an Independence Day
Present

Since the Iranians' complaints rested on the micro-
fiche list, Cave asked for proof of the overcharge. In
the meantime, Ghorbanifar and an Israeli official at-
tempted to keep the initiative alive. The Israeli hoped
to gain the release of at least one hostage in time for
the July 4 Independence Day celebration of the
Statue of Liberty's 100th anniversary.^ Ghorbanifar
told the Israeli that he could deliver'" and, on July 2,
Amiram Nir, adviser to Israeli Prime Minister Shimon
Peres on combatting terrorism, called North and pre-
dicted the release of an American hostage in time for
the celebration. ' ' North immediately dispatched an
interagency team to Wiesbaden. But when the release
did not occur, Poindexter criticized North for falsely
raising expectations and North, in frustration, let it be
known to Nir that he would not take any more calls
from him until further notice.'^

In July, North received a copy of a letter purport-
edly from Ghorbanifar to the Second Iranian. ''^ The
letter, dated July 8, complained that the Iranians had
missed an opportunity by failing to release a hostage
in time for the July 4 celebration. Using statistics of
deaths in America from a variety of causes, the letter
warned that Americans would lose interest in the
hostages and, consequently, the Iranians would lose
their leverage.'*

The letter concluded by proposing two alternative
arms-for-hostages transactions. As a third option, it
recommended that if the Iranians were not serious
about pursuing such transactions with the United
States, they should terminate the whole matter imme-
diately. In this fashion, it stated, ". . . we can pretend
nothing happened, as if 'no camel arrived and no
camel left.' "'^

On July 26, Ghorbanifar and the Israelis registered
a success: Reverend Lawrence Jenco was released.
The Israeli intermediary had forced the issue, telling
Ghorbanifar after the July 4 disappointment that the
initiative was over unless a hostage was released.
Shortly thereafter, Ghorbanifar announced that Jenco
would be freed. '^ Although welcome, the release of
Father Jenco generated confusion and concern; it was
unclear what Ghorbanifar had promised to gain his
release.

The next day North and Cave met in Frankfurt
with Ghorbanifar and an Israeli official to clarify mat-
ters. Ghorbanifar described the arrangements he had
made with the Iranians to obtain the release of Rev.
Jenco. These included the sequential release of the
hostages and the delivery of arms to Iran. Ghorbani-
far also told the group that, on his own accord, he
had promised the Iranians that if they could prove the

claim that they had been overcharged by $10 million
for the HAWK spare parts, the United States would
make up for it by giving Iran 1,000 free TOWs. "
In a July 29 memorandum to Poindexter, North set
forth Ghorbanifar's 6-step plan for the sequential re-
lease of the hostages in exchange for the remaining
HAWK parts, 2 HAWK radars and 1,000 TOWs.

Step 1: One hostage released and $4M to Ghor-
banifar for items removed from the aircraft in
Tehran during the May visit (Ghorbanifar re-
ceived the $4M on July 28)

Step 2; Remainder of 240 parts plus full quota of
electron tubes (item 24 on Iranian parts list) and
500 TOWs delivered to Iran.

Step 3: Second hostage released and Ghorbanifar
paid for remainder of 240 parts.

Step 4: 500 TOWs and 1 HIPAR [HAWK] radar
delivered.

Step 5: Third hostage released and Ghorbanifar
paid for one radar.

Step 6: Meeting in Tehran to discuss future fol-
lowed by release of the last hostage and delivery
of second HIPAR radar.

We believe that the mixture of HAWK parts and
TOWs was designed to satisfy both the military
and the Revolutionary Guards in Iran.'*

The proposed terms left the United States in an
awkward position. McFarlane had withdrawn his del-
egation from Tehran when the Iranians had failed to
produce all four remaining hostages in exchange for
the 12 pallets of HAWK spares sitting on the ground
in Israel. They had also discussed the HIPAR radars
in Tehran but they, too, were to be delivered only
after the radars were paid for and all of the hostages
were released.

Poindexter had described the problem to McFar-
lane in a July 26 note: "Gorga (sic) has cooked up a
story that if Iran would make a humanitarian gesture
then the United States would deliver the rest of the
parts. Of course, we have not agreed to any such
plan."'^ Poindexter recognized, however, that the re-
lease of Jenco left the United States with a very real
dilemma: "[t]he problem is that if the parts aren't
delivered, Gorba will convince [his Tehran contact]
that we welched on the deal."^°

North repeatedly warned that one of the hostages
might be killed if the HAWK parts were not deliv-
ered. In his July 29 memorandum to Poindexter,
North predicted that "[i]t is entirely possible that if
nothing is received, [the Second Iranian] will be killed
by his opponents in Tehran. Ghorbanifar will be
killed by his creditors . . . and one American hostage

246

Chapter 14

will probably be killed in order to demonstrate dis-
pleasure."^'

North recommended that Poindexter brief the
President and "obtain his approval for having the 240
HAWK missile parts shipped from Israel to Iran as
soon as possible, followed by a meeting with the
Iranians in Europe."^^ Poindexter noted on the
memorandum: "7/30/86 President approved. "^^

The decision in Tehran not to ship the parts unless
all the hostages were released first had been reversed.
On August 4, 1986, the HAWK parts were flown into
Iran. Secord provided the crew and Israel provided
the airplane.^*

The Da'wa Prisoners

The Adviser, the member of the Iranian Parliament
who met with the McFarlane delegation, had told
McFarlane and North in Tehran that the freeing of
the Da'wa prisoners in Kuwait was essential to the
release of all the United States hostages. The demand
was taken seriously and North closely monitored the
status of the Da'wa prisoners. North saw signs of
hope, both that the captors of the Americans would
relent on this condition and that Kuwait might, on its
own, release the Da'wa prisoners.

After the release of Rev. Jenco, North wrote to
Poindexter that "[a]lthough the Da'wa 17 in Kuwait
continue to be mentioned as the ultimate demand on
the part of the hostage-holders, ... we have not seen
reference to this issue since our meeting in Tehran. "^^
On August 5, North discussed the Da'wa prisoners at
a meeting of the Operations Sub-Group of the Terror-
ist Incident Working Group. The participants specu-
lated that Kuwait might "releas[e] the Da'wa 17 and
[about] the conditions that would lead to that action
{i.e.. protected borders with Iran)."^^

Crowe Is Apprised

At a meeting of the Terrorist Incident Working
Group (TIWG) chaired by North in late June or
early July, an allusion was made to the Iranian arms
sales. One of the members of the TIWG was Lt.
General John Moellering, then-Special Assistant to
Admiral William J. Crowe, Jr., Chairman of the Joint
Chiefs of Staff. The Joint Chiefs had not been in-
formed of the sales and Moellering was perplexed by
the reference to arms sales. ^'' Later, Assistant Secre-
tary of Defense Richard L. Armitage, who had been
at the TIWG meeting, briefly explained the Iranian
arms sales to Moellering.^*

Moellering relayed what he had learned from Ar-
mitage to Admiral Crowe, a 40-year veteran who
served in World War II, Korea and Vietnam. ^^
Crowe, though Chairman of the Joint Chiefs, had not
been consulted or informed about the decision to ship
weapons to Iran, or the McFarlane mission to

Tehran.^" Crowe was "startled" by the "nature of the
transaction" because it was "contrary to our
policy."^'

Crowe confronted Defense Secretary Weinberger
and asked him to explain why the Joint Chiefs of
Staff had been excluded from the decisionmaking
process.''^ Weinberger offered no defense of the initi-
ative. Instead, he merely told Crowe that the decision
had been made by the Commander in Chief; that "he
(the President) can do what he wants to do;"^^ and
that "consultation with others below the Commander
in Chief level would not have perhaps been very
fruitful.''^'*

For the first time, at Crowe's direction, the military
focused on the effect that the previous sales to Iran
had had on the strategic balance in the Middle East
and the defense capability of the United States. Given
Iran's avowed hostility to the United States, and to
U.S. allies in the region, such a study by military
experts should have been completed before any sales
were authorized. The obsession with secrecy and the
desire to avoid possible criticism led to the conceal-
ment of the sales not only from Congress but from
the President's principal military advisers. Only after
determining how the TOWs were actually being de-
ployed was Crowe able to conclude that the arms
sales did not significantly affect United States military
interests. ^^

The Vice President Is Briefed

At North's request, Nir briefed Vice President
George Bush during his visit to Jerusalem on July 29,
shortly before the HAWK parts shipment. Craig
Fuller, the Vice President's Chief of Staff, was
present and prepared a memorandum of the meeting.
According to Fuller, Nir "described the details of the
efforts from last year through the current period to
gain the release of the United States hostages."^® Nir
stated that one of the open issues was whether to
agree to a sequential release of the hostages or to
remain insistent on the prior release of all before any
weapons were delivered.^'

Nir described the initiative as "having two layers —
tactical and strategic." The tactical layer was an
effort "to get the hostages out." The strategic layer
was designed "to build better contact with Iran and
to insure we are better prepared when a change (in
leadership) occurs."^* Nir told the Vice President
that Iran was using the retention of the hostages as
leverage: "the reason for the [Iranians'] delay [in re-
leasing the hostages] is to squeeze as much as possible
as long as they have assets. "^^ But the Iranians were,
Nir stated, arranging to release one hostage with an-
other to follow. In return, the Iranians wanted
HAWK spare parts and TOWs.

Nir then framed the issues awaiting decision:

247

Chapter 14

Should we accept sequencing? What are alterna-
tives to sequencing? They fear if they give us all
hostages they won't get anything from us. If we
do want to move along these lines we'd have to
move quickly. It would be a matter still of sever-
al weeks not several days, in part because they
have to move the hostages every time one is
released .... It is important that we have assets
there 2 to 3 years out when the change occurs.
We have no choice other than to proceed. ■'°

Nir also told the Vice President that "we are dealing
with the most radical elements."

The Vice President did not comment except to
thank Nir "for having pursued this effort despite
doubts and reservations throughout the process."*'

A New Deal in London

The August 4 delivery of the HAWK parts did not
satisfy the Iranians. They continued to protest the
high price of the HAWK parts. Moreover, to gain the
release of Father Jenco, Ghorbanifar had promised
the Second Iranian that the United States would pro-
vide 1,000 TOWs in addition to the HAWK parts if a
hostage was freed.

Shortly before the HAWK parts were sent to Iran,
North and Nir discussed the next steps in the initia-
tive. North noted that he would instruct Cave to
explain to the Second Iranian that some of the terms
that Ghorbanifar had promised had not been author-
ized by the United States. North planned to ask Cave
to convey the United States recognition of the Irani-
ans' unhappiness.*^ At the same time, Cave was to
note that, "if there is no payment" to Ghorbanifar,
the United States would have to stop selling arms
because "those who loaned the merchant (Ghorbani-
far) the money will make the whole thing public."'*^
To address these unresolved issues. North planned a
meeting with the Iranians in Europe.*"'

On August 8, in what proved to be North's last
face-to-face meeting with Ghorbanifar, North, Nir,
and Ghorbanifar met in London. The meeting pro-
duced a plan, which North described in his note-
books:

Proposed next step:

1. 40 Tubes [HAWK Radar Parts]
500 TOWs

2. [Hostage]

3. 500-t-HP[HAWK Radar] -|- 137 missing items

4. [Hostage]

5. Meeting

6. Remaining for disc:
— [Hostage]
—HP

— [William] Buckley location
—Pay us $15.5 M
for 1000 TOWs

177 missing units
40 Tubes
2 HPs-'s

Although North apparently agreed to the proposal,
he told Ghorbanifar that it was subject to approval in
Washington.*^ The plan incorporated the principle of
sequential delivery of hostages and arms — a position
the United States had rejected since November 1985.
North's notes of the London meeting suggest one
reason, attributed to the Speaker of the Iranian Parlia-
ment Rafsanjani, for accepting the sequential process:
" 'If all the Americans are released at once, everyone
knows that a deal was made w/ Iran.' "*'' But this
does not explain why arms deliveries had to intervene
between each release.** In fact, North never opposed
sequential delivery of arms and the release of the
hostages. He recommended it as early as December 4
in a PROF note to Poindexter, and he was disappoint-
ed when McFarlane did not accept the two hostage
deal in Tehran.*^

The Microfiche Arrives

The dispute about overcharging remained unresolved.
By August 6, the Israelis had received the microfiche
list from Iran.^° It consisted of pages showing prices
as of November 1, 1985, and was authentic.^' The
Iranians had clear evidence that they had been grossly
overcharged. But North never considered a refund,
even though the Enterprise had more than enough
money to mollify the Iranians. North had no intention
of eliminating the markup on future shipments. At
North's instruction, Robert Earl, North's National Se-
curity Council colleague, was calculating prices on
possible future shipments using a 3.7 multiplier against
cost.^^

North's solution to Iran's complaint was to ask the
CIA to prepare a phony price list to justify the prices
charged Iran.^'' According to Allen, this effort failed
because the CIA's Office of Technical Services
proved incapable of preparing a credible forged list.^*

As a further complicating factor, when the Iranians
inspected the HAWK parts shipped in August, they
rejected many of the parts and found the shipment
incomplete. By August 20, Iran had identified 177
items that it had originally ordered and had not been
included in the shipment. Iran had also determined
that 63 of the items that had been sent were defective
and asked that they be returned. ^^

Ghorbanifar was thus left in difficult straits; pur-
sued on the one hand by his creditors and criticized,
on the other, by Iran for participating in a scam.
Ghorbanifar complained hysterically to Allen. ^^ Even
after Iran paid Ghorbanifar $5 million for the HAWK
parts it received on August 4, Ghorbanifar claimed he
was still $10 million short of meeting his obligations
to his creditors. From North's point of view, an alter-

248

Chapter 14

native to Ghorbanifar, with all his financial problems,
was needed.

The Search for a New Channel

Ghorbanifar had never been a popular emissary with
the Americans. McFarlane in December 1985 had,
according to Secord, found him "one of the most
despicable characters [he] had ever met . . . . "^'

After the February meeting in Frankfurt, North
complained that Ghorbanifar had deliberately distort-
ed the translations.^* The CIA's Deputy Chief of the
Near East Division soon to become Chief of that
division (C/NE), said that Ghorbanifar had "lied to
both sides" to get them to the Frankfurt negotia-
tion.*® When George Cave joined the Iran initiative,
he was "a little bit horrified" when he was informed
of Ghorbanifar's involvement.^"

On February 27, North wrote of the need to "get
Gorba out of the long range picture ASAP."^' By
the time of the Tehran meeting in May therefore,
Ghorbanifar was in jeopardy. When the Americans
attributed the failure of the McFarlane mission to
Ghorbanifar's misrepresentations to both sides, his re-
placement was certain.

Shortly after the Tehran breakdown, Poindexter au-
thorized North to seek a new opening to Iran for
continued negotiations — a "Second Channel."®^
Hakim testified that he believed that the idea for a
second channel originated with his associate, Richard
Secord. ^^ Hakim took the lead in finding the appro-
priate contacts while keeping North and Secord in-
formed.^*

Hakim thus had the opportunity to promote his
business interests and to serve both his newly adopted
country, the United States, and his native country,
Iran.^* Hakim estimated the trade market between the
United States and Iran to be worth $15 billion. ^^ He
hoped that his role in renewing relations between the
two countries would win him a part of this market.
Hakim and Secord intended to use part of the surplus
from the Iranian sales to invest for their own benefit
in commercial opportunities in Iran.*'

Hakim contacted an Iranian expatriate (the "First
Contact") whom he had employed in the past. At
least twice in 1983 Hakim had brought the First Con-
tact to the attention of the CIA as a possible source of
information, but the CIA did not use him.®* The First
Contact came to the United States to meet with
Hakim and Cave, on July 10 and 11. The meetings
focused on the First Contact's connections in Iran and
how the trade door to Iran might be opened. He was
also tested by a private polygraph examiner. ®®

Hakim and Cave told the First Contact that the
U.S. Government wanted to resume trade to re-estab-
lish relations with Iran and that they planned to "cap-
italize" on this trade by using their contacts in the
U.S. Government. Hakim told the First Contact that
he would pursue the Iranian-American trade market

no matter what "we" (the United States) finally de-
cided,'"

The First Contact made it clear that he expected to
be paid for his work. In Cave's presence, Hakim as-
sured him that "if anything goes through" he would
realize a "good commission."' ' The demand for re-
muneration was no surprise to Hakim. Transactions in
the Middle East frequently call for "baksheesh" — a
payoff to intermediaries. He had made such payoffs in
the past.'^ Hakim would draw the money for bak-
sheesh from the profits of the arms deals with Iran."

With the promise of a payoff the First Contact
turned to a fellow Iranian businessman (the "Second
Contact") with direct connections to the Iranian Gov-
ernment. How many others helped open the new
channel is unclear. But, by the time it was in use.
Hakim had obligated for payoffs an indefinite portion
of $2 million set aside for such expenses from the Iran
profits.'*

The Second Channel's Debut

The First and Second Contacts quickly found another
avenue into Iran. North first got reports that an emis-
sary from the "Second Channel" had been identified
in late July. By July 31, the emissary's relationship to
a leading Iranian official had been verified.'* On
August 19, North learned that the emissary would
meet with Secord and Hakim in Brussels, Belgium.'®

The meeting occurred on August 25. Both the First
and Second Contacts were present. Thereafter, the
First and Second Contacts ordinarily did not attend
the meetings between the Americans and the emis-
sary.

The emissary ("the Relative") was an Iranian, who
had distinguished himself in the ranks of the Iranian
Revolutionary Guard Corps in the war with Iraq.

The Relative impressed Secord. In a message to
North after the Brussels meeting, Secord described
the discussions as a "comprehensive tour de force"
covering matters ranging from Soviet activities to the
conduct of the Iran-Iraq war. Arms, however, re-
mained the currency for dealing with Iran. The Rela-
tive recited an extensive list of weapons that "[t]hey
badly need[ed]," including "air defense items, armor
spares, TOWs, gun barrels, helo spares, and tactical
intelligence." Secord responded that "all things
[would be] negotiable if we can clear the hostage
matter quickly.""

The Relative knew of the efforts of Ghorbanifar
and his contacts. He described Ghorbanifar as a
"crook," but promised not to interfere in that channel.
He offered to help Ghorbanifar win the release of
more hostages. Secord reported to North on August
26, "[m]y judgment is that we have opened up a new
and probably much better channel into Iran."'*

249

Chapter 14

Two Trains Running

Ghorbanifar was not immediately dropped. North and
the CIA still pressed for the approval of the deal that
North, Nir, and Cave had negotiated with Ghorbani-
far in London on August 8. On September 2, North
submitted a memorandum to Poindexter reviewing
the initiatives under way to free the hostages. Ghor-
banifar, the Relative, and some efforts by another
country were all mentioned. In his memorandum,''^
North summarized the terms proposed at the London
meeting with Ghorbanifar.

Deliver 500 TOWs and the 39 electron tubes for
the HAWK system previously requested.

[Hostage] released.

Deliver 500 TOWs and one of the HAWK radars
previously requested.

[Hostage] released.

Meeting in Tehran to discuss broadened relation-
ship, Soviet intelligence, etc.

DeHver remaining radar and 100 TOWs while we
are in Tehran.

[Hostage] released and Buckley's body deliv-
ered. *°

North favored the plan and asserted that others in the
CIA did also: "[The] CIA concurs that [the Second
Iranian]-Ghorbanifar connection is the only proven
means by which we have been able to effect the
release of any of the hostages."*'

Having posed the question on sequential release to
Poindexter, North then worked for a quick response.
In a PROF note dated September 3, he advised
McFarlane that "[w]e still have no response fm (sic)
JMP re proceeding w/ the sequential release proposal
outlined to you some time back. Have now undertak-
en to have Casey raise same w/ JMP tomorrow at thr
(sic) weekly meeting. The things one must do to get
action. "*2 North's notebooks also show a meeting
with Poindexter on September 4, in which the entry
appears: "Go/No Go on sequential deliveries."*^ The
entry mentioned the need to talk to "Joshua," North's
code name for President Reagan.**

On September 8, North updated his September 2
memorandum to Poindexter. North noted that enough
HAWK spare parts had been located to "entice the
Iranians to proceed with the sequential release pattern
proposed in the London meetings." According to
North's notes dated that same day, Cave reported to
North that the Second Iranian was "rabid" for the
arrival of additional HAWK parts,*-^ and Charles
Allen called North to say that Casey planned to call
Poindexter and that Deputy CIA Director Robert
Gates was "supportive."*^

At that point, news from Iran caused a change in
plans and a reevaluation of Ghorbanifar's influence:
North told Poindexter of a telephone conversation in
which the Second Iranian told Cave that his "boss" in
the Iranian Government approved of the planned
meeting between the Relative and the Americans.
North added that the Second Iranian's prompt trans-
mission of the Prime Minister's approval was inter-
preted by the CIA as "confirmation that Rafsanjani
may be moving to take control of the entire process
of the United States relationship and the hostages."*''

Second Channel Out Front

On September 9,** Poindexter met with President
Reagan. The Second Channel was on the agenda.*^
Another American, Frank Reed, had been kidnapped
that day, and North worried that the incident might
scuttle the initiative.^" He expressed concern in his
notebook that "Paul" would stop everything.^'

After Poindexter's meeting with the President,
North told Allen that Poindexter had given him "new
guidance" on the hostage issue. North was to contin-
ue working to develop the Second Channel, and
Ghorbanifar was to be eliminated from all future ship-
ments, "if at all possible. "^^ In a memorandum to
Director Casey, which was also sent to Gates, Allen
observed that, to banish Ghorbanifar, North would
have to raise "a minimum of $4 million. "^^ Ghorbani-
far was not to be abandoned altogether, however.
North was instructed that "[i]f there is no other chan-
nel for financing future arms shipments, then Ghoban-
ifar (sic) will be used as a last resort."^'* Allen said
North was "greatly relieved" by the guidance.^*
Poindexter's instructions evidenced a strong commit-
ment to continuing the Iran initiative — even the
flawed Ghorbanifar could continue as a backup if the
Second Channel failed.

Secord/Hakim Ascending

The opening of the Second Channel reversed roles
for Secord-Hakim and Israel. The Israelis had devel-
oped the Ghorbanifar channel and they had assured
the Americans that they knew how to deal with
Ghorbanifar.^^ Even after the United States had
taken over the initiative in January 1986, Nir had
taken the risk — considerable for an Israeli — of accom-
panying McFarlane and North to Tehran.®'' Secord
called the initiative a "joint venture" between the
United States and Israel.®*

Secord and Hakim had had little to do with the
negotiations with the First Channel. According to
Secord, his relationship with Ghorbanifar, whom he
had met in the aftermath of the November 1985
HAWK fiasco, withered when Secord told him in an
"acid" conversation in February that Ghorbanifar was
going to recommend that Ghorbanifar be "terminat-

250

Chapter 14

ed." Secord said that Ghorbanifar "took it the wrong
way."'®

After the February 25 and 26 meetings in Frank-
furt, Secord was reduced to a behind-the-scenes advis-
er and logistician. Hakim's role was even smaller.
Persona non grata to the Iranians, Hakim had to use a
pseudonym, Ibrahim Ibrahamian — and wig — to serve
as an interpreter at the Frankfurt meetings.'*"'

All this changed with the opening of the Second
Channel. Hakim, not the Israelis, developed the
Second Channel. From August through November,
Hakim and Secord were at all meetings with the
Relative. Secord acted as a negotiator for the United
States, presenting — and sometimes formulating — the
views of the United States and offering military guid-
ance to the Iranians. On one key occasion. North left
Hakim, a private citizen, by himself to complete nego-
tiations on behalf of the United States.""

Nir Suspects

Initially unaware of the dialogue with the Relative,
Nir had continued to promote a new meeting between
the Second Iranian and North. On August 24, he
called North to urge a meeting as soon as possible.'"^
By late August, however, Ghorbanifar had advised
Nir that the Americans were seeking a new channel
into Iran and that at least one meeting had already
occurred between the new contact and the United
States. Nir decided to come to Washington and press
the Ghorbanifar channel personally. In a September 3
PROF note. North wrote to McFarlane that Nir was
arriving the following week, and "will raise enough
hell to move it [the Ghorbanifar proposal] if it hasn't
all fallen apart by then."'°^

North prepared "Talking Points" for Poindexter's
September 10 meeting with Nir. At the meeting,
among other things, Poindexter told Nir that the
United States would continue seeking the release of
the hostages held in Lebanon; that the United States
developed the Second Channel; that the Second
Channel was connected with Speaker Rafsanjani; and
that the President had approved proceeding with a
meeting with the Rafsanjani representative. '"■*

Nir left the United States on September 15. Before
departing, he met again with Poindexter and
North. '°^ North's notes indicate that Nir stated that
Ghorbanifar was trying to finance a deal large enough
to entice the Iranians into gaining the release of all
the hostages simultaneously. Two days after he left,
Nir reported to North that Ghorbanifar was having
little luck financing the deal. Appeals to the Second
Iranian for the release of the hostages were likewise
unsuccessful. '"8

On the heels of his first meeting with the Relative,
Secord learned from the Relative that an independent
TOW transaction involving Iran might be under way.
Secord reported this to North on August 27.'°'' In his
message, Secord warned North that "our groups (sic)

credibility with the Iranians is at stake here."'"* He
added that the Relative was worried that this TOW
transaction would "thwart a new beginning on the
relationship with USG."""*

Hakim advised Allen that Ghorbanifar and Kha-
shoggi were likely involved in the transaction."" At
North's request, Allen reported the matter to United
States Customs. ' ' ' Concerns about this independent
transaction are reflected in North's notebooks as late
as October 22. "^

In "Great Satan's" Parlor

North's notes show that, throughout the Nir visit, he
was preparing for the Relative to visit Washing-
ton. "^

North complained about the CIA's resistance to
arranging the visit and urged Poindexter to "call
Casey and tell him to get on with moving the guy
[the Relative] in so that we don't embarass (sic) the
hell out of ourselves w/ Rafsanjani.""* At another
point, he complained of yet another delay:

Why Dick [Secord] can do something in 5 min.
(sic) that the CIA cannot do in two days is
beyond me — but he does. " *

Secord summarized for North the Relative's proba-
ble agenda in the upcoming meetings. He predicted
that the Relative and "his group are attaching more
importance to a long-term relationship than to any
short-term quick fix, such as a few thousand TOWs."
But Secord warned that the Relative would "have a
list of needed items and will no doubt suggest some
kind of shipment to clear the hostage matter and to
firmly establish direct USG to GOI transactions and
to eliminate the Gorbas and [the Second Iranian]."
Secord also expected that the Relative would ask for
intelligence information and a means of securely re-
ceiving more intelligence."®

To get the relationship off to a good start, there-
fore, Secord said "the CIA must deliver the goods
[intelligence] and come up with suitcase secure phone
device."' "

Secord arranged for the Relative to be flown to
Washington for a 2-day visit on September 19. The
first day the Relative met with North, Secord, and
Cave in North's office in the Old Executive Office
Building. Hakim attended part of the meeting. On the
second day, the group met at the headquarters of
Stanford Technology Trading Group International in
Vienna, Virginia."*

Secord's forecast of the Relative's agenda was cor-
rect. Each side assured the other that its objective
was a long-term relationship and a common defense
against Soviet aggression. But arms, hostages, the
Da'wa — and a new subject, the status of Iraq's Presi-
dent, Saddam Hussein — dominated the discussion. The
key points of those meetings follow.

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Chapter 14

Arms: The Relative brought an extensive arms
"wish list." It included previously requested items,
such as HAWK spare parts and radars, and many
other items, including offensive weapons, critical to
their war effort. To operate the equipment, Iran also
could use "minimum levels of technological assist-
ance" from the United States.''^

North reviewed the list and told the Relative that,
"in principle, to the extent that the items are available
either here or elsewhere, there isn't a particular prob-
lem."'^° North singled out only the request for
10,000 175 RAP rounds as "not a reasonable request."
He counseled patience: The President had authorized
only the shipment of defensive arms, and, even if the
new weapons were approved, the wait would be long
since "most of these items would have to come by
ship .... [T]hey are very big and heavy and only a
few could come by aircraft."'^' North promised,
however, that the TOWs and HAWK spares would
be shipped as soon as the hostage issue was re-
solved.'^^

On the cost of weapons, North explained that
Ghorbanifar had to be charged the market price, not
cost. He suggested that, once the "obstacles" of the
hostages were removed, the price to Iran could be
reduced. In the meantime. North urged that Iran pay
Ghorbanifar what it owed him to keep him and his
financiers quiet. '^^

Hostages: North pressed for the release of all the
hostages, not only as a condition of arms sales but as
the first step toward a normal relationship with Iran.
According to Secord's notes. North said:

With respect to the document we prepared in
Teheran, you will note a considerable emphasis
on hostages. We consider them to be an obstacle.
An obstacle to the understanding of the Ameri-
can people. The widespread perception here in
America is that Iran is basically responsible for
these hostages. The issue of hostages and terror-
ism must be dealt with since it is a political obsta-
cle. On the other hand, you should realize that
52,000 people in the United States died last year
in automobile accidents and 130,000 died from
lung cancer. Five United States hostages rarely
make the newspapers or the television, but be-
cause this is a democracy, if the President is
found to be helping Iran with this obstacle still in
the way, it would be very difficult to explain to
our people. '^^

North reminded the Relative that the United States
had to get the hostages "behind us" in order to ship
weapons, '^^ and he reiterated, "We are prepared to
continue to provide to Iran items which will help in
her defense but wish to see the hostage issue behind
us so that we can move forward." '^^ The Relative
responded that he was "confident" the hostage issue
"would be resolved."*^''

The Da'wa Prisoners: Less that two weeks before
the meeting with the Relative, Allen had observed
that "[m]ore and more, we suspect that some Hizbal-
lah leaders would be willing to settle for the release
of the [hostages] for Shia prisoners held by [the] the
Southern Lebanese Army."'^^

Cave agreed with this analysis. He believed that the
families of the Southern Lebanese Army prisoners
might place enough pressure on the Hizballah to force
an exchange of the American hostages for the Lahad
prisoners. '^^

Despite these assessments, the Da'wa prisoners
were discussed at the meeting with the Relative.
North said the United States could not intervene in
Kuwait. '^° He predicted, however, that Kuwait
would free the prisoners in phases "if the Govern-
ment of Iran goes privately to Kuwait and promises
them no terrorism."'^' North said that the Kuwaiti
position "seem[ed] reasonable" and advised the Irani-
ans to approach Kuwait. Later, when the parties pre-
pared a summary of the two days of meetings, North
himself added "the point about the Da'wa hostages
and Kuwait and Kuwait's desire for a guarantee
against terrorism" to the list. '^^

Saddam Hussein: The Relative also sought to enlist
the support of the United States in the removal of
Iraq's president, Saddam Hussein. The Relative said
the Gulf countries, friendly to the United States,
should end their support for Hussein. North respond-
ed that the United States could "make no commit-
ment about getting rid of Hussein," even though
"[w]e agree that there is a need for a non-hostile
regime in Baghdad." '^^ The Relative was not satis-
fied with this response. He returned to the issue the
next day. He said that "he knows we can bring our
influence to bear with certain friendly Arab nations
and it is 'within the power of the Arab nations to get
rid of Sadam (sic) Hussein.' "i34

Other Issues: The Relative asked that the United
States join Iran in trying to raise the price of oil.'^^
North did not address this proposal at the time but
later he observed that the oil market was "naturally
depressed."'^® He also stated that the United States
and Iran had "similar interests with respect to oil."'^''

The Relative said that the Second Iranian had
"played a role" in the kidnapping of Frank Reed to
put "additional pressure on the United States to send
the next shipment [of weapons]." '^^

The Relative also stated that William Buckley "was
not killed; ... he died of natural causes; ... he had
three heart attacks."'^® According to Cave, the
Americans challenged the Relative's assertion that
Buckley had died a natural death.'*" They also ques-
tioned the Relative on the complicity of the Revolu-
tionary Guards in Buckley's interrogation and torture,
but the Relative denied it. Cave nevertheless conclud-
ed that the Revolutionary Guards had interrogated
Buckley.'-"

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Chapter 14

Joint Commission: The Relative proposed a joint
commission of Iranians and Americans to develop the
relationship between the countries, and North ap-
pointed Secord, Cave, and himself as the American
representatives. ' * ^

North also promised the Relative that President
Reagan would signal his appreciation for Iran's with-
holding of landing rights for a hijacked Pan American
night. '"3

The Intermediaries: The Second Contact accompa-
nied the Relative to the United States. In the midst of
the negotiations, he raised with Hakim the question of
his compensation for participating in the opening of
the Second Channel. Hakim returned to the room
and, with North, Secord, Cave, and the Relative
present "made sure" that the subject of "financial
remuneration" for himself and the other Iranians
"would not be forgotten." '^■'

When the first day of talks had concluded. North
and Hakim led the Relative from the Old Executive
Office Building to the White House and conducted a
guided tour. '''^ Hakim said the tour covered "every
corner of the White House," including the Oval
Office. '*«

During the tour. North paused before the portrait
of President Theodore Roosevelt and told the Rela-
tive of Roosevelt's arbitrating an end to the Russo-
Japanese War of 1904-05, for which Roosevelt won
the Nobel Peace Prize. He said that the United States
would be willing to arbitrate an end to the Iran-Iraq
conflict. North repeated the same theme in reports to
Poindexter the following day during and after the
talks:

Talks going extremely well. They and we want
to move quickly beyond the "obstacle" of the
hostages. Sincerely believe that RR can be instru-
mental in bringing about an end to Iran/Iraq
war — a la Roosevelt w/ Russo-Japanese war in
1904. Anybody for RR getting the same
prize?'*^

You can brief RR that we seem to be headed in a
vy positive direction on this matter and have
hopes that the hostage resolution will lead to a
significant role in ending the Iran/Iraq war.'**

Preparations for Frankfurt

At the Washington talks, the Relative had suggested
another meeting. In the meantime, the Relative kept
in touch with North through Secord and Hakim.

North advised Poindexter in an October 2 memo-
randum that the Relative reported that there was now
an "internal consensus on how to proceed with regard
to the hostages 'obstacle,' " and that, at the next meet-
ing, he would bring one of the officials who had been
involved in the discussions with McFarlane in
Tehran. ■■'^ The Relative also asked for a "definitive

sampling of intelligence."'^" North said the Relative
gave the intelligence a "higher priority . . . than any
other assistance we could provide."'^' He also re-
ported that the Relative was bringing a Koran for the
President.

The memorandum recommended that:

— North be authorized to meet again with the
Relative.

— The President inscribe a Bible with an appro-
priate inscription from Galatians, 3:8 to be given
to the Relative. '^2

— Poindexter prohibit anyone other than North,
Cave, and Secord from having contacts with Ira-
nian intermediaries.

—The United States provide intelligence to
Iran.'^^

North explained how intelligence could be provided
without giving Iran an advantage in the war. He
suggested that a "mix of factual and bogus informa-
tion could be provided at this meeting which will
satisfy their concerns about 'good faith' . . ."'54
In conclusion. North observed that:

A memo from you to the President has not been
prepared for obvious reasons. It is hoped that
between now and 3:00 p.m. Friday you will have
an opportunity to privately discuss this with the
President and obtain his approvals/signatures on
the steps indicated above. '^^

North did not explain the "obvious reasons" for not
preparing a memorandum for the President. By giving
the Iranians a Bible signed by the President, North
provided Iran with proof that was used as evidence of
the President's involvement.

North reported to Poindexter that Nir and the
Second Iranian were besieging North and Cave with
phone calls inquiring about the status of the Second
Iranian's request for the additional HAWK parts and
TOWs discussed at the London meeting in August.
North noted that, although Nir was in a "supporting
role rather than acting as a primary source of con-
trol" in the Second Channel, continued Israeli partici-
pation was desirable for political and operational rea-
sons.'^^ North recommended that Secord be sent to
Israel to "ameliorate Nir's angst over his 'new
status'."'^''

With Poindexter's approval, Secord met Nir on Oc-
tober 5 in Israel. He delivered a letter from President
Reagan to the Israeli Prime Minister thanking him for
his efforts in furthering the Iran initiative and lauding
Nir's work. Secord assured Nir that he would contin-
ue to be consulted, and he conveyed the President's
reaffirmation of his commitment to the Prime Minister

253

Chapter 14

that the Iran initiative continued to be a joint venture
project. '■"'** North's enthusiasm for the Second Chan-
nel was shared by others. On October 3, Poindexter
sent McFarlane a PROF note attributing much of the
success with the Second Channel to McFarlane him-
self and saying that a "group release" of the hostages
was still the objective:

Your trip to Tehran paid off. You did get
through to the top. They are playing our line
back to us. They are worried about Soviets, Af-
ghanistan, and their economy. They realize that
the hostages are obstacle (sic) to any productive
relationship with us. They want to remove the
obstacle. [The Relative has been in Beirut, says
he has good news for Frankfort (sic). We shall
see. Still insisting on group release. If this comes
off may ask you to do a second round after the
hostages are back. Keep your fingers crossed. '■''^

McFarlane wrote a PROF note back to Poindexter
the next day saying, "[i]f you think it would be of any
value, I might be able to take a couple of months off
and work on the problem."'^"

This optimism continued even though more Ameri-
cans were kidnapped in Lebanon shortly before the
meeting with the Relative in Washington. Reed was
seized on September 9, and Joseph Ciccipio was taken
hostage three days later. In an attachment to his Oc-
tober 2 memo. North attributed the Ciccipio kidnap-
ping to the Second Iranian but blamed Reed's abduc-
tion, which the Relative had fixed on the Second
Iranian, on another group. "^' And on October 21,
just before the second set of October meetings in
Germany, Edward Tracy was kidnapped.

Chasing the Horizon— Frankfurt,
October 6-8

The U.S. negotiating position suffered dramatic ero-
sion in Frankfurt. The concessions made included
mainstay principles of American policy on the Middle
East and terrorism. In his testimony, when questioned
about these concessions. North asserted that he had
"lied every time [he] met the Iranians." '"^

The meetings began on October 6. North, Secord,
Hakim, and Cave represented the United States. The
Relative appeared for the Iranians, along with a Rev-
olutionary Guard intelligence official. '^^ The intelli-
gence officer was not a new face for North, Secord,
and Hakim. He had attended the first meeting with
Ghorbanifar and the Second Iranian in Frankfurt on
February 25-26, and was given a briefing there on
U.S. intelligence by Secord. He had also participated
in the negotiations with the McFarlane party in Tehe-
ran in May.

Because of his persistently negative positions and
his insistence on concessions to Iran, the Americans
called him "the monster.""''' Hakim, for his part, saw

the man as "the engine" because he was the "heart"
behind the Iran initiative. '^^ To Hakim, this man was
the key to an agreement.

In the negotiations, the Engine described himself as
the "extraordinary representative of the cooperative
that has been assigned to deal with the relationship
with the United States" '^^ He made clear, however,
that there was no unanimity within the Government
of Iran on establishing a relationship with the United
States.

The agenda at Frankfurt was the familiar one:

Arms and Intelligence: Speaking for the Americans,
Secord told the Iranians that the President had ap-
proved the transfer of HAWK parts, high-powered
radars, 500 TOWs, and three pallets of free medical
supplies.'®'

North went further by dropping the restriction
against offensive weapons. The "only" limitation was
that the sales not include items that would "allow or
encourage" the Army or the Revolutionary Guards to
seize Baghdad. "^^ The Relative had candidly admit-
ted in Washington that he wanted artillery to make
Iranian infantry attacks more successful. '^^

The only "problem" North cited with providing
the howitzers and the 500 howitzer barrels requested
in Washington was that the numbers involved would
force the Americans to open a production line.
Secord suggested that Iran go to a friendly third
country for the artillery, and the United States would
"look the other way.""° North assured the Iranians
that ". . . all of this and more can be done, but we
need to fireproof our President by removing the ob-
stacle." North then provided the Iranians with what
he described as "very sensitive intelligence . . ."
North added that, "[i]f it ever became known that we
have done this, we would be finished in terms of
credibility as long as President Reagan is Presi-
dent."'" Cave described the intelligence that he had
brought"^ — some of which contained erroneous in-
formation.'''

Hostages: North and Secord said that only the hos-
tages stood in the way of a great era of Iranian-
American relations, a period that would include arms
transfers involving the Foreign Military Sales Pro-
gram from the United States to Iran and great finan-
cial support for rebuilding the war-torn economy.
The hostages were the "obstacles," the term used to
describe them throughout the meetings.

The Engine insisted that the Iranians did not hold
the hostages and that, if they did, they would have
resolved the problem as they had the Embassy hos-
tages."'' Iran could not guarantee that the Lebanese
would listen "100 percent" to Iranians on hostage
matters, he said."^

The Engine added that there was no full agreement
in Iran on the release of the hostages. He explained
that his role was to ". . . gain the Iranian confidence
and the Lebanese confidence." Turning to North, he

254

Chapter 14

asked the Americans to "[p]lease, show me the way"
to resolve the impasse.'''* North responded that the
Americans sympathized with the Iranians' problems in
gaining the release of the hostages.

Saddam Hussein: In Frankfurt, the Americans ac-
cepted the Iranians' position on Hussein. Poindexter
testified that the matter was not discussed with the
President.''" The President told the Tower Board
that the statements made by the American negotiators
were "absolute fiction.""*

North said that the United States sought peace in a
way that "it becomes very evident to everybody that
the guy who is causing the problem is Saddam Hus-
sein." North said that Iran was no threat to the other
countries in the region, and he repeated that Hussein
prevented peace. '^® The Engine asked North, "[D]o
you really believe this?"'*° North replied that he did
and that the "inner circle of our Government knows
that."

North purported to convey the President's view of
President Hussein: "Sadam Hussein is a [expletive]."
Hakim, acting as interpreter, demurred at the harsh-
ness of the expletive, but North urged a faithful trans-
lation saying, "Go ahead. That's his [the President's]
word, not mine."'*'

As the negotiations continued. North returned to
the fate of President Hussein. He declared that "[w]e
also recognize that Saddam Hussein must go," and
North described how this could be accomplished.'*^

The Da'wa Prisoners: When the Engine asked North
to "show me the way" to gain the confidence of the
Lebanese captors and his fellow Iranian officials,
North provided two quick answers: First, he said,
"[l]et me give you some ammunition for your guns."
Then he brought up the Da'wa prisoners.'*^

North said he recognized the desire of the Shi'ite
captors to obtain the release of their "brethren who
are held in Kuwait as convicted terrorists."'** He
assured the Iranians, that, although the United States
had told Kuwait that the Da'wa prisoners were "their
business," the United States would not criticize
Kuwait should Kuwait release them.'*^ The United
States had recently conveyed this position to Kuwait,
North added. Although a North notebook entry indi-
cates that he and Poindexter had met with the Kuwai-
ti Foreign Minister on October 3,'*® the Committees
have been unable to determine what was discussed.
What is indisputable is that at various meetings with
the Second Channel, representatives of Iran — a nation
classified by the United States as a supporter of ter-
rorism— North offered assistance in gaining the re-
lease of Da'wa terrorists. Whether that assistance con-
sisted of not protesting the release, or more, it was
contrary to U.S. policy against terrorism.

Thus, North claimed to the Iranians that the Ku-
waiti position was "simple": Kuwait would release the
prisoners over time in exchange for a promise from
"somebody in authority" that there would be no more
attacks on the Amir of Kuwait.'*''

Cave told the Committees that the Americans em-
phasized that they distinguished between the Da'wa
prisoners given relatively brief prison terms and those
who received longer sentences. Cave said the Ameri-
cans also made it clear that they would not intervene
on behalf of the three Da'wa prisoners sentenced to
death.'** The transcripts of the Frankfurt meetings
do not show such distinctions, and North testified to
none. Although the transcripts are not complete, they
contain considerable discussion on the Da'wa. But
even if the distinction was drawn, any intervention
was against U.S. policy.

Peace Broker: From time to time North discussed
President Reagan's interest in resolving the Iran-Iraq
war on "honorable" terms. North even created a fan-
ciful meeting between himself and the President at
Camp David in which he showed the President the
Relative's arms list. According to North, President
Reagan then ordered North to "[s]top coming in and
looking like a gun merchant." At this point, he said.
President Reagan struck the table and declared, "I
want to end the war."'**

As North presented the Bible inscribed by the
President, he created another apocryphal session with
the President. President Reagan was depicted as
having returned from a weekend of prayer for guid-
ance on whether to authorize North to tell the Irani-
ans that "[w]e accept the Islamic Revolution." North
said that the President gave him the passage that he
later inscribed in the Bible with the observation:
"This is a promise that God gave to Abraham. Who
am I to say that we should not do this?"'®"

Starting Points: North presented a handwritten list
of seven points that he said the President had author-
ized.

1 . Iran provides funds for 500 TOWs and remain-
der of HAWK parts.

2. Within 9 days we deliver [HAWK] parts and
TOWs (500) plus medical supplies.

3. All American hostages released.

4. Iran provides funds for 1500 TOWs.

5. Within 9 days we will deliver:

* 1500 TOWs

♦Technical support for HAWKs ,

•Updated intelligence on Iraq
•Communications team

6. Iran will then:

•Release [John] Pattis

•Provide body of [William] Buckley

•Provide copy of Buckley debrief

7. United States will then:

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Chapter 14

♦Identify sources for other items on [the Rela-
tive's arms] Hst. . . .'^'

*Iran will then work to release other hos-
tages.'®^

Counterpoints: The next day, the Engine responded
with his own list:

1. The United States would establish a timetable
for the delivery of the arms on the Relative's list,
thus committing itself to providing offensive and
defensive arms.

2. One hostage would then be released.

3. A timetable and a location would be estab-
lished for the exchange of intelligence; and the
United States and Iran would evaluate the Rus-
sian, Afghanistan, and Iraq situation.

4. Iran would "only promise" to gain the release
of the remaining two American hostages but this
was to be linked to American progress on the
Da'wa prisoners. The Engine made clear that the
release of the Americans and the Da'was would
have to "wash." "They would have to coincide
or have some other logical correlation." '^^

5. Shipment of the eight items on the Relative's
list would proceed based upon mutually agreed-
upon priorities and quantities. Iran would try —
but not promise — to locate and arrange the re-
lease of the other two hostages.

6. The United States would contact Kuwait to
make sure that there are no problems with the
release of the Da'wa prisoners.

7. The United States and Iran would agree to
work within the framework of the Hague settle-
ment process to provide Iran with military items,
such as F-14 spare parts, that Iran had paid for
under the Shah's rule but that had been embar-
goed after the Embassy seizure.'®*

By way of "clarification," the Engine added two
other points to his list: John Pattis, a United States
citizen, who had been arrested in Tehran as an al-
leged spy, would not be considered in this round of
discussions, and the status of the Shi'ite prisoners held
by the Southern Lebanese Army in Lebanon would
be left to the Lebanese themselves to resolve.'®^

Ambassador Extraordinaire

The Engine presented his counterproposals to an anx-
ious group North had to return to Washington, and
all parties were worried that their prolonged discus-
sions might attract the attention of local authorities.
As North prepared to leave, he told the Iranians that
their differences were so great that Iran and the
United States would "pass each other like ships in the

night. "'®^ The Relative, in turn, accused the Ameri-
cans of maintaining that they were pursuing long-term
relations with Iran while focusing on the hostages as
"the only thing that is being discussed."'®'

North was not prepared to give up and suggested
to the group, "[W]hy don't you guys hold this discus-
sion after I'm gone, OK?" He left his seven-point
proposal behind, saying "[t]his list was given to me by
the President of the United States of America. And
there's no way on God's green earth that I'm going to
violate my instructions. . . . That's the President's
authorized list. That's all he authorized .... In fact,
he told me 'don't give away more than you have
to' — that is everything he authorized me to talk
about."'®*

North then was gone. Secord, too, left to attend to
business in Brussels. Cave also departed. North had
said that, if by the time he reached Washington there
was no acceptable proposal, he would report to Poin-
dexter that the meeting was unsuccessful and that the
Second Channel would have to be closed.'®®

Hakim testified that North left him to negotiate
with the Iranians. ^°°

Q: Did you feel like you had been the Secretary
of State for a day?

A: I would not accept that position for any
money in the world, sir.

Q: Well, you had it better than the Secretary of
State in some sense. You didn't have to get con-
firmed; correct?

A: I still believe that I have it better than the
Secretary .... I can achieve more, too.

Q: And if this initiative had succeeded, did you
ever make any calculation as to how much you
and General Secord would make?

A: In what period of time, sir?

Q: People tend to think in terms of three-to-five
year plans.

A: Many millions.

Q: Did it bother you at all that here you — and I
say it respectfully — a private citizen was left with
this kind of task of negotiating an agreement in
which if it succeeded, you stood to benefit very
substantially?

A: What bothered me was that we didn't have
the competence within the government to do
what I could do. That still bothers me.^°'

Hakim's negotiating guidelines were North's hand-
written seven-point plan.^°^ This same sheet of paper
also contained Secord's handwritten addition: "We
understand S. Hussein must go — believe we can help

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Chapter 14

(after obstacles go) with diplomacy in the Arab world
. . . — continued military pressure OK."

Hakim completed the negotiations by the time
North arrived in Washington. In his public testimony,
Hakim stated that he would be "honored" if the
agreement was known as the "Hakim Accords. "^"^

The agreement's nine-point plan differed sharply
from North's seven-points. Under his grant of immu-
nity, Hakim produced the original version in Farsi. As
translated by the Library of Congress, this version
provides:^"*

1. Iran provides funds to Mr. Hakim for 500
TOWs and, if willing, Iranians will provide for
the HAWK spare parts which remain from the
previous agreement.

2. Nine working days from now the 500 TOWs
and the HAWK spare parts (if accepted by Iran)
and the gifted medicines will be delivered to
Iran.

3. Before executing Item 4 below, Albert will
provide the plan for the release of the Kuwaitis
(17 persons).

4. 1 '72 (1 definitely and the 2nd with all effective
possible effort) American hostages in Lebanon,
through the effort of Iran, will be released by the
Lebanese.

*5. Using the Letter of Credit method, (three to
four days after delivery of shipment stipulated in
Item 2) additional 500 TOWs (together with a
maximum of 100 launchers), within four days
after the execution of Item 4 above, will be deliv-
ered to Iran. The method of Letter of Credit will
be reviewed between Albert and [ .] by tomor-
row night. Iran will pay the funds for 1500
TOWs (the 500 TOWs mentioned above plus an
additional 1000 TOWs) and the 1000 TOWs will
be delivered to Iran within nine days.

6. The United States will start with the technical
support of the HAWKs (material and know-
how), update of the military intelligence and
maps, establishment and commissioning of the
special communication link, and will prepare the
chart related to the items (provided by Mr. [ ])
indicating price and delivery to Iran.

t 7. Before the return of Mr. [ ] to Tehran, the
subject of the Moslem prisoners (Shia) in Leba-

* The Letter of Credit will be opened in favor of Mr. [ ] and he
will make the money for the 500 TOWs available by using 80% of
the Letter of Credit.

t After discussion between Mr. Secord and Mr. [ ]. it was agreed
regarding the Moslem prisoners that the sentence (text) will be
written in the following manner: [end of text]. ^"^^

non and the manner of their release by the in-
volved parties will be reviewed by Mr. Secord.

8. Iran will continue its effort for creating the
grounds for the release of the rest of the hos-
tages.

9. The steps for delivery of items referred to in
the second part of Item 6 above will start.

The Hakim Accords contain a number of conces-
sions. These include the release of only 1 1/2 hostage;
the delivery of 500 TOWs before any release and a
promise to supply 1,000 more TOWs; technical sup-
port for the HAWKs; updated intelligence; and prices
for the other weapons Iran had listed. In negotiating
the nine-point agreement. Hakim felt under intense
pressure from North. In addition to the short deadline
to complete the agreement, Hakim testified North also
told him that the President wanted a hostage back by
Election Day.^os

Transmission and Approval: Hakim testified that
when Secord returned from Brussels he transmitted a
translation of the nine-point plan to North by secure
communications device.^"' Hakim said he learned
quickly from North that the President had approved
the plan.^°* It was distributed on the same day to the
CIA which noted on its copy: "[T]his is the first draft
of nine points. There were subsequent refinements
which are only available at the NSC."^°®

The only subsequent draft with "refinements"
found by the Committees at the NSC is in an October
10, 1986, PROF note from North to Poindexter.^i"
Unlike the Hakim version, the PROF note plan in-
cludes Hakim's price for the TOWs, and provides that
only "some," not all, of the 17 Da'wa prisoners would
be released:

1. They [the Iranians] pay $3. 6m next week.

2. We deliver 500 TOWs (no HAWK parts) 9
daysafter (sic) payment.

3. Copp & Sam help prepare a plan for approach-
ing the Kuwaitis to guarantee no more terrorism
against the Amir and by which the Amir will use
a religious occasion to release some of the Dawa.
They will take this plan to the Hizballah as their
idea (face saving gesture w/ the Hizb.)

4. Two hostages (if possible, but no less than one)
released w/in four days of TOW delivery. If
only one hostage released, whole process stops
and we meet again.

5. Repeat funding and Delivery cycle as in steps
1 & 2 above.

6. We send tech support for HAWKs, update on
Intel and secure comm team to Tehran and pro-
vide location/availability of artillery items noted

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Chapter 14

on the original list provided by [the Relative] in
Washington mtg.

7. Iran does utmost to secure release of remaining
hostage(s).^"

The plan represented a retreat for the United
States. The Iranians' position on sequential deliveries
had been accepted, and the plan did not expressly
provide a mechanism for the release of all three of the
remaining American hostages kidnapped before 1986.
Iran had agreed to release only one hostage.

Moreover, the U.S. position on the Da'wa prisoners
was bargained away by promising to develop a plan
for the release of some of the 17 prisoners. The
United States had criticized allies who, fearing repris-
als, had freed terrorists. It had cited Kuwait as an
example of a nation with courage: a nation that, al-
though small and vulnerable to terrorism, was none-
theless willing to imprison terrorists. As the Secretary
of State testified: "And here was little Kuwait, very
vulnerable, standing up to it [terrorism]. So we have
to support them. They are much more vulnerable
than we. If they can stand up for it, dog-gone it, so
should we."^'-

There were other concessions: a $2,400 reduction in
price for each of the 500 TOW missiles; an agreement
to prepare a list showing the price and delivery
schedule of the items on the Relative's long weapons
list; and an abandonment of the demand for the return
of William Buckley's remains and the transcript of his
interrogation. The fate of Pattis was left for another
day. The Americans seized in September 1986 were
not mentioned.

Secretary Shultz said of the plan at the public hear-
ings: "Our guys. . . they got taken to the clean-
ers."^'''

Nevertheless, North reported to Poindexter that
Cave and Secord had told him that his "donkey act"
with the Iranians had had "quite an effect." He said
that the Engine had confided to Secord that if he had
returned to Iran "without the hope of further help . . .
he would be sent back to the front. "^'*

In recommending that Poindexter approve the plan.
North minimized his concessions. He asserted that the
"[o]nly changes from my proposal is sequential nature
of their plan and lack of mention of Buckley body &
transcript of interrogation." The release of the Da'wa
and the contemplated supply of artillery, he said,
could be managed "w/o any great complications." He
stated that Cave, Director Casey, and the Chief of the
Near East Division all believed that the plan was the
"best and fastest way to get two more out — probably
within the next 14 days." He added, as the Division
Chief had reported, "the situation in Lebanon is get-
ting much worse and we may be getting close to the
end of the line for any further movement."^ '^

North concluded that the agreement was a bargain:
the United States would get two more hostages out

for "nothing more than the two sets of 500 TOWs."
As for the future. North recommended to Poindexter
that "we shd push them to include the Buckley re-
mains and transcript and then get on with it."^**
Poindexter testified, "I discussed those with the Presi-
dent, and he approved the ones that applied to the
U.S. Government.^'''

Poindexter and North had different rationales for
approving the concessions on the Da'was. North testi-
fied that, sooner or later, Kuwait would release the
prisoners "as sure as I'm sitting here"^'* and so "the
United States might as well get something for
them."2'9

Poindexter maintained that since Secord, a private
citizen, was to develop the plan to facilitate the re-
lease of the Da'wa prisoners, his actions would not
compromise U.S. policy against concessions to terror-
ists.^^" Poindexter held to this position even though
Secord represented the United States in the negotia-
tions and North had appointed him, with Poindexter's
approval, to the joint U.S. -Iran commission suggested
by the Relative. 2^' Cave stated that he understood
that the United States approach to the Kuwaitis
would be official but that the United States would not
seek relief for the three Da'wa prisoners who had
been sentenced to death. ^^^

Whatever the rationale, any intervention to free the
Da'wa prisoners conflicted with official U.S. policy,
which was being publicly proclaimed at the very time
the secret negotiations with the Second Channel were
under way. In response to an article in Newsweek
magazine speculating on a trade of Da'wa prisoners
for the American hostages, the White House prepared
a "press guidance" sheet dated October 14, which
reiterated long-standing U.S. policy:^^^

The question is not whether we would seek the
release of 3 or 17 prisoners. We will not negoti-
ate the exchange of innocent Americans for the
release from prison of tried and convicted mur-
derers held in a third country, nor will we pres-
sure other nations to do so. To make such con-
cessions would jeopardize the safety of other
American citizens and would only encourage
more terrorism. ^^^

Arms Transfer Preparations

Shortly after the meeting in Frankfurt, North and
Secord began to implement the nine-point plan. They
advised Nir that the Iranians would deposit money
for the shipment of the 500 TOWs. Secord also told
Nir that the United States would charge significantly
less for these TOWs than it had in the earlier transac-
tions. This caused Nir concern. He warned Secord
that the low price could cause Ghorbanifar or his
financiers to protest and expose the operation. He

258

Chapter 14

recommended charging the old price, so the excess
could be used to pay Ghorbanifar's financiers. ^^^

But the price quoted to the Second Channel was
part of the deal for the hostages and could not be
renegotiated. Instead, Nir and North discussed in-
structing Secord to tell the Relative that the low
price was an "undercharge" that would have to be
increased on the next shipment.^^^

North, Secord, and an Israeli official met in Geneva
on October 22 to iron out the details of the next arms
shipment to Iran. They agreed that the 500 TOWs
sent to Iran would be taken from the 508 sent to
Israel in May and rejected as inadequate by the Israeli
Defense Forces, and that the United States would
supply Israel with another 500 replacement mis-
siles. ^^''

On October 27, the flight crew that Secord had
retained arrived in Israel. The next day, an Israeli
plane delivered the substitute 500 TOWs to Iran.^^*
Under step 4 of the nine-point plan, at least one hos-
tage was to be released 4 days later.

The switch of TOWs, which North approved, was
not without risk. The Relative had already com-
plained to North that the TOWs the United States
had sent earlier had misfired in battle. Secord said in
his testimony that he had heard the Iranians complain
that the TOWs had gone "ballistic. "^^s

Secord testified that he did not participate in the
decision to switch the TOWs.

Q; Do you think that was consistent with trying
to build the moderate power base for the Iranians
if you are sending them old weapons after . . .
they've complained before about the quality of
weapons?

A: It may not have been, but that was the deci-
sion that was taken by the Government.

Q: Well, did the Government make the decision,
our Government make the decision to allow the
Israelis to make the switch?

A: Oh, yes.

Q: Did you participate in that decision?

A: Not at all.230

Arming the Guards

As the Americans knew, both the Relative and the
Engine were members of the Iranian Revolutionary
Guards Corps. The Revolutionary Guard is the mili-
tary arm of the most radical elements in Iran. As
Cave explained, "they were the executive arm of the
revolution. "23' The Revolutionary Guard was com-
peting with and trying to replace the regular Iranian
Army. 232

Early in the Iran initiative, the Americans were on
notice that the weapons sent to Iran might go to the

Revolutionary Guards. Ghorbanifar had, in fact, con-
tended that the first shipment of TOWs in August of
1985 had been seized by the Guards when it arrived
at Tehran.233

According to Cave, the Relative told the Ameri-
cans that the February shipment of TOWs had gone
to the Revolutionary Guards. ^st In November, the
Engine shared with North his hope to build an air
wing for the Guard.^35

Although the arms were sent to the Revolutionary
Guard, the January Finding had a different purpose:
to "facilitat[e] efforts by third parties and third coun-
tries to establish contact with moderate elements
within and outside of the Government of Iran ..."
(emphasis supplied). The goal approved by the Presi-
dent was to supply arms to the moderate elements to
assist them "in their effort to achieve a more pro-
United States government in Iran by demonstrating
their ability to obtain requisite resources to defend
their country against Iraq and intervention by the
Soviet Union."

To the best of the Committees' information, the
President was never told that the United States was
arming the Revolutionary Guard. Cave stated that he
recalled no discussion of whether arming the Guard
was consistent with the Finding.236 in his last inter-
view with the Committees, Cave still characterized
the Second Channel as "middle roaders."^^''

Mainz Meeting

North, Secord, Hakim, Cave, the Relative, and the
Engine met in Mainz, Germany, south of Frankfurt,
on October 29, 1986, to discuss the promised release
of one or two hostages and the implementation of the
rest of the nine points.

The Mainz discussions began with ominous news.
The Relative reported that dissension in Iran over the
initiative had prompted students associated with a po-
litical faction to publish "five million copies" of pam-
phlets describing the McFarlane visit to Iran.238
Moreover, although the Hizballah was "basically
under the control of the Iranian Government," a fac-
tion of Hizballah radicals had published an account of
the negotiations between the United States and Iran
for distribution in Lebanon. ^39 These events almost
prevented the Engine and Relative from coming to
the meeting. 24°

The information in the leaflets and the Hizballah
publication had not reached the United States. Secord
later in the meeting observed that, "[I]f it was blown,
it was only blown inside. "2*'

The Relative then insisted that North tell him who
in the U.S. Government supported the Iran initiative.
North said the President, the Vice President, Poin-
dexter, Casey, and Regan were in favor, and Secretar-
ies Shultz and Weinberger opposed. "No one else

259

Chapter 14

counts," and Congress would not be told "until we
get the hostages out."^''^

North reaffirmed the nine-point plan, saying that he
wanted to be able to "assure his boss that the plan he
approved is indeed being carried out."^*^ North then
provided the Iranians with a report on steps the
United States had purportedly taken since the meeting
in Frankfurt to implement the nine-point plan and to
otherwise assist Iran. The Committees could not de-
termine whether North's claims were factual.

North told the Iranians that the United States had
persuaded another Western government to terminate
arms shipments to Iraq. The United States also alleg-
edly had private discussions with certain Arab gov-
ernments. When the Engine stated that an Arab gov-
ernment had agreed to put pressure on Iraq, North
said "That's us doing that."^'*'* The Committees have
no evidence that North's statement of U.S. pressure
was true. North testified, though not with reference
to this, that "I lied every time I met the Iranians.''^*^
Hostages: North expressed bewilderment that the
Iranians did not simply "exercis[e] every possible
amount of leverage they've got to get those people
out." He found this particularly confounding because
". . . we agree that as soon as they're out, we can do
all kinds of good things." North included on the list
of "good things," foreign military sales contracts and
the "formal relationship that McFarlane had held out
in Teheran. "^^® "The big problem I've got," North
said, "is the whole damn appearance of bartering over
. . . bodies."^'"

In discussing the plan for the release of the hos-
tages, North divulged to the Iranians classified materi-
al of particular sensitivity. ^''^

Arms. Intelligence. Assistance: The prospect of
American military assistance to Iran if more hostages
were released dominated the Mainz meetings. The
Relative informed the Americans that Rafsanjani had
taken a personal interest in restoring inoperable Phoe-
nix missiles.'''^ The Relative held out the hostages as
bait: "I'll tell you what I'll do. You send that techni-
cian to help us with the Phoenixes, I will personally
get the third guy out, and I could tell you where the
rest of the guys are. I will learn where they are."^^°
The Phoenix was a complicated missile that re-
quired several technicians to repair.^^' The Ameri-
cans expressed concern that if the United States sent
technicians, their presence might be discovered by
America's allies. North explained, "If there is a visible
effort made by the United States Government when
there's a long list of hostages being held in Lebanon,
this President is going to get stoned by" U.S. allies.
To thi:>, Secord added: "[A]nd by his own
people. '-■°'^

Secoid told the Iranians that he had located the
man "who ran the HAWK system in Iran for me,"^^^
and could provide them with technical assistance. But
the hostages were the obstacle. Secord said ". . . [if]
after Sunday we will still have at least one hostage

that we score or count against Iran — at least one. I
think its highly unlikely that we would be allowed to
send technicians into Iran, to Isfahan. "^^^ On the
other hand, "if he [an Iranian leader] just goes out
tomorrow or the next day and grabs those three guys
out of Lebanon, we'll go back in and rebuild his
goddamn air force. I built it once, I'll go back in and
build it again. That was my baby; I built that air
force — four and half years on it."^^^

Secord estimated that, with his help, the Iranians
would find in their own depots "a billion dollars
worth of stuff they don't know they've got — in two
weeks. "^^^

North added that if the Iranians were to get the
hostages out, the United States would send them "a
million" TOWs. In fact, he said, the United States
would "open up an FMS [Foreign Military Sales]
account and you'd get a better price on them."^^^

The Relative added a request for 22 Chinook heh-
copters, then under embargo,^ ^^ reconnaissance cam-
eras for the RF-4,2S9 and the return of $20 million
which the Relative said had been adjudicated as be-
longing to Iran but which the F.B.I, continued to
hold.2 60

The Da'wa: North emphasized to the Iranians that
he had "already started" on the Da'wa plan. He
claimed that he had "already met with the Kuwaiti
Foreign Minister, secretly. In my spare time between
blowing up Nicaragua."^®' (North, in an aside to the
American participants, stated that he had spent 7 days
putting together a plan on the Da'wa.)^^^ However,
when asked about the particulars of North's seven
days of effort, Cave said he never heard about it.^^s

The Interlocutors: Ghorbanifar was not the only Ira-
nian intermediary demanding money. The Relative
told Secord and Cave that he had received "ten calls
from [the Second contact] asking where his money
was."*"* Secord responded that the financial straits of
the Second Contact were "our responsibility; we'll
take care of it."**'^ The discussion then turned to
Albert Hakim. The Relative complained that Hakim
was "trying to push this [the whole relationship] too
fast."^®" Secord explained that "we have placed
Albert [Hakim] under pressure on the hostages." He
later returned to Hakim's defense by saying:

Now, Albert told me at the beginning— he told
all of us— he did not want to be involved in these
political discussions. He said, 'I'm a businessman,
I don't want to be involved in political discus-
sions." Because of his language capability and be-
cause of his association with me — Sam [Cave]
can't be everywhere all the time — we have to use
Albert. He has not wanted to be in this role. And
he's not comfortable in this role.*®'

Secord promised that "[a]s soon as the President tells
us to move ahead, I'm sure that Sam and I can get the
right people involved in this."*®*

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Chapter 14

Secord's description of Hakim as a businessman and
a reluctant participant in the Iran initiative contrasted
with other explanations of Hakim's role. At the Wash-
ington meeting, North had described Hakim as a
"consultant to our government on Iranian affairs from
time to time."^^^ In Mainz, just a short time before
Secord made his remarks, North told the Relative
that Hakim was a "consultant" who worked for
North "in the President's office," that he held this
position for 4 or 5 years and that he handled North's
Farsi translations.^'"'

Joint Commission: As the United States shifted from
the First Channel to the Second, there were strong
indications that, notwithstanding the change, the
United States was dealing with the same political con-
sortium in Iran.

This was confirmed at Mainz, when the Relative
explained the composition of the Iranian factions sup-
porting the initiative. The Relative said, "[w]hen [the
First Channel] raised the issue of establishing relations
with the United States he [Rafsanjani, to whom the
Second Channel reported] was in favor of it, but for
his own politics he decided to get all the groups
involved and give them a role to play."^''^ The Rela-
tive observed that this politically astute maneuver by
the Iranian official meant that if the initiative "would
be a failure and all parties are involved so there
would not be an internal war."^'^

The Relative then announced the Iranian member-
ship on the "joint commission." The appointees were
the Engine, a participant in meetings held under the
auspices of both channels; the Adviser, who negotiat-
ed with McFarlane in Tehran; a member of the Irani-
an Parliament, the Majlis; and the Second Iranian,^'^
the primary Iranian official in the First Channel and
the man who the Relative had said was responsible
for Reed's kidnapping. ^^■^ The Americans did not
object even though the composition of the Commis-
sion, including the Second Iranian, "really blew our
minds."^'* The Commission membership demonstrat-
ed to the Americans the true breadth of the political
union with which they had been dealing all along.

Saddam Hussein: The removal of Iraqi President
Hussein from power remained on the Iranian list.
Secord said that "we" would talk to another country
in the region. ^''^ He added, "It's going to take a lot
of talk, alot of talk."2"

The Release of Jacobsen

When the negotiators in Mainz disbanded, North re-
ported to Poindexter through Lt. Col. Robert Earl.
Earl advised Poindexter that the Relative "assures us
we will get 2 of 3 US hostages held by Hizballah in
next few days — probably Fri or Sat but NLT [not
later than] Sunday. "^'^ North proposed that he and
Secord go to Lebanon to coordinate the release of the
hostages and to brief the American Ambassador on

both the third hostage and the "remaining three . . .
when we get info from Rafsanjani on loca-
tions . . . ." North also wanted to arrange to pick up
a Soviet tank that Iran had promised. ^^'

So that the President would get credit for the re-
lease. North urged that the President announce the
hostages' release "after the AMCITS are in USG
hands" but "before CNN knows it has happened."
North hoped that under this arrangement, President
Reagan would be "seen to have influenced the
action . . . ."^so

North voiced the same thought to Poindexter via
Earl in a PROF note: "This is the damnedest oper-
ation I have ever seen. Pis let me go on to other
things. Wd very much like to give RR two hostages
that he can take credit for and stop worrying about
these other things."^*'

Secord reported to North that Hakim had spoken
to the Engine and that the Iranians were caucusing on
a statement to be made by Speaker Rafsanjani. The
initiative was in doubt, but the Engine gave it an "80
percent chance." At the same time, the Engine report-
ed that a second hostage would soon be released and
asked for another "500 TOWs ASAP." Secord added
that he did not know whether the second hostage and
the 500 TOWs were linked. ^s^

On Sunday, November 2, two days before the mid-
term elections, David Jacobsen was released.

Exposure

The next day, the initiative was exposed. The source
was neither Ghorbanifar nor his financiers, who had
made earlier threats to do so, but the Lebanese maga-
zine, Al-Shiraa. It had picked up the story that had
been circulating in the Hizballah broadsides. On No-
vember 4, Rafsanjani addressed the Iranian Parliament
and acknowledged that an American delegation had
visited Tehran. After the speech, the Relative con-
veyed to North that the Iranians still wished to con-
tinue the initiative.

The Americans also wished to continue. Howard
Teicher of the NSC staff wrote to Poindexter that the
revelation of the initiative "coming on the heels of
high-level Iranian visits to Damascus, are the clearest
possible signals we could receive that the succession
struggle is underway and United States-Iranian rela-
tions are likely to play an important role in the strug-
gle." He advised that ". . . we must not let this
opportunity to assess the consequences in Iran of
these revelations slip through our fingers." He then
"strongly urge[d] [Poindexter] to discuss our options
with Shultz and Casey. At a minimum, we need to
determine how best, other than parts, etc., to signal
the Iranians in a productive manner. "^*^

North continued to seek the release of another hos-
tage in return for concessions on the Da'wa. North's
notebooks show entries about his desire to resolve

261

Chapter 14

quickly the "Kuwaiti United States Da'wa problems
and the hostages."^*''

North's notebooks reflect his belief that the goal of
securing the release of the hostages justified the initia-
tive, and that the public would approve once the facts
were out. Noting this, he wrote his conclusion and
included a notable misstep: "Ultimately on side of
angles [sic]."^^^

Taking Stock in Geneva

On November 8, 1986, Cave, North, Secord, and
Hakim met with the Engine in Geneva.^®^

By now, each side had its own acute problems. The
Engine worried that Ghorbanifar, whom the Iranians
now suspected of being an Israeli agent, might cause
trouble. He asked Cave's advice on how to "appease"
him.^^' North, on the other hand, stated that the
burgeoning publicity surrounding the initiative made
it all the more imperative that the hostages be re-
leased. North assured the Iranians he was "here at the
order of the President and we still have the same
objectives as explained in Washington and Frank-
furt."^^^ The Engine made it clear that the freeing of
the Da'wa prisoners was a prerequisite to the release
of the "other two hostages." Once the Da'wa prison-
ers were released, there would be "no problem" with
the two hostages.^*®

The Americans responded that "we had done all
that was humanly possible by talking dsirectly (sic) to
the Kuwaitis . . ."29o -phe Americans concluded by
strongly recommending that the Iranians send a dele-
gation to Kuwait with the assurance that it would be
"warmly received. "^^^

Release of the hostages had, from the beginning,
been linked to arms sales. Now it was officially linked
to the Da'wa as well,^^^ even though the Iranians
had receded from their demand that all the prisoners
be released. North wrote in his notebooks that the
Engine said that if "some" of the Da'wa prisoners
were released, "then something may be possible. "^^^

On November 9, North and Secord met with Nir.
They told Nir that the Lake Resources account had
been closed because some of the Iranian funds had
become "mixed" with funds for Nicaragua. North's
notes of this meeting show that Nir told North and
Secord that Ghorbanifar was asserting that the United
States was spending Iranian money in Nicaragua.^*''

When North returned from Geneva, he briefly
acted, at Hakim's suggestion, as a ghostwriter for
Rafsanjani. The Iranians were contemplating making
a public statement in the light of the exposure of the
initiative in Iran. On November 11, Hakim asked
North to "create something for Rafsanjani to say."^"^
North drafted a statement that he sent Hakim by KL-
43 computer to be transmitted to the Engine. North
added instructions that the statement be issued "from
Iran." He said that it would "help with the Kuwaiti
situation on which we are now working. "^'^

In North's proposed statement, Iran proclaimed
"the enduring reality of its Islamic Revolution," its
interest in peace, and "His Holiness^^' the Imam['s]
. . . gracious[ ] command[ ] that acts of terrorism are
not acceptable to advance the aims of the Islamic
Revolution." North asked that the Engine "carry this
message for me as a personal favor for the cause we
both believe in . . . ."^ss

The Circle Opens

The Secretary of State testified that he did not re-
ceive confirmation of the arms sales that had been
reported in Al-Shiraa until November 10, when he
attended a meeting in the Oval Office with the Presi-
dent and principals of the NSC. He feared the arms
sales would continue. He saw the Administration's
statement — that the arms embargo would remain in
effect "as long as Iran advocates the use of terror-
ism"— as a license to ship arms to Iran by pretending
that it was no longer supporting terrorism. ^^^

On November 14, a day after the President's tele-
vised speech on the issue. Secretary Shultz, at his
regular weekly meeting with the President, urged him
not to sell any more arms to Iran. The President did
not commit himself Shultz then tried another ap-
proach. The next day, he submitted a proposal to
Chief of Staff Regan permitting the State Department
to take control of U.S. /Iran policy. This would have
given State the authority to block further sales. Regan
said he favored this step, but the President was un-
willing to adopt it.^""

Shultz appeared on "Face the Nation," a televised
news program, on November 16. He acknowledged
that, while he opposed further arms sales to Iran, he
did not have authority to speak for the Administra-
tion. Not until the diversion of money to the Contras
was discovered and Poindexter's resignation was re-
quested did the President agree on November 24 that
the State Department should assume control of the
Iran initiative.^"'

In the meantime. North pursued it. His notebooks
show continued discussions about the Da'wa prisoners
and other aspects of the initiative. One note stated his
intention to seek the support of the American-Israel
Public Affairs Committee (AIPAC) to attempt to
quiet growing concern among Congressional Demo-
crats about the arms sales. ^°^ The Committees have
no information that North did contact AIPAC.

North called Nir on November 23 and informed
him that he had been interviewed by Attorney Gener-
al Meese. North said that Meese had asked him about
the diversion of some of the Iran arms money to
Nicaragua. North then asked Nir to have Israel
accept responsibility for the plan but Nir rejected the
request. North's notes quote Nir as saying: "I cannot
back this story. "^°^

262

Chapter 14

The Finale

In early December, Cave asked Hakim to set up an-
other meeting with a representative of the Second
Channel. Hakim did so and, on December 12, Under
Secretary of State Michael Armacost and Director
Casey met to discuss ground rules for the meeting.
They agreed that the Iranians would be informed that
the channel would, henceforth, be used only for intel-
ligence purposes between the two countries.

In a memorandum to Casey that day, Allen warned
that the Second Channel would effectively shut it
down if limited in this manner. Allen argued that if
was "imperative" to change the ground rules to
permit exchanges "broader than intelligence."^"*

The following day, Casey met alone with Regan
and succeeded in reversing the ground rules. Under
the new decision, the Second Channel could be used
for policy purposes as well as intelligence ex-
changes.^"^ Secretary Shultz learned of this change
only after the fact. He observed: "Nothing ever gets
settled in this town."''"^

The meeting with the Engine took place in Frank-
furt on December 13. Before the meeting Cave told
Charles Dunbar, the State Department representative
and a Farsi speaker, that Hakim would attend only if
his attorney was also present. Cave declined the con-
dition and Hakim left. Dunbar reported to his superi-
ors that, "[i]t is just as well that Hakim is out of the
circle. The last thing we need is another five per-
center involved."'"'

Once the meeting was underway, the Engine told
Cave and Dunbar that, despite the press revelations,
Iran was ready to proceed within the "already estab-
lished framework." He noted that "[m]uch had been
accomplished by North, Secord, and Cave."'"®

He then proceeded to lay out the four issues on
Iran's agenda. The first was the Iran-Iraq war. The
Engine said that Iran had "some ideas" on this topic
but that the "key and non-negotiable demand ... is
that Saddam 'and his organization' must go."'"^

The second issue was the delivery to Iran of all
Iranian-purchased military equipment held by the
United States. The Engine said that senior Depart-
ment of Defense officials had admitted that these
goods belonged to Iran, and the Iranians wanted
them.3>o

Third, the Engine asked for the new weapons that
had been "promised" by the United States. He listed
1500 TOWs and 100 launchers as the items prom-
ised." '

Fourth was the Da'wa prisoners in Kuwait whom
the Engine described as "an important issue for the
Lebanese." As he had in Geneva, the Engine said that
if the Da'wa prisoners were released, the Lebanese
would "be more flexible" on the hostages. He prom-

ised that, in this event, Iran would apply "whatever
limited influence it has.""^ (Cave later told State
Department Official Charles Dunbar that he believed
that Poindexter had met recently with the Foreign
Minister of Kuwait and had urged the release of the
Da'wa prisoners.)

The Engine brought up the nine-point plan, saying
that five or six of the points had been executed. This
was the first that Dunbar or the State Department
had heard of the nine points, and Cave had to confirm
to Dunbar that there was such a plan.'" Cave told
the Committees that the State Department did not act
on his invitation to brief Dunbar, and as a result,
Dunbar was not well prepared for the meeting.'**

When he spoke, Dunbar conveyed the new ground-
rules for the Iranian-American dialogue. He told the
Engine that arms from the United States would no
longer be a part of the initiative, and the Engine, in a
quiet and unemotional voice, responded that that
"would bring us back to zero." He suggested that
Dunbar must be mistaken and that he should return to
Washington for a full briefing."^

When Dunbar told Secretary Shultz of the nine-
point plan, the Secretary was shocked. He insisted on
immediately telling the President about it in
person."®

Poindexter testified that the President had approved
the nine-point plan as it applied to the U.S. Govern-
ment. Poindexter contends that the deal with Secord
and Kuwait was private."'' North told Cave of the
President's approval.'*® Secretary Shultz testified,
however, that when he told the President of the plan,
the President gave no indication that he was familiar
with it, but "reacted like he had been kicked in the
belly.""* Shultz continued:

And I told the President the items on this
agenda, including such things as doing something
about the Dawa prisoners, which made me sick
to my stomach that anybody would talk about
that as something we could consider doing. And
the President was astonished, and I have never
seen him so mad. He is a very genial, pleasant
man and doesn't — very easy going. But his jaws
set and his eyes flashed, and both of us, I think
felt the same way about it, and I think in that
meeting I finally felt that the President under-
stands that something is radically wrong here.'^"

The President's meeting with Secretary Shultz laid
the Iran initiative to rest. The President authorized
Shultz to tell Iran that the United States repudiated
the nine-point plan and unequivocally rejected further
arms sales. Further, Secretary Shultz sent a cable to
Kuwait affirming strong U.S. support for Kuwait's
refusal to yield on the Da'wa prisoners.'^* The Iran
initiative was over.

263

Chapter 14

Chapter 14

1. The Second Channel comprised several persons who,
together, provided an alternate route into the Government
of Iran. No single individual constituted the Second Chan-
nel as the term is used in this report.

2. Israeli Historical Chronology.

3. Cave Memorandum of 6/23/86 telephone conversation
with the Second Iranian, N 2402.

A. Id.

5. North Notebook, 6/23/86, Q 2229.

6. C 200.

7. Handwritten notes of 6/30/86 telephone conversations
with Iranian officials, N 2399.

8. Ex. OLN 48.

9. Israeli Historical Chronology.

10. Id.

11. North Notes, Q 2243. According to the Israeli Chro-
nology, Nir expressed doubts to North as to whether the
Iranians would effect the release.

12. Allen Dep., 6/29/87, at 476.

13. Cave Int., 9/29/86, at 46-47.

14. Ghorbanifar Letter, July 8, 1986, to the Second Irani-
an, N 2395.

15. Id.

16. Israeh Historical Chronology.

17. Id

18. Ex. JMP 56.

19. Poindexter PROF, 7/26/86, to McFarlane, N 12577.

20. Id

21. Ex. JMP 56.

22. Id

23. Id

24. Israeli Historical Chronology.

25. Ex. JMP 56.

26. Memorandum of OSG/TIWG Meeting, 8/5/86, N
3903.

27. Crowe Dep., 6/18/87, at 4.

28. Id

29. Id at 5.

30. Weinberger Test., 7/31/87, at 132.

31. Crowe Dep., 6/18/87, at 30-31.

32. Id at 7.

33. Crowe Dep., 6/18/87, at 8.

34. Weinberger Test., 7/31/87, at 132-33.

35. Crowe Int., 4/10/87, at 4-5.

36. Craig Fuller notes, 8/6/86, N 2560-62.

37. Id

38. Id

39. Id at N 2561.

40. Id at N 2562.

41. Id

42. North Notes, Q 2314.

43. Id

44. N 44488.

45. North Notes, Q 2339, Q 2340.

46. Israeli Historical Chronology.

47. North Notes, Q 2339.

48. Cave noted on August 15 a conversation with Nir in
which Nir raised terms similar to those discussed in
London. Cave's notes added, however, that 309 Lebanese
Shi'ites were also to be released, C 9516.

49. North PROF, 12/4/85, to Poindexter, N 9910.

50. Israeli Historical Chronology.

51. Allen Dep., 9/23/87, at 7-8; Cave Dep., 4/17/87, at
106-07.

52. Earl Dep., 5/2/87, at 33-38.

53. Cave Dep., 4/17/87, at 244.

54. Allen Dep., 9/23/87, at 7-8.

55. North Notes, Q 2349-51.

56. Allen Dep., 6/29/87, at 533.

57. Secord Test,, Hearings. 100-1, 5/6/87, at 93.

58. PROF Note from North to McFarlane, 2/17/86
8:54:13, N 12119-20.

59. Tower Int. of C/NE, 1/5/87, at 19.

60. Tower Int. of Cave, 1/5/87, at 5.

61. PROF Note from North to McFarlane, 2/27/86
20:22:22, N 12121.

62. North Test., 7/10/87, at 125-126.

63. Hakim Test., 6/4/87, at 2.

64. Id at 3.

65. Hakim Test., Hearings, 100-5. 6/3/87, at 195.

66. Hakim Test., Hearings. 100-5, 6/4/87, at 285.

67. Hakim Test., 6/4/87, at 122-23; Nightline Interview,
7/9/87.

68. CIA Cables, C 9926-27; C 9928; C 9929.

69. The First Contact was not "vetted" by the CIA in the
usual manner. Instead of being subjected to a CIA-con-
trolled polygraph, the First Contact was tested by a private
polygraph company. Wilt Int., 6/22/87, at 2-5. The examin-
er stated that the test, which was arranged by Hakim and
performed on July 14, was inadequate because the informa-
tion which Hakim provided for the test was insufficiently
precise to establish the accuracy of the test. Id. Cave stated
that one reason the CIA did not itself perform the poly-
graph was because the Iran initiative was "an NSC oper-
ation." Cave Int., 9/29/87, at 35.

70. Memo of CIA meeting with the First Contact, 7/10/
86, N 2396.

71. Memo of CIA meeting with First Contact, 7/1 1/86, N
2398.

72. Hakim Test., 6/4/87, at 90-91. North said that he, too,
knew "well the meaning of the term baksheesh . . . and that
it is a long established tradition in that part of the world."
North understood that, to open a new channel. Hakim
would have to satisfy the demands for baksheesh. "Mr.
Hakim made it clear that there was a necessity to compen-
sate those engaged in the activity." North, 7/10/87, at 125-
26.

73. Hakim Dep., 5/31/87, at 34-35.

74. Hakim Dep., 5/31/87, at 32-35.

75. North Notes, Q 2307.

76. North Notes, Q 2345.

77. Secure telephone message to Secord, 8/26/86, N
2801-02.

78. Id at N 2802.

79. Memorandum from North to Poindexter: Subj: "Next
Steps with Iran," 9/2/86, J 5968-70.

80. Id at J 5969.

81. W. at J 5970.

82. PROF Note from North to McFarlane, 9/3/86
20:12:50, N 12156.

83. North Notes, Q 2388.

84. Id.

85. North Notes, Q 2395.

264

Chapter 14

86. Id.

87. Memorandum from North to Poindexter: Subj: Sup-
plement to Next Steps with Iran, N 2809.

88. Tower B-152.

89. Id.

90. CIA Memo to Casey from Allen on American Hos-
tages, 9/10/86, C9517.

91. The reference to "Paul" is unclear. North's code lists
show that at one time David Kimche was referred to as
"Paul." Later North himself held this code name.

92. C9517.

93. Id.. Allen Dep., 6/29/87, at 567.

94. C9517.

95. Id

96. Tower Int. of C/NE, 1/5/87, at 20.

97. The magnitude of the risk later became clear when
the Relative told Cave that the Iranians knew throughout
the Tehran meeting that Nir was an Israeli. Cave Int., 9/29/
87, at 17.

98. Secord Test., Hearings. 100-1, 5/6/87, at 99.

99. Secord Test., Hearings. 100-1, 5/6/87, at 105.

100. Hakim Test., Hearings, 100-5, at 225.

101. Hakim Test., 6/4/87, at 164, 166-67.

102. North Notes, Q 2364.

103. PROF Note from North to McFarlane, 9/3/86
20:12:50, N 12156.

104. Israeli Historical Chronology. Memorandum to Poin-
dexter from North on Meeting with Nir, 9/9/86, N 44515-
16.

105. Id

106. North Notes, Q 2413.

107. Secure telephone message from Secord, N 2799-800.

108. Id

109. Id

1 10. Memorandum for the Record by Allen: Subj: "TOW
sales to Iran," J 5957.

HI. Id

112. North Notes, Q 2558.

113. North Notes, Q 2397, Q 2404, Q 2407-08.

114. PROF Note from North to Poindexter, 9/17/86
07:56:26, N 18046.

115. PROF Note from North to Poindexter, 9/17/86
12:59:11, J 6094.

116. Secure telephone message to North from Secord,
9/17/86, N 2923.

117. Id

118. Hakim Test., 6/4/87, at 34.

119. Memoranda of conversations of 9/19/86 meetings, N
2842-59 at N 2853-57.

120. Id at N 2853.

121. Id at N 2857.

122. Id. at N 2856.

123. Id. at N 2849.

124. Id at N 2848.

125. Id at N 2849.

126. Id at N 2849.

127. Id at N 2850.

128. Memorandum to Poindexter from Allen on hostages,
9/8/86, N 2811.

129. Cave Int., 9/29/87, at 23.

130. Memoranda of conversations of 9/19/86 meetings, at
N 2856.

131. Id

132. Id at N 2858.

133. Id at N 2848.

134. Id at N 2858.

135. Id at N 2843.

136. Id at N 2852.

137. Id

138. Notes of 9/19/86 meeting, N 2861.

139. Memoranda of conversations of 9/19/86, at N 2852.
Although the United States had long before concluded that
Buckley was dead and, in earlier meetings with Ghorbani-
far, had sought the return of his body, the Relative added a
new dimension. He stated that Buckley had been subjected
to a "debriefing" by his captors and that a transcript of the
interrogation was held by the Iranians. It allegedly ran to
over 400 pages and contained 200 to 300 "sensitive names."
Other than trying to assess the damage such a transcript
might cause, the CIA never systematically attempted to
determine whether these assertions were true. Cave Int., 9/
29/87, at 76-78. Neither the Committees nor the CIA have
any evidence that a transcript of the debriefing exists.

140. Cave Int., 9/29/87, at 73-74.

141. Id at 75-76.

142. N 2862.

143. N 2850-61.

144. Hakim Test., 6/4/87, at 35-36.

145. Hakim Test., 6/4/87, at 8.

146. Id at 8-9.

147. PROF Note, 9/22/86 8:37:02, N 12608.

148. PROF Note from North to Poindexter, 9/22/86
9:22:57, N 18059-60.

149. Memorandum to Poindexter from North: Subj:
"Next Steps With Iran," 10/2/86, N 2816-18.

150. Id at N 2817.

151. Id

152. "And the Scripture, foreseeing that God would justi-
fy the Gentiles by faith, preached the gospel beforehand to
Abraham, saying, 'All the nations shall be blessed in you.' "
N 2825.

153. Memorandum to Poindexter from North: Subj:
"Next Steps with Iran," 10/2/86, N 2816-18.

154. W. at N 2817.

155. Id

156. Id

157. Id at N 2817.

158. Israeli Historical Chronology.

159. PROF Note from Poindexter to McFarlane, 10/3/86
20:35:35, N 7503.

160. PROF Note, 10/4/86, N 12620.

161. N 2827.

162. North, 7/9/87, at 121.

163. N2817.

164. Hakim Test., 6/4/87, at 48.

165. Hakim Dep., 5/31/87, at 87.

166. Transcript of Frankfurt meeting, C 312-24 at C 322.

167. Id at C 358-71 at 364.

168. C 368.

169. Memorandum of 9/19-9/20 conversation with the
Relative, N 286063 at N 2862.

170. Transcript of Frankfurt meeting, C 372-84 at C 380.

171. Id at C 383.

172. Id at C 384.

173. Kerr Int.. 9/23/87, at 3-4.

174. Transcript of Frankfurt Meeting, C 375-76.

175. Id at C 376.

176. Id

265

Chapter 14

177. Poindexter Test., 7/21/87, at 145.

178. Tower at III-18.

179. Transcript of Frankfurt Meeting, C 371.

180. Id.

181. W. at 382.

182. Transcript of Frankfurt Meeting, C 400-10 at C 406.

183. The 17 Da'wa prisoners were convicted by the Ku-
waiti government of conducting a series of large-scale ter-
rorist attacks in Kuwait on December 12, 1983. Bombing
attacks were carried out against the U.S. and French Em-
bassies, a U.S. housing compound, an airline terminal, an oil
facility, and a Kuwaiti government office. Six people were
killed and 80 wounded. Congressional Research Service
Issue Brief on Terrorism, 9/27/87, at 11; "America's For-
gotten Hostages," Newsweek. 10/20/86, at 39, 47.

184. Transcript of Frankfurt Meeting, C 378.

185. Id.

186. North Notes, Q 2486.

187. Transcript of Frankfurt Meeting, C 378.

188. Cave Int., 9/29/87, at 60, 137-41.

189. Transcript of Frankfurt Meeting, C 375.

190. Id at C 408.

191. Although the copy provided by Hakim omitted the
last line of the first entry under point 7, Cave identified the
list referred to therein as the arms list that the Relative
brought to Washington, DC. Cave Int., 9/29/87, at 142-43.

192. Ex. AH-22.

193. Transcript of Frankfurt meeting, C 10423-33 at C
10425.

194. Id at C 409-10, C 10423-25.

195. Id at C 10426.

196. Id at C 10427.

197. Id at C 10429.

198. Id at C 10431-32.

199. Hakim Test., 6/4/87, at 166.

200. Id., at 164, 166-67.

201. Id, at 174-75.

202. Id, at 167.

203. Id., 6/5/87, at 67. Poindexter testified that he did not
think it was "fair" to describe the plan as the "Hakim
Accords." Poindexter Test., 7/21/87, at 144.

204. Hakim provided a translation of his own Farsi copy
of the nine-point plan to the Committees. It differs in a
couple of respects from the translation of the same Farsi
document by the Library of Congress. One point at which
the two documents differ is in point 4. The Library of
Congress translation states that the "one and one-half hos-
tages are to be released three or four days after the delivery
of the 500 TOWs to Iran. This, however, appears inconsist-
ent with the requirement in both the Hakim and Library of
Congress version of point 3 which provides that Hakim
must produce a plan for the release of all of the 17 Da'wa
prisoners before the hostages are to be released.

205. Ex. AH-22.

206. Hakim Dep., 5/31/87, at 202; Id, 5/23/87, at 83;
Hakim Test., 6/4/87, at 159-63; Id., 6/5/87, at 119-20.

207. Hakim Test., 6/4/87, at 49.

208. Id. at 49.

209. C 9341.

210. PROF Note from North to Poindexter, 10/10/86
21:55:31, N 12176-77. The changes in the Hakim plan may
have been negotiated by Secord upon his return to Frank-
furt. Cave Int., 9/29/87, at 149-50.

211. N 12176.

212. Shultz Test., 7/23/87, at 160.

213. Id at 184.

214. PROF Note from North to Poindexter, 10/10/86
21:55:31, N 18741-42.

215. W.

216. W.

217. Poindexter Test., 7/21/87, at 144.

218. North Test., 7/13/87, at 247.

219. Id. The Da'wa prisoners were sentenced to varying
penalties ranging from imprisonment for a term of years, to
death. Several prison terms for one group of prisoners will
expire sometime this year. Cave Int., 9/29/87, at 152. The
release of these prisoners, therefore, would follow Kuwaiti
due process norms.

220. Poindexter Test.. 7/15/87, at 174.

221. Memorandum of Washington meetings with the Rel-
ative, N 2862.

222. Cave Int., 9/29/87, at 137-39.

223. Press Guidance regarding Newsweek article, "Amer-
ica's Forgotten Hostages" N2832-35.

224. Id at N 2833.

225. North Notes, Q 2558-59.

226. Id at Q 2559.

227. Israeli Historical Chronology.

228. Id

229. Secord Test., 5/8/87, at 311.

230. Id, at 121-22.

231. Cave Int., 9/29/87, at 64.

232. Cave likened the struggle between the Iranian Army
and the Revolutionary Guards to replacement of the regular
army by the Red Army during the Russian Revolution. Id.
at 63, 64.

233. Ledeen Dep., 6/19/87, at 68-69.

234. Cave Int., 9/29/87, at 65-66.

235. North Notes, Q 2593.

236. Cave Int., 9/29/87, at 69-70.

237. Id at 67.

238. The distribution of the leaflets was attributed to
Mehdi Hashemi, a follower of Montazeri. An Associated
Press report, carried on September 29, 1987 in the Washing-
ton Times, stated that Hashemi had been executed after
having been convicted of numerous crimes.

239. Transcript of Mainz meeting, C 255-72 at C 256.

240. Id

241. Transcript of Mainz meeting, C 273-311 at 305.

242. Id at 289.

243. Id at 258.

244. Id at 284.

245. North Test., 7/9/87, at 121.

246. Transcript of Mainz meeting, C 10451-71 at C 10458.

247. Id

248. C 322, 323.

249. C 10455. The Iranians had been seeking Phoenix
missiles through the Iran initiative since September 1985.
Allen Dep., 4/21/87, at 67.

250. C 10439.

251. C 10456.

252. C 10462.

253. C 10468.

254. C 10437.

255. C 10465.

256. C 10466

257. C 10442.

258. C 10466.

266

Chapter 14

259. C 10454.

260. Allen Memorandum on Frankfurt meeting, 11/3/86,
C 9519-23 at C 9522.

261. C 10462.

262. C 10463.

263. Cave Int., 9/29/87, at 163.

264. C 317.

265. C 317.

266. C 318.

267. C 320.

268. C 320.

269. N 2850.

270. C 292.

271. C 294. Cave agreed with this assessment when he
stated that by the time of the February meeting in Frank-
furt, the Iranian factions had agreed to act jointly in the
overture to the Americans. Cave Int., 9/29/87, 169-70.

272. C 294.

273. N 9322-23. This memorandum bears Charles Allen's
name but both Cave and Allen agree that Cave wrote it.
Allen Int., 9/23/87, at 30-31; Cave Int., 9/29/87. at 166.

274. Cave explained that the Engine represented one
group while the Second Iranian represented another. A
third, Rafsanjani's group, was represented on the Commis-
sion by the Majlis member and the Adviser. Cave Int., 9/
29/87, at 169-70.

275. Id. at 67.

276. C 10445.

277. Id.

278. PROF Note from Earl to Poindexter, 10/29/86
22:23:43 N 18446.

279. Id

280. Id

281. PROF Note, 10/29/86; Tower at 172.

282. Secure telephone message from Secord to North, N
8084.

283. PROF Note, 11/4/86, 09:35:58, N 17560.

284. North Notes, Q 2609.

285. North Notes, Q 2596.

286. C 9480.

287. Cave notes on Geneva meeting, C 9526-29 at C 9527.

288. Id

289. Id at C 9528.

290. Id. North's notebooks for this period refer to a "6
step Kuwaiti plan." Q 2603. Cave did not know what the "6
step plan" comprised. Cave Int., 9/29/87, at 171-72.

291. C9528.

292. The Engine claimed that the hostages were in the
hands of the Jihad-i-Islami (or Islamic Jihad Organization or
"IJO"), who were more responsive to Syria than to Iran.
North Notebooks for November 8-10 period, Q 2605-06; C
9528.

293. North Notes, Q 2607.

294. North Notes, Q 2610.

295. North Notes, Q 2618.

296. Secure telephone message from North to Hakim, N
8090.

297. Cave said that Iranians do not apply the term "His
Holiness" to the Imam. Cave Int., 9/29/87, at 83-84.

298. N 8090.

299. Shultz Test., 7/23/87, at 96-97.

300. Shultz Test., 7/23/87, at 105-07, 109.

301. Shultz Test., 7/23/87, at 109, 116-17.

302. North Notes, Q 2619.

303. North Notes, Q 2650; Israeli Historical Chronology.
According to the Israeli Chronology, Nir was astonished by
North's request and replied that Israel would not lie but
would state only the truth, that Israel never transferred
money to the Contras.

304. Memorandum from Allen to Casey on Terms of
Reference for Cave/Dunbar discussions, 12/12/86, C 9532.

305. Shultz Test., 7/23/87, at 119.

306. Shultz Test., 7/23/87, at 122.

307. Memorandum of phone call from Dunbar in Frank-
furt regarding "Iran Caper," S 3878-80 at S 3878.

308. Id

309. Id

310. Id

311. W.

312. W.

313. Shultz Test., 7/23/87, at 120.

314. Cave Int., 9/29/87, at 180.

315. S 3879-80.

316. Shultz Test., 7/23/87, at 11.

317. Poindexter Test., 7/21/87, at 144.

318. Cave Int., 9/29/87, at 182.

319. Shultz Test., 7/23/87, at 159.

320. Shultz Test., 7/23/87, at 11.

321. Shultz Test., 7/24/87, at 130-31; Ex. GPS-C.

267

Chapter 15
The Diversion

The term "diversion" entered the vocabulary of
American history on November 25, 1986, when the
media, covering Attorney General Edwin Meese's
press conference, reported a "diversion of funds" for
the Contras from the Iran arms sales. The diversion
immediately became the focus of the public's atten-
tion: Whose idea was it? Who approved it? When?
Who knew of it? How much was diverted?

The Committees were able to answer these ques-
tions, but only partly, because of contradictions in the
record, the destruction of evidence, and apparent for-
getfulness by officials.

Lt. Col. Oliver North, Vice Admiral John Poin-
dexter, and Richard Secord all vigorously rejected
the term diversion, because it implies that the arms
sales proceeds were earmarked for the U.S. Govern-
ment, and were misappropriated. To North, Poin-
dexter, and Secord, providing assistance to the Con-
tras was only one of a number of intended uses of
those proceeds. North named several projects that he
was planning to finance from the proceeds.' Indeed,
Poindexler saw the generation of money for the Con-
tras from the arms sales as no more exceptional than
raising money from foreign countries, which the NSC
staff had been doing with the President's approval for
18 months. Thus, for North, Poindexter, and Secord,
the "diversion" was no diversion. But that was one of
the few things upon which they agreed.

Whose Idea?

The generation of profits for covert uses from the sale
of arms was not a novel idea when North first seized
upon it. Sophisticated weapons bring premium prices
in the international grey market for arms, and can
thereby create slush funds for improper covert activi-
ties that could not be financed through appropriated
money.

General John Singlaub had presented such a pro-
posal in a memorandum to North and Director of
Central Intelligence William J. Casey during 1985.
The memorandum, prepared by Singlaub's associate,
Barbara Studley, defined the "problem":

With each passing year. Congress has become
increasingly unpredictable and uncooperative re-
garding the President's desire to support the

cause of the Freedom Fighters despite growing
Soviet oppression. The funds have not been
forthcoming to supply sufficient arms necessary
for the Freedom Fighters to win.^

The "objective" was "to create a conduit for main-
taining a continuous flow of Soviet weapons and tech-
nology, to be used by the United States in support of
Freedom Fighters in Nicaragua, Angola, Cambodia,
Ethiopia, etc."^

The memorandum proposed a three-way trade in
which the United States would provide high technol-
ogy equipment to another country, that country
would deliver from its stockpiles military equipment
of equal value to a third country, and the third coun-
try would export Soviet-compatible arms to a trading
company at the direction of the United States. "The
United States," the memorandum observed, would
then be able to dispense the arms to "Freedom Fight-
ers worldwide, mandating neither the consent or
awareness of the Department of State or Congress."
The memorandum diagrammed the plan (see Figure
15-1)."

North acknowledged receiving this memorandum,
but dismissed its significance.^ * The Singlaub-Studley
plan was not implemented, but the idea of using so-
phisticated U. S. weapons to finance arms for anti-
Communist insurgents was known to those working
to support the Contras before any proceeds from U.S.
sales of arms to Iran were first received.

While Studley was developing her proposal, the
Israelis were acting on a different plan. According to
the Israelis, North proposed in early October 1985
using the excess funds from the TOW missile sales to
support pragmatists in Iran.^ North testified, howev-
er, only that he had reason to suspect that the Israelis
were using excess funds for covert purposes.'

By the end of November 1985, the Enterprise re-
ceived a portion of the arms sales proceeds. At
North's request, the Israeli intermediaries paid the
Lake Resources account $1 million from the proceeds
of its August-September TOW shipments. According

•when Secretary Shultz was shown the Singlaub-Studley plan at
the hearings, he responded that, "[t]his is not in line with what was
agreed to in Philadelphia. This is a piece of junk and ought to be
treated that way." Shultz Test., Hearings. 100-9, 7/23/87, at 192.

269

Chapter 15

Figure 15-1. Exhibit JKS-6: 3 Way Trade

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AFGHANISTAN

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to North and Secord, the money was to cover the
Enterprise's expenses in arranging five shipments of
HAWKs to Iran. But when the dehveries were hahed
after one shipment, the Enterprise held $800,000 in
unexpended funds. North received the Israehs' per-
mission to use the $800,000 for "whatever purpose we
wanted," and he directed Secord to spend the money
for the Contras.^

Thus, by early December, the notion that the Iran
sales could be used as a vehicle for financing the
Contras was firmly planted in North's mind. On De-
cember 6, 1985, North remarked to Israeli Ministry of
Defense officials that he needed money and that he
intended to divert profits from future Iranian transac-
tions to Nicaragua.^ * On December 9, North recom-
mended to Poindexter that the United States take

•One of the Israeli officials took contemporaneous notes of the
meeting, recording North's comment The two other Israeli offi-
cials at the meeting (which dealt mainly with other matters) did not
recall the comment by North. Israeli Historical Chronology.

control of the arms sales from Israel, and use "Secord
as our conduit to control [Iranian intermediary] Ghor-
banifar and the delivery operation." '° This mecha-
nism was adopted in the President's January 17, 1986,
Finding, thereby avoiding the Arms Export Control
Act requirement of Congressional notification for
Israel to continue sales to Iran of the U.S. weapons.
The mechanism allowed the CIA to sell arms to Iran
directly or through a "third party, " although it did not
authorize or even mention the generation of profits.
Nevertheless, by permitting the CIA to sell through a
third party, the Finding created an opportunity for
profits to be generated and placed in the hands of the
third party — an opportunity that would not have ex-
isted if the CIA sold the arms directly. So far as the
record shows, this possibility was never suggested to
the CIA attorneys who drafted the Finding, nor did
Poindexter discuss it with the President in connection
with the President's execution of the January 17 Find-
ing.

270

Chapter 15

In January 1986, the idea that excess money could
be generated by arms sales to Iran surfaced in another
way. The Israelis had been promised replenishment of
the TOWs they shipped in August-September 1985,
but the United States had delayed action on Israel's
request. When National Security Adviser Robert
McFarlane resigned, North found no agreement on
the price Israel was to pay for the replacements.
Some Israelis thought that McFarlane had agreed to
replenish the TOWs for nothing. NSC consultant Mi-
chael Ledeen had quoted a low price," even though
certain U.S. Government officials wanted the full
price for the more expensive, improved TOWs that
Israel wanted. The price for those improved TOWs
exceeded the proceeds remaining from Israel's sale of
older model TOWs to Iran. According to North,
Amiram Nir, the adviser to Israeli Prime Minister
Shimon Peres, proposed in January 1986 that Israel
use some of the profits from selling additional TOWs
to pay for replenishment of the original 504
TOWs. '2 *

When the United States decided in January to sell
the additional TOWs through the Enterprise (not
through Israel), North and Poindexter agreed that
part of the profits would be set aside to pay for the
replacement of Israel's previously shipped TOWs. ' ^
Thus, the plan to divide up the proceeds of the U.S.
arms sales to Iran was in place when the January 17
Finding was signed.

North testified, however, that the proposal to sup-
port the Contras from arms sales proceeds was first
suggested by Ghorbanifar in late January 1986. He
did not recall discussing the idea in December 1985
with Israeli Ministry of Defense officials, although he
said the "subject may well have come up before [late
January], but I don't recall it." ^^ According to
North, during a meeting abroad with Nir and Ghor-
banifar relating to the February 1986 TOW shipment
to Iran, "Ghorbanifar took me into the bathroom and
. . . suggested several incentives to make that Febru-
ary transaction work, and the attractive incentive for
me was . . . that residuals could flow to support the
Nicaraguan resistance." '^

The tape of the meeting shows that the idea of
assisting the Contras was, in fact, discussed, not alone
with North in the bathroom, but with the whole
group present. This fact does not negate earlier con-
sideration by North. Indeed, Ghorbanifar does not
seem to have been referring to using the sales pro-
ceeds, but rather to Iran's assisting U.S. interests in
Central America in return for receiving U.S. military
assistance:

GHORBANIFAR:

(Laughingly)

•According to the Israeli Financial Chronology, it was North,
not Nir. who made this proposal.

And we do everything. We do with the hostages
for free of charge; we do all terrorists free of
charge; Central America for you free of charge;
American business free of charge; [First Iranian
Official] visit; . . . Everything we do.

NORTH:

I would like to see that, that at some point this
idea . . . and maybe, y'know, if there is some
future opportunity for Central America. You
know that there is a lot of Libyan, a lot of
Libyan and Iranian activity with the Nicara-
guans.

Regardless of its origin, North believed that using
the funds from the arms sales for the Contras was a
"neat idea," and he advocated it to Poindexter.'^ He
testified that he sought Poindexter's approval upon
returning from the meeting with Ghorbanifar and Nir,
and that Poindexter pondered the decision for at least
several weeks.''' Poindexter testified, however, that
he approved the diversion idea after thinking about it
for only a few minutes. ' *

Who Else Knew— a Study in
Contradictions

Presidential Knowledge

Although both Poindexter and North testified that
they never told the President about the diversion, the
substance of their testimony diverges from there.

Poindexter testified that he made "a very deliberate
decision not to ask the President" about the diversion
in order to "insulate [the President] from the decision
and provide some future deniability for the President
if it ever leaked out." Although Poindexter asserted
that the President would have approved of the diver-
sion as an "implementation" of his policies, he never-
theless chose to protect the President from knowledge
of the diversion because it was a "politically volatile
issue." '^ Poindexter testified as to the success of his
efforts to provide the President with "future deniabi-
lity" of the diversion. When Poindexter was ques-
tioned about the White House statement (issued the
day after his initial hearing testimony) that the Presi-
dent would not have authorized the diversion, Poin-
dexter responded: "I understand that he [the Presi-
dent] said that, and I would have expected him to say
that. That is the whole idea of deniability." ^°

Poindexter testified that he considered the diversion
so controversial that he understood he would have to
resign if it ever were exposed. 2' Nevertheless, he also
testified that, in approving the diversion, he did not
consult Casey, a political expert who had managed
the 1980 Reagan campaign, and that, only 2 months
after taking office as National Security Adviser, he
made this decision on his own. Poindexter had been

271

Chapter 15

commended in the Navy for keeping his superiors
informed. ^^ He testified that he had never before
withheld information from any of his commanders in
order to give them deniabiUty.^^ Moreover, McFar-
lane, for whom Poindexter had worked for 2 years,
assumed that Poindexter would have informed the
President.^'' Preempting a decision by the President
to provide political deniability — which Poindexter tes-
tified that he did — was totally uncharacteristic for a
naval officer schooled in the chain of command.

Poindexter testified at his deposition that "I told
Colonel North repeatedly not to put anything in writ-
ing on the transfer of funds to the Contras and not to
talk to anybody about it." ^^ * Poindexter could not
recall any memorandum that referred to the diversion,
stating that he was surprised on November 24, 1986,
to learn that a written document showing the diver-
sion had been found. ^^ He claimed that he never saw
the early April diversion memorandum before then,
although North's secretary Fawn Hall recalled that
Poindexter had returned a draft of that memorandum
with changes.^' ** Even when confronted with a
PROF message, dated April 7, 1986, from North to
McFarlane, which referred to the memorandum and
stated that Poindexter had asked North to "lay out
arrangements for our boss," Poindexter maintained
that he never asked North to prepare the docu-
ment.^* *** Consistent with this testimony, Poin-
dexter did not recall North ever telling him in No-
vember 1986 or any other time that all memorandums
referring to the use of the arms sales proceeds to
support the Contras had been destroyed. ^^

In essence, Poindexter's story on Presidential
knowledge of the diversion was that he had con-
structed a situation whereby only he and the Presi-
dent would know whether the President had been
advised of the diversion. '^^ In this regard, Poindexter
testified that he never told North that the President
was not privy to the diversion decision.^'

In contrast. North testified that he always "assumed
that the President was aware of [the diversion] and
had, through my superiors, approved it." ^^ North
estimated that he prepared as many as five or six
memorandums in final form referring to the use of the
arms sales proceeds for the Contras. These memoran-
dums went "up the line" to Poindexter and covered
each actual or proposed arms transaction for which

•In his public testimony — after North's public appearance — Poin-
dexter attempted to retreat from this definitive statement in his
deposition. He testified pubhcly that he did not recall telling North
not to put anything in writing on the diversion. Poindexter Test..
Hearings. 100-8, 7/15/87, at 44.

•*In his post-North public testimony, Poindexter softened this
testimony somewhat by staling that "(i]t appears that it is possible
that I saw one [diversion] memo. . . ." Poindexter Test., Hearings.
100-8, l/\l/il. at 135; 7/20/87 at 282.

***He speculated, however, that North might have prepared
such a memo in response to a request for an outline of the upcom-
ing trip to Tehran in May. Poindexter Test., Hearings. 100-8, 7/15/
87. at 44.

payment would be received. ^^ The use of proceeds
was described in only one paragraph in each memo-
randum. North's memorandums concluded with the
recommendation that Poindexter brief the President
to secure approval for the transfer and provided lines
on which someone could indicate whether the trans-
fer had been "approved" or "disapproved." ^'^ North
further testified that he did not recall any instruction
from Poindexter or anybody else not to write and
send such memorandums, adding that "had I been
given [such an instruction], I would have followed
it." ^^ Instead, North created records such as the sur-
viving copies of the April diversion memorandum
that called for Presidential briefings and approval.*

North was unequivocal that the April 7 PROF mes-
sage referred to the diversion memorandum prepared
by him in early April 1986 and uncovered by the
Justice Department in November. ^^ North also testi-
fied that Poindexter had communicated approval
either orally or in writing on at least three of the
diversion memorandums, and that he believed that
he "had received authority from the President." ^'
Finally in this regard, he testified that early on No-
vember 21, 1986, he assured Poindexter that all docu-
ments referring to the use of proceeds for the Contras
had been destroyed.^*

North assumed without asking Poindexter explicitly
that the President knew and approved of the diver-
sion. North had worked under three National Securi-
ty Advisers. Based on that experience, he concluded
that a decision of this magnitude would be taken only
with Presidential approval^* — a view that McFarlane
shared. •'0

North told Secord that he had conversations with
the President about the irony that the Ayatollah's
money was being used to support the Contras. Secord
testified that North did not convey these conversa-
tions "in a way that I took it as a joke."'" North
testified that he had no such conversation with the
President, but told Secord otherwise in an effort to
lift Secord's spirits.''^ There is no evidence that North
did tell the President about the diversion; according
to White House records, he never met alone with the
President.

* In his first deposition before the Committees, James R. Rad-
zimski, the NSC's System IV Control Officer in 1985 and through
October 1986, recalled two such North memorandums to Poin-
dexter discussing the diversion — one in late 1985, the other in mid-
April 1986. Radzimski recalled also that the April memorandum
attached a proposed memorandum from Poindexter to the Presi-
dent. Radzimski Dep., 4/29/87, at 54-57, 68-74, The Committees
directed an exhaustive search of White House files and computer
entries, in which the FBI participated, but no evidence was found
to corroborate Radzimski's testimony. Further, Radzimski's own
document log did not support his recollection, Radzimski Dep.. 8/
1 1/87, Ex. -V Accordingly, ihe Committees recalled Radzimski for
further deposition, where he testified that there was a "distinct
possibility" his recollection "is not completely accurate." Radzimski
Dep., 8/11/87, at 33.

272

Chapter 15

North said that he continued until November 21,
1986, to assume that the President had approved the
diversion. He testified that, on or about that day, he
asked Poindexter directly, "does the President
know?" He told me [the President] did not." "^ North
testified that the President confirmed this lack of
knowledge on November 25 when the President told
him by telephone that, "I just didn't know." ■**
Robert Earl, North's aide, testified that North had
told him that the President had said "it is important
that I not know." *^ Lt. Cmdr. Coy, the third office-
mate, who was also present, did not recall any con-
versation about the President's knowledge.**^ Fawn
Hall testified that North told her that the President
had "called him an American hero" and said that "he
[the President] just didn't know." •"

Except for the April memorandum, the memoran-
dums that North claimed he sent Poindexter are gone.
North testified that he destroyed them. Three drafts
of the April memorandum were found in various loca-
tions in North's files. They are identical except for the
precise date of the Israeli September 1985 TOW ship-
ment on the first page.**

Memorandums for the February, May, and October
1986 shipments, describing the use of the proceeds, do
not exist. If they were prepared, they were destroyed.

Casey's Knowledge

Discrepancies about Casey's knowledge of the di-
version also abound. Poindexter testified that he "pur-
posely" did not discuss the subject with Casey.*®
Poindexter's reasoning was that Casey frequently had
to testify before Congress and he did not want to
place Casey in a position of having to lie.*° Poin-
dexter further testified that he had no indication that
Casey was aware of the diversion aspect of the arms
sales operation.*'

North, on the other hand, testified that he "had
consulted very carefully with Director Casey [about
the diversion], and he . . . was very enthusiastic
about the whole program." *^ He stated that he had
told Casey of the plan to use the proceeds for the
Contras before the fact, and that he had reviewed
with Casey (probably in February 1986) at least one
memo referring to the diversion before sending it "up
the line" for Presidential approval.*^

While still at the NSC, North made inconsistent
statements about Casey's knowledge. He told Earl in
the spring of 1986 that Casey knew.** But on No-
vember 23, when questioned by the Attorney Gener-
al, North omitted Casey from the list of persons privy
to the diversion. According to North, this omission
occurred after Casey had suggested a "fall guy plan"
in which North and, if necessary, Poindexter would
take the blame.**

Another CIA official, Charles Allen, became aware
as early as January or February 1986 of the possibility
of a diversion. Allen effectively acted as Ghorbani-

far's CIA case officer from their first meeting in Janu-
ary 1986. Allen's notes record that, early in their
relationship, Ghorbanifar told him that money could
be generated from the arms sales to support the Con-
tras and other activities. Allen found Ghorbanifar's
statements so "far-fetched" and "trivial" that, al-
though he recorded them in his notes, he did not
report them to his superiors.*^ *

By the end of August, Allen had focused on the
inflated pricing of the arms sold to Iran and the possi-
bility that money might have been diverted to the
Contras.*' Allen shared his concerns that same month
with Richard Kerr, the CIA's Deputy Director of
Intelligence, who had succeeded Robert Gates. Ac-
cording to Kerr, Allen told him that the United States
had overcharged Iran in the sale of HAWK parts and
that the excess money had possibly been diverted to
assist the Contras.** Kerr said that, as best he could
recall, Allen did not explain why he believed that
funds might have been diverted to the Contras. Kerr
told Allen to monitor the situation and keep him
apprised of further developments.

Kerr recalls that he recounted Allen's diversion
speculation to Gates, who told Kerr that he also
wanted to be kept informed about the matter. Kerr
took no further steps.*® **

Allen remained "very troubled in September that
the operation was to spin out of control." ^° On Sep-
tember 9, he met with North following a meeting
between North and Poindexter on the Iran initiative.
North told Allen that the First Channel into Iran was
to be shut down, and that the Second Channel had
"flourish[ed] into full bloom."

Allen was surprised by this information.^' He re-
turned to the CIA "very nonplussed because I
couldn't figure out why we would so abruptly shut
down the first channel unless we had a very good
plan for shutting it down in a way that Ghorbanifar
and other creditors of Ghorbanifar would feel as-
suaged . . . ." ^^ Nevertheless, the next day Allen
reported this conversation to Casey matter-of-factly
and without comment, including a flat, unexplained
observation that "[t]o cut Ghorbanifar out, Ollie will
have to raise a minimum of $4 million." ^*

On October 1, Allen took his worries to Gates. He
told Gates that the Ghorbanifar channel was a "run-
ning sore," and that he was concerned that the Iran
initiative was "going to be exposed if something isn't
done." ** He also told Gates that "perhaps the money
has been diverted to the contras." ®* According to

♦Later in the year, George Cave of the CIA grew suspicious
when he learned that the Iranians were paying significantly more
for the U.S. arms than the CIA was receiving, and heard specula-
tion of a diversion to the Contras. Cave stated in his deposition that
he did not report these concerns. Cave Dep., 4/17/87, at 158-59.

"Gates told the CIA Inspector General that he could not recall
the meeting in which Kerr apprised him of Allen's suspicions. Kerr
Int., 9/23/87, at 6-7.

77-026 0

b7

10

273

Chapter 15

Allen, Gates was "deeply disturbed by that and asked
me to brief the Director." "^^ When Allen briefed
Casey a week later, he found that Roy Furmark — a
business associate of Saudi entrepreneur Adnan Kha-
shoggi's and former client of Casey's — had been there
before him.

As discussed more fully in Chapter 18, Furmark
and Casey met on October 1.^'' Although Furmark
knew of Ghorbanifar's speculation about the diver-
sion, it is not clear that he shared this speculation
with Casey. Furmark's testimony before the Senate
Select Committee on Intelligence is somewhat incon-
sistent on this point.®* North testified that Furmark
had told Casey in early October about the speculation
surrounding the diversion to the Contras.®^

In any event, according to North, the meeting with
Furmark triggered Casey to instruct North "that this
whole thing was coming unravelled and that things
ought to be 'cleaned up' . . ." In response. North
testified that he "started cleaning things up"; he
"started shredding documents in earnest after [this]
discussion with Director Casey in early October

"70

When Allen and Gates met with Casey on October
7, Casey did not mention that funds might have been
diverted to the Contras." According to Gates, how-
ever, "Allen shared his speculation with the Director
about the possibility that some of the money was
being diverted to the Contras. The Director told him
to put all of that down on paper." '^

Allen's October 14 memorandum did not expressly
allege that the profit from the arms deals might have
gone to the Contras. Instead, the memorandum re-
corded Ghorbanifar as stating that, "some of . . .
[the] profit was redistributed to other projects of the
US and of Israel." '"

At Casey's direction, Allen and Furmark met on
October 16. However, it was not until a subsequent
meeting on October 22 also at the CIA, among Allen,
George Cave (also of the CIA), and Furmark that
Furmark raised, for the first time with Allen, the
possibility that funds might have been diverted to the
Contras.'''' Allen and Cave reported the substance of
this latter meeting to Casey, who appeared "deeply
disturbed" by what he was told.'^

Allen and Cave then jointly prepared a memoran-
dum for Casey to send to Poindexter. This memoran-
dum referred to Ghorbanifar's accusation, which Fur-
mark had repeated, that some of the "bulk of the
original $15 million price tag was earmarked for Cen-
tral America." ''^ The memorandum "laid out starkly
. . . that Ghorbanifar had made allegations of diver-
sion of funds to the Contras." ^^

Although Casey spoke to Poindexter by secure tele-
phone about the October 22 meeting, the Allen-Cave

memorandum never reached Poindexter. According
to Allen, the memorandum "fell into the wrong
outbox," and was not discovered until November
25.'«

Allen and Furmark met once more, on November
6. By this time, the publicity of the Iran initiative had
occurred. The following day, Allen prepared a
memorandum for Casey which reported, among other
things, that Furmark had again alerted Allen to the
link between the overcharges on the HAWK spare
parts and the diversion.'^ On this point, Allen con-
cluded reassuringly that "much of what they know is
speculation and cannot be proven." ®°

At Furmark's request, Casey met with him again on
November 24 at CIA headquarters. Furmark and
Casey reviewed the finances of the Iran arms transac-
tions, and established that the transactions had result-
ed in excess money. Casey told Furmark that he did
not know where the excess had gone.*'

Before Casey suffered a stroke on December 15,
1986, he maintained that he had not known of the
diversion prior to the Attorney General's press con-
ference.*^ He died on May 6, 1987.

How Much Was Diverted?

Even the amount of arms sales profits that were used,
and that were intended to be used, for the Contras is
the subject of contradictory testimony. The Commit-
tees have concluded that at least $3.8 million of the
$16.1 million in arms sales profits were used for
Contra assistance.*^ Poindexter testified that he be-
lieved the entire surplus was used for that purpose.**
In contrast, North testified that the surpluses were to
be used for a number of other covert projects, and
that Secord and his partner, Albert Hakim were enti-
tled to a fair profit.*^

Secord and Hakim testified that no agreement exist-
ed on how much of the money would be used for the
Contras: it was within their discretion whether to
accept or reject any request for expenditure by North.
North and Poindexter were both surprised that the
Enterprise still has more than $8 million. Poindexter
was repeatedly told by North that Secord was losing
money, and he assumed that all of the Enterprise's
funds had been spent.*®

Whatever the amount or expectations, the diversion
did occur. Money generated by arms sales authorized
by a Presidential Finding for only one covert pur-
pose— the Iranian initiative — was used for a wholly
different covert purpose — Contra support. Arms-for-
hostages also became arms-for-Contras, a purpose that
was not authorized by any Finding and that was pro-
scribed by the Boland Amendment for appropriated
funds.

274

Chapter 15

Chapter 15

1. North Test,. Hearings. 100-7, Part I. 7/10/87, at 314-15.

2. Ex. JKS-6.

I. Id.
A. Id.

5. North Test.. Hearings. 100-7. Part II. 7/13/87, at 73-74.

6. Israeli Historical Chronology.

7. North Test., Hearings, 100-7. Part I. 7/10/87, at 295-96.

8. Secord Test., Hearings, 100-1, 5/6/87, at 95-96. North
Test., Hearings, 100-7, Part I, 7/7/87, at 55-56. According
to the Israeli Chronologies, North and Secord told the
Israelis only that the money was needed for shipping ex-
penses.

9. Israeli Historical Chronology.

10. N 28749.

II. Koch Test., Hearings, 100-6, 6/23/87, at 70-71.

12. North Test., Hearings, 100-7, Part I, 7/8/87. at 106.

13. W. at 113-14.

14. Id. at 295-96.

15. Id. at 106-07.

16. Id. at 107-08.

17. Id at 298.

18. Poindexter Test., Hearings. 100-8, 7/15/87, at 36;
Poindexter Dep., 5/2/87, at 71.

19. Poindexter Test., Hearings. 100-8, 7/15/87, at 37.

20. Id at 169.

21. Id

22. Ex. JMP-100.

23. Poindexter Dep.. 6/18/87, at 448.

24. McFarlane Test., Hearings. 100-2, 5/11/87, at 68-69.

25. Poindexter Dep.. 5/2/87, at 182 (emphasis added).

26. Poindexter Test., Hearings. 100-8, 7/15/87, at 44, 47;
Poindexter Dep., 5/2/87, at 116, 178.

27. Hall Test., Hearings. 100-5, 6/8/87, at 477.

28. Poindexter Test., Hearings, 100-8, 7/15/87, at 44;
Poindexter Dep., 5/2/87, at 188.

29. Poindexter Test., Hearings, 100-8, 7/16/87, at 116.

30. Poindexter Dep., 5/2/87, at 72.

31. Poindexter Test., Hearings, 100-8, 7/15/87, at 41.

32. North Test., Hearings, 100-7, Part 1, 1/1/%1, at 10.

33. W. at 11-12.

34. Id. at 14-15.

35. Id at 12.

36. Id at 14.

37. Id at 12.

38. Id at 19.

39. Id at 10.

40. McFarlane Test., Hearings. 100-2, 5/11/87, at 68-69.

41. Secord Test., Hearings. 100-1, 5/6/87, at 136-137.

42. North Test

43. Id at 10.

44. Id at 93.

45. Earl Dep

46. Coy Dep.

47. Hall Test

Hearings. 100-7. Part I. 7/7/87, at 26-27.

5/22/87, at 145-47.

3/26/87, at 79-80.

Hearings. 100-5, 6/8/87, at 506-507.

48. Exs. OLN-283A, OLN-283B, OLN-283C.

49. Poindexter Dep., 5/2/87, at 173, 187.

50. Poindexter Test,, Hearings. 100-8, 7/15/87, at 43.

51. W, at 345-46,

52. North Test,, Hearings. 100-7, Part I, 7/9/87, at 240-41,

53. Id at 134, 249-50,

54. Earl Dep,, 5/2/87, at 37,

55. North Test., Hearings, 100-7, Part II, 7/13/87, at 40-
41.

56. C 184-85.

57. Allen Dep., 4/24/87, at 259,

58. Kerr Int., 9/23/87, at 6,

59. Id

60. Tower, at B-168.

61. Allen Dep,, 4/24/87, at 452.

62. Id at 453,

63. C9517,

64. Tower, at B-168.

65. Id

66. Id

67. Furmark Dep., 7/22/87, at 122.

68. Furmark, SSCI Test., at 70, 73.

69. North Test., Hearings. 100-7, Part I. 7/7/87. at 19.

70. Id

71. Tower, at B-168.

72. Gates, Tower Test., at 19.

73. N 10.

74. Furmark Dep., 7/22/87, at 141.

75. Allen, Tower Test., at 33.

76. I 196.

77. Tower, at B-169.

78. Id at B- 169-70.

79. C9371,

80. I 9372,

81. Furmark Dep,, 7/22/87, at 167-69.

82. Ex. EM-53.

83. See Chapter 22.

84. Poindexter Test., Hearings. 100-8, 7/16/87, at 105.

85. North Test., Hearings. 100-7, Part I, 7/8/87, at 4-5;
see Chapter 22.

86. Poindexter Test., Hearings, 100-8, 7/20/87, at 260,

275

Chapter 1 6
Summary: The Iran Initiative

It was not a mistake for the President to seek an
opening to Iran. Nor was it an error for the President
to seek the release of kidnapped American citizens.
What was wrong with the Iran initiative was the way
in which the Administration tried to achieve these
objectives.

The Administration had pledged that the United
States would not bargain with terrorists. This Nation
would not make concessions in exchange for Ameri-
can hostages, because such concessions could only
encourage more kidnapping. Painful as the conse-
quences might be, the Administration had recognized
that the United States could not undermine its foreign
policy to win the freedom of its captive citizens — for
otherwise, the entire Nation would be held hostage.

Similarly, the Administration had recognized that it
was not in the Nation's interest to prolong the Persian
Gulf War and strengthen the hand of the Ayatollah
against Iraq. The Administration had therefore
pledged that the United States would not arm either
side, but would maintain a policy of strict neutrality,
and would urge U.S. allies and friends to do the same.

The Iran initiative broke both of these pledges and
violated both of these policies.

It is true, of course, that policies are subject to
change. Foreign policy is not immutable. But when
policies are thought ripe for change, established proc-
esses exist in the U.S. Government for making in-
formed judgments. These processes are not mere for-
malities. They are intended to draw on the knowledge
and expertise of accountable officials, and to produce
reasoned determinations. In the Iran initiative, those
processes were deliberately bypassed, and deception
replaced consultation.

The President undertook the arms initiative in 1985
against the advice of his own Secretaries of State and
Defense, without obtaining the views of intelligence
community professionals, and without adequate analy-
sis. Secretary of State Shultz warned that the pro-
posed initiative amounted to trading arms for hos-
tages. Secretary of Defense Weinberger warned in
1985 that it violated the law. Both Cabinet officers
rejected the notion that the United States could use
the leverage of arms sales to open a new relationship
with Iran. A draft National Security Decision Direc-
tive proposing the new arms policy was dropped.
And the Central Intelligence Agency warned that the

proposed interlocutor of the new relationship, Man-
ucher Ghorbanifar, was a talented fabricator. There
was, in short, no adequate basis for reversing U.S.
policy against arms sales to Iran or concessions to
terrorists. Yet the plan proceeded.

The manner in which the President made his deci-
sion epitomized the larger problem. His decision was
at once too casual and too influenced by emotional
concern for the hostages. It constituted a major shift
in U.S. policy, yet it was not recorded in any writing.
Public knowledge of the original decision comes
almost entirely from Robert McFarlane, whose recol-
lection has fluctuated. Reasoned analysis was sacri-
ficed for the sake of secrecy and deniability. The
President's decision was therefore never fully exposed
to the members of the National Security Council
itself. Secretary Shultz, for example, argued against
the proposed policy in December 1985 and January
1986 at three White House meetings, unaware that the
President had signed Findings authorizing the arms
sales prior to each of those meetings. Secretary Wein-
berger believed during 1986 that the United States
would ship no more than 500 TOWs unless and until
all the hostages were released, unaware that the
United States had in fact shipped 1,500 TOWs plus
HAWK spare parts to obtain the release of just two
hostages.

The results in these circumstances were predictable.
Indeed, given the manner in which the Iran initiative
was conceived and conducted, there is no mystery in
why it failed, only in why it continued, particularly
when promise after promise was broken by the Irani-
an side:

• At least four hostages were to be released in
September 1985 after Israel shipped the 504
TOWs. But only one was.

• All of the hostages were to be released in
November after Israel shipped the HAWK mis-
siles. But none was.

• The Speaker of the Iranian Parliament, Hof-
shan Rafsanjani, was to meet McFarlane during
his Tehran trip. But Rafsanjani never appeared.

277

Chapter 16

• All of the hostages were to be released when
the United States completed the delivery of the
HAWK parts in 1986. But only one was.

• The Iranians were to release one hostage and
to exert best efforts to release another after the
United States shipped 500 more TOWs in Octo-
ber 1986. But only one was released, while the
Iranians demanded additional weapons before
they made any effort to release a second.

As Secretary Shultz testified, "[o]ur guys, . . . they
got taken to the cleaners." ' Indeed, by the end of the
initiative, the Administration had yielded to virtually
every demand the Iranians had ever put on the table.
Concessions that the Administration was unwilling
even to consider in 1985, it made in 1986. No price
seemed too high to North and Poindexter, not even
promises to help overthrow the Government of Iraq
or to pressure Kuwait into releasing the murderous
Da'wa terrorists. And in the meantime, three more
Americans were kidnapped in Lebanon.

The record affords some explanation of why the
Administration persisted — and capitulated — when the
Iranians repeatedly reneged: the decisionmakers were
moved by different objectives in hopeless conflict
with one another. The goals of freedom for the
American hostages and better relations with Iran re-
quired that the United States create trust in Tehran.
But generating surpluses for the Contras and other
secret operations required that the United States over-
charge the Iranians. Stinging the Ayatollah may have
provided some ironic laughter in the Old Executive
Office Building, as North testified, but it was no basis
for building an improved relationship with Iran or for
gaining release of the hostages. North boasted that, "I
lied every time I met the Iranians." ^ But the Iranians
North was so willing to deceive were the same people
the Administration was depending on to foster a new
relationship with Tehran.

With these thoughts in mind, the Committees now
examine the record in greater detail for the reasons
that the President and his advisers continued the Iran
initiative long after the handwriting was on the wall.

The Attorney General's Advice

Attorney General Edwin Meese advised the President
that he did not have to notify Congress before selling
arms to Iran.^ The Attorney General based this
advice on an opinion of his predecessor, William
French Smith, who concluded that the President
could export arms pursuant to a Finding, without
complying with the Arms Export Control Act.'* But
Attorney General Smith's opinion explicitly stated
that the President should notify the Intelligence Com-
mittees before the arms were actually exported.*
Meese took this advice one step further and approved
the sales without advance notification.

In taking this aggressive position, the Attorney
General, out of concern for secrecy, did not consult
with the Office of Legal Counsel in the Justice De-
partment or with any of his aides. He did no research
on legislative history, and his advice was not reduced
to writing.® The Attorney General appears to have
done little more than to express his "concurrence
with the CIA view." '

The sale of arms pursuant to a Presidential Finding
without prior notification to the Intelligence Commit-
tees or Congress itself was, so far as the Committees
can determine, unprecedented. The President was en-
titled to more careful legal advice from the Attorney
General before the President approved the sales. The
Committees believe that sound analysis and judgment
would have led Attorney General Meese, like his
predecessor, to advise the President that the Intelli-
gence Committees had to be notified.* Had the Presi-
dent been required to take this step, he may well not
have proceeded with the sales, and the President and
the country would have been spared serious embar-
rassment.

The Attorney General served as a member of the
NSC by appointment of the President. There is only
one reason to have an Attorney General on the NSC:
to give the President independent and sound advice.
That did not happen in the Iran Affair, and the Presi-
dent was poorly served.

The Hostage Objective

In his address to the Nation on August 12, 1987, the
President stated:

[0]ur original initiative got all tangled up in the
sale of arms, and the sale of arms got tangled up
with the hostages .... I let my preoccupation
with the hostages intrude into areas where it
didn't belong.

The record supports this candid self-criticism.

Freeing the hostages was a primary objective for
the President in the Iran initiative. It was foremost in
his mind. Yet the President failed to see that, by
pursuing this objective through the sale of arms, the
Administration was violating its own basic principles,
and putting all the cards in the terrorists' hands. The
Administration, in effect, was creating an incentive
for the Iranians to continue escalating their demands,
and worse, to continue kidnapping Americans.

The President seems to have been vulnerable to the
pleas of the hostage families. His aides sought to keep
those families from meeting with him. But this quar-
antine ended in June 1985, when the President held
the first of several meetings with the hostage families.

Although the President was also undoubtedly inter-
ested in promoting moderation of Iranian policies and
opening a new relationship with that regime, his pri-
mary focus throughout the venture was on the hos-

278

Chapter 16

tages. Indeed, North told the Attorney General in
November 1986 that, with the President, "it always
came back to the hostages." ^ And to be sure, from
the very outset in the summer of 1985, the NSC staff
stressed that the initiative could lead to the release of
the hostages.

Perhaps the best expression of the President's con-
cern was his statement at the December 7, 1985,
meeting with members of the NSC. There, as recalled
by Secretary Shultz, the President brushed aside argu-
ments that the arms sales might violate the Arms
Export Control Act with the statement that "the
American people will never forgive me if I fail to get
these hostages out over this legal question." '°

The Iranians preyed on the President's vulnerability
with threats to kill the hostages if the arms sales
stopped. North's reports of these threats — which he
may well have exaggerated — came at crucial mo-
ments. For example, after McFarlane's trip to London
in December 1985, McFarlane thought the initiative
was dead. He discounted Ghorbanifar's warning that
the Iranians might kill the hostages if the Americans
refused to sell additional arms unless the hostages
were first released. McFarlane's response was to rec-
ommend against further dealings with Ghorbanifar.
North, however, reported the threat to Washington
and recommended more arms sales. The President
directed that the initiative proceed.

Eight months later, in August 1986, after the Irani-
ans had reneged on additional promises, North
warned again that the hostages might be killed if the
United States did not deliver the remaining HAWK
parts. With the suggestion that the blood of the hos-
tages would be on his hands, the President ordered
delivery of the remaining HAWK parts. Tragically,
and ironically, the lives of the captive Americans had
now become hostage to an initiative that was intended
to free them. The United States was now providing
arms not only to obtain the freedom of the hostages,
but also to keep harm from befalling them.

The President's concern for the hostages was trans-
lated by North into political terms. For example, ac-
cording to Noel Koch of the Defense Department,
North told him in the fall of 1985 that the President
was "driving [North] nuts" to get the hostages "out
by Christmas."" Although North testified that he
did not recall such a conversation with Koch or the
President, he said that "it was clear that the President
wanted as many hostages home, all of them home, as
fast as possible." ^^ Also, North wrote in his note-
book that the hostages should be released in time for
the President's 1986 State of the Union message. ^^"
Then, North wrote of achieving a release in time for
the President's July 4 appearance at the Statue of
Liberty Centennial.'^'' And Hakim testified that,
before he negotiated the infamous nine points. North
told him that the President wanted the hostages home
by election day. '^ North admitted that he may have

made this statement to Hakim, but said that the Presi-
dent had never made any such statement to North.''*

The Committees do not fault the President for his
concern about the hostages. It is a testament to the
values of this Nation that the leader of the greatest
power on Earth would devote so much energy and
thought to the fate of six citizens. But when funda-
mental foreign policy decisions are sacrificed in the
hope of freeing six hostages, then the Nation itself
becomes the victim. Every American who travels
abroad becomes a potential hostage, and U.S. policy
can be dictated by hostage-takers.

As the President himself now recognizes, emotion
must never be allowed to substitute for judgment in
the conduct of U.S. foreign policy. The stakes are
simply too great.

The Position of Israel

Israel's sponsorship of the Iran initiative, and of
Ghorbanifar as an intermediary, carried great weight
with the President and his advisers. Israel has taken a
strong stand against international terrorism; and Israe-
li intelligence services are among the most respected
in the world. McFarlane turned to Israel in the spring
of 1985 for intelligence on Iran because of dissatisfac-
tion with CIA capabilities.

The Israelis strongly advocated the initiative, view-
ing it as a joint U.S. -Israel operation, and were will-
ing to give the United States deniability — so long as it
did not subject them to criticism by Congress and the
Secretary of State was fully informed. McFarlane and
Poindexter discussed with the Israelis at various times
in 1985 the Administration's view that, since Israel —
and not the United States — was selling to Iran, U.S.
policy was not being violated.

Moreover, the Israelis made a particularly attrac-
tive proposal in January 1986 when Nir told Poin-
dexter that if the hostages were not released after the
delivery of another 500 TOWs, Israel would bear that
loss and the United States would not have to replen-
ish the Israeli inventory. Even after this "no lose"
proposition was rejected in favor of the United States
selling to Iran through Secord, Amiram Nir continued
to urge the initiative.

Yet, the President was under no illusion that the
interests of the United States and Israel were synony-
mous. As early as June 1985, Secretary Shultz had
pointed out to McFarlane that Israel had little to lose
by promoting the initiative: it had no policy against
arms sales to Iran, and, given the hostility of most of
its neighbors, Israel was more willing to gamble on
the prospect of changes in the Iranian Government.

No foreign state can dictate the conduct of U.S.
foreign policy. Superpowers make their own deci-
sions. And the United States did so in this instance.
Nevertheless, Israel's endorsement of the Iran initia-

279

Chapter 16

live cannot be ignored as a factor in its origin or in its
continuation.

The Contra Objective

If Israel had its own interests in promoting the initia-
tive, and if the President was preoccupied with the
hostages in pursuing the initiative, North was ob-
sessed with the Contras. From North's first substan-
tive involvement with the arms sales in the fall of
1985, the initiative produced money for the Contras.

Thus, the Israelis paid the Enterprise $1 million for
the cost of delivering 120 HAWKs in November
1985. When only 18 were delivered at a cost of ap-
proximately $200,000, the Enterprise had $800,000 left
in the bank. With the Israelis' permission to use this
money as the United States wished. North directed
Secord to spend the $800,000 on Contra support.

In late November 1985, Secord learned during his
visit to Israel that the earlier TOW sales had generat-
ed proceeds that Nimrodi and Schwimmer, the Israeli
arms dealers, used for purposes other than purchasing
the HAWKs. The idea was catching. One month
later, on December 6, North told Israeli officials that
the United States expected to generate a profit on
future arms sales to be used in Nicaragua.

After the Enterprise became the selling agent for
the CIA in January 1986, North set prices to create a
surplus for the Contras. He and Secord used a
markup of more than 200 percent. And when the
Tehran mission failed. North sought to cheer up
McFarlane with the news that the arms sales had at
least achieved some benefit — they were subsidizing
the Contras.

It is not necessary, however, to rely on inference
for the effect of profits on North's recommendations
to continue the weapons sales. North testified that
when he was beginning to doubt the wisdom of the
initiative in January 1986, he found the opportunity to
support the Contras from the proceeds of future sales
an "attractive incentive" to continue.

North's promotion of the initiative continued to the
end, as he drafted memorandums to Poindexter for
the President, always recommending that the initiative
proceed, warning that the hostages might be killed if
it ended, and predicting ultimate success in retrieving
the hostages if the United States stayed the course.
There is no evidence that North ever saw or under-
stood that gouging the Iranians on behalf of the Con-
tras was at cross purposes with gaining freedom for
the hostages. Arms-for-hostages and profits-for-

Contra-support were conflicting goals that could not
be reconciled.

The Profit Objective

While North sought profits for the Contras (and other
covert operations), Albert Hakim sought profits for
himself He made no secret of his personal motive to
North or to George Cave of the CIA in promoting
the Second Channel as a means of continuing the
collapsing initiative.

Above all. Hakim was a businessman. He candidly
testified that he saw an opportunity to make a 3
percent piece of the annual $15 billion Iranian market
if the Second Channel initiative succeeded. While
Hakim saw no conflict between his personal interests
and those of the United States, he negotiated the nine-
point agreement as if basic principles were commod-
ities open for trade. This unappointed diplomat was
willing to bargain away the most fundamental pre-
cepts of U.S. foreign policy to open the doors for
business with Iran.

The fault, however, does not lie with Hakim. He
was left by North to negotiate the agreement; his plan
was approved by North and Poindexter, and accord-
ing to Poindexter, by the President (who was not told
that Hakim had negotiated it); and his ulterior pur-
poses were well known.

Arms-for-profit thus entered the list of colliding
objectives in the Iran initiative. Privatization of for-
eign policy had its costs.

*****

Too many drivers — and never the right ones —
steering in too many different directions took the Iran
initiative down the road to failure. In the end, there
was no improved relationship with Iran, no lessening
of its commitment to terrorism, and no fewer Ameri-
can hostages.

The Iran initiative succeeded only in replacing
three American hostages with another three, arming
Iran with 2,004 TOWs and more than 200 vital spare
parts for HAWK missile batteries, improperly gener-
ating funds for the Contras and other covert activities
(although far less than North believed), producing
profits for the Hakim-Secord Enterprise that in fact
belonged to the U.S. taxpayers, leading certain NSC
and CIA personnel to deceive representatives of their
own Government, undermining U.S. credibility in the
eyes of the world, damaging relations between the
Executive and the Congress, and engulfing the Presi-
dent in one of the worst credibility crises of any
Administration in U.S. history.

280

Chapter 16

Chapter 16

1. Shultz Test., Hearings. 100-9, 7/23/87, at 72. 9. Ex. EM-47, Hearings. 100-9.

2. North Test., Hearings. 100-7, Part 1, l/9/%l, at 231. 10. Shultz Test., //ear/ngj, 100-9, 7/23/87, at 31-32.

3. Poindexter Test., Hearings. 100-8, 7/15/87, at 31-33. 11. Koch Test, //earmg.-, 100-6, 6/23/87, at 69.

4. Id. 12. North Test., Hearings. 100-7, Part 1, 7/10/87, at 287.

5. Meese Test., Hearings. 100-9, 7/28/87, at 205. 12a. North Notebook, 1/13/86, Q 1438.

6. Id., at 205-06. 12b. North notebook, 7/2/86, Q 2243.

7. Id, at 205. 13. Hakim Test., Hearings, 100-5, 6/4/87, at 292-93.

8. See chapter 27. 14. North Test., Hearings. 100-7, Part I, l/\0/%l, at 287.

281

Part IV
Exposure and Concealment

Chapter 1 7
Exposure and Concealment: Introduction

The covert operation to support the Contras had been
functioning for over a year when, on October 5, 1986,
one of the resupply planes was shot down in Nicara-
gua with Eugene Hasenfus on board — and the secret
program began to unravel.

Administration officials denied both publicly and in
testimony to Congress that the U.S. Government had
any connection to the Hasenfus flight. Nonetheless,
investigations were commenced by the FBI and the
Customs Service, which, if continued uninterrupted,
might have uncovered both the Contra and Iran
covert actions and Secord's Swiss bank accounts.
North and Poindexter moved promptly to delay and
narrow those investigations.

At about the same time, a threat of exposure came
from a different quarter. Roy Furmark, a business
associate of Saudi financier Adnan Khashoggi and a
former client of CIA Director Casey, told Casey that
Khashoggi and two Canadian investors had lost $10
million on the Iran arms sales. He warned Casey that
the Canadians might sue for return of the $10 million,
claiming that the money had been used by the U.S.
Government for activity in Central America. Accord-
ing to North, Casey advised him at about this time to
destroy documents relating to the covert Contra sup-
port operation.

Then, on November 2, 1986, David Jacobsen was
released from captivity in Lebanon — the last of the
three Americans to be released as part of the Iran
initiative. His release was announced and applauded
by the White House on November 3, 1986.

On the same day, a Lebanese magazine, Al-Shiraa,
reported that the United States had sold arms to Iran,
and that Robert McFarlane had visited Tehran. This
report soon surfaced in the American press, evoking
strong criticism from all quarters. The President was
accused of making concessions to terrorists and of
violating the law in selling arms to Iran.

The Administration's first response to the disclo-
sures was silence. Encouraged by Poindexter and
others on the NSC staff, the President told his advis-
ers that comment should be withheld so as not to
jeopardize release of the hostages.

Silence proved infeasible, however, and the Presi-
dent was forced to comment. The President's first
public statement was to assert that the press reports of
arms sales to Iran had "no foundation." Shortly there-

after, on November 13, 1986, the President conceded
publicly that arms had been sold to Iran, but branded
as "wildly false" the charge that he had traded arms
for hostages.* The President also denied on Novem-
ber 13, 1986 that the sales violated any laws.

A preliminary Justice Department analysis written
on or about November 13, 1986 concluded the sales
were lawful because they were done pursuant to an
Intelligence Finding signed by the President on Janu-
ary 17, 1986. But the writer of the analysis was un-
aware that the United States had been involved in
shipments of U.S. arms by Israel in 1985 prior to any
Finding.

The President's advisers discussed the legal prob-
lems raised by the pre-Finding Israeli shipments on
November 18 and 19, 1986, while preparing for the
President's press conference scheduled for the
evening of November 19. When the President was
asked about the pre-Finding shipments at his press
conference, he denied that the United States was in
any way involved.

In fact, however, the United States had approved
the 1985 Israeli shipments, and a CIA proprietary
airline had actually carried a November 1985 ship-
ment of HAWK missiles to Iran.

Nonetheless, in the two days following the press
conference. North and McFarlane prepared a false
chronology, Poindexter and Casey gave misleading
statements and testimony, respectively, to Congres-
sional committees, and McFarlane gave a false state-
ment to the Attorney General, denying in each case
that the United States knowingly participated in the
pre-Finding Israeli shipments. In the afternoon on No-
vember 21, 1986, Poindexter destroyed a key docu-
ment— a Presidential Finding — which would have ex-
posed these statements as false.

Not all Administration officials participated in this
effort to rewrite history. Secretary Shultz argued re-
peatedly for prompt and full disclosure of the facts.
He warned the President directly on November 19

•The President maintains this position today. He stated in a
recent interview that the Iran arms initiative "was not trading arms
for hostages" (The New Republic. 10/26/87. at 10) despite his
concession on March 4, 1987 (in response to the Tower Board
findings) that "what began as a strategic opening to Iran deteriorat-
ed in its implementation into trading arms for hostages."

285

Chapter 17

and 20 that certain of his subordinates were giving
out inaccurate information. Abraham Sofaer, Legal
Adviser to the State Department, warned the White
House and the Justice Department that a false story
was being put forward regarding the November 1985
HAWKs shipment. Provided with this information,
the Attorney General sought and received authority
from the President to commence an inquiry on No-
vember 21.

Shortly after learning of the Attorney General's
inquiry, both North and Poindexter destroyed docu-
ments. North also altered documents relating to the
NSC staffs Contra support operation, and he assured
Poindexter that all documents relating to the use of
proceeds from the Iran arms sales to support the
Contras had been destroyed.

Notwithstanding North's efforts. Justice Depart-
ment investigators found a memorandum on Novem-
ber 22 that referred to the diversion; and on Novem-
ber 25, the Attorney General and the President made
public the fact that arms sales proceeds had been used
for the Contras.

The existence of the Enterprise, however, remained
a secret until the public hearings of these Committees.
North concealed the Enterprise — Secord's companies
and Swiss bank accounts — even while admitting to
the diversion. He falsely told the Attorney General
on November 23, 1986 that the Iran arms sales pro-
ceeds had gone directly from the Israelis into ac-
counts set up by Contra leader Adolfo Calero, and
omitted any reference to Secord's accounts in which
the funds had actually been placed. The Attorney
General repeated this incorrect account of the diver-
sion to the public on November 25.

The disclosures made by the Attorney General on
November 25 precipitated the President's request for
appointment of an Independent Counsel, the establish-
ment of the Tower Board, an investigation by the
Senate Select Committee on Intelligence, and the cre-
ation of these Committees; and the secret "off-the-
shelf companies used in both the Iran and Contra
covert operations were eventually exposed.

286

Chapter 1 8
October 1986: Exposure Threatened

The Hasenfus Plane is Shot Down

On October 5, 1986, a C-123 aircraft carrying ammu-
nition, uniforms, and medicine for the Contras was
shot down over Nicaragua.' One crew member,
Eugene Hasenfus, survived and was captured by the
Sandinistas. Documents on board the airplane con-
nected it to Southern Air Transport (SAT), a former
CIA proprietary charter airline based in Miami, Flori-
da. ^

The U.S. Government denied involvement, but sev-
eral investigations by Government agencies, as well as
the press, commenced shortly thereafter. A CIA Sta-
tion Chief in Central America, Tomas Castillo, sent a
secret message to Robert Dutton, Secord's top aide in
the Contra resupply operation, alerting him that the
"situation requires we do necessary damage control."^

North Tries to Slow the FBI Investigation
of SAT

Within days of the Hasenfus crash, FBI agents
began interviewing SAT employees.* They sought to
determine whether arms or combatants had been sent
from the United States to support insurrection in
Nicaragua, in violation of the Neutrality Act. Before
the FBI agents could obtain any subpoenas. North
called FBI Executive Assistant Director Oliver
Revell on October 8 and told him he was concerned
about the SAT investigation.^ North assured Revell
that SAT was not involved in illegal activities. North
also indicated to Revell that SAT was involved in the
arms sales to Iran. North had earlier told Revell about
the Iran arms sales in late July 1986 during an Oper-
ations Sub Group meeting.® North told Revell that he
did not know anything about the C-123 that was shot
down.' North said that SAT was still flying arms
shipments to Iran, and those missions would inevita-
bly be disclosed if SAT was investigated.*

Revell contacted the Miami FBI office and asked
for a written briefing on the investigation,* but he did
not slow it down. Instead, he obtained authority from
Deputy Assistant Attorney General Mark Richard to
begin an official investigation on October 10, 1986.'°

North Tries to Slow the Customs
Investigation of SAT

The U.S. Customs Service also began an investiga-
tion after the crash. Upon tracing the purchase of the
C-123 to SAT, Customs agents served a broad admin-
istrative subpoena on SAT.'' A full-scale investiga-
tion would have revealed payments for both the Iran
flights and for arms shipments to the Contras from
the Enterprise's Lake Resources and Hyde Park
Square accounts in Switzerland.'^ In fact, during the
May 1986 Tehran mission, the SAT crew stopped in a
European country on their return flight, loaded arms,
and flew them to a base in Central America for the
Contra resupply operation. One wire transfer from
Hyde Park Square paid for both missions.'^

On October 9, 1986, North called U.S. Customs
Assistant Commissioner for Enforcement William Ro-
senblatt and said he was concerned about the SAT
subpoena. North told Rosenblatt that the SAT people
were "good guys" who had done nothing illegal.
North denied that the SAT airplane contained arms
when it left the United States.'* Relying on North's
assurances, Rosenblatt took steps to narrow the focus
of the investigation to the airplane itself, and whether
arms or ammunition were being exported without a
license.'^

On October 17, David Major, an FBI agent on
assignment to the NSC, sent a PROF note to Alton
Keel stating that the FBI investigation should be
ending. The note continued:

However, Customs is going after this case like a
dog in heat. They have a task force investigating
violations of (1) foreign asset laws (2) Nicaragua
trade embargo and (3) illegal export laws. Treas-
ury is running . . . hard on this investigation and
will most likely trip over legal but very sensitive
cover CIA operations not related to Nicaragua.'®

In the same time period, North called Rosenblatt and
again assured him that he had "double-checked" and
there were no arms aboard the C-123 airplane.''' Ro-
senblatt, who had by then received similar informa-
tion from the Customs agent in charge of the investi-
gation, told North once again that Customs was con-
centrating the investigation on the airplane itself to

287

Chapter 18

see whether special Hcensing requirements had been
violated.'*

After Customs served a new subpoena on SAT on
October 29, Craig Coy, one of North's assistants, tele-
phoned to tell Rosenblatt that he had spoken to North
and that they were concerned about the Customs
agents being "all over" SAT.'^ Rosenblatt then called
North, who asked why the Customs agents were at
SAT, telling Rosenblatt, "We are right in the middle
of a lot of sensitive business here, I am trying to get
some packages [hostages] out of here. . . ." 20 j^q.
senblatt told North that the investigation of the C-123
was going forward and other agencies were investi-
gating as well. North told Rosenblatt to call Coy and
tell him to take care of the other agencies, which
Rosenblatt did.^' Rosenblatt took no steps, however,
to terminate the Customs investigation, and he had no
further contact with North regarding SAT.^^

Poindexter Tries to Slow the
Investigations

Shortly thereafter, Poindexter called the Attorney
General and asked him to delay the investigations of
SAT by the FBI and Customs.^' According to the
Attorney General, Poindexter told him that the SAT
employees were needed for the Iran initiative. ^'^ At-
torney General Meese also mentioned the Customs
investigation briefly to Treasury Secretary James
Baker, but did not recall discussing it any further with
him thereafter. 2* Meese told Associate Attorney Gen-
eral Steven Trott to ask FBI Director Webster to
delay the SAT investigation for 10 days.^® On Octo-
ber 30, Trott called Webster and asked him to delay
all nonurgent investigative activity regarding SAT,^''
telling him that, without the delay, the investigation
could compromise "sensitive hostage negotiations."^*
FBI headquarters checked with their Miami office
and was told the investigation could be delayed for 10
days. After more than 10 days had passed, Trott
raised the matter with the Attorney General at the
FBI's request, and several days later Attorney Gener-
al Meese told him the FBI could proceed.^*

House Committee Seeks Independent
Counsel to Investigate Hasenfus Crash

On October 17, 13 days after the Hasenfus crash, a
majority of the Democratic members of the House
Judiciary Committee asked the Attorney General to
appoint an Independent Counsel to investigate North,
Casey, Poindexter, and others regarding their alleged
involvement with the Contras.^" The request cited
the Hasenfus crash and prior allegations by Senator
John F. Kerry and others regarding activities by Ad-
ministration officials in support of the Contras. The
Attorney Genera! referred the letter to the Criminal
Division of the Justice Department, where it was in
turn referred to the Public Integrity Section.

Once a request for an Independent Counsel is re-
ceived from Congress, the Justice Department has 30
days to report back. The Justice Department's Public
Integrity Section began by asking the other sections
of the Justice Department, and the FBI and Customs,
to identify any cases that might involve Administra-
tion officials in the Contra operation.^' The Public
Integrity Section learned that the Fraud Section was
investigating allegations of improper use of humani-
tarian aid through the Nicaraguan Humanitarian Aid
Office program to provide weapons to the Contras. ^^
The Public Integrity Section also learned that the FBI
and U.S. Attorney's office in Miami were investigat-
ing claims that North, Robert Owen, and others were
providing military aid to the Contras.'^

Customs and FBI officials promised to provide syn-
opses of pending cases. The FBI provided no infor-
mation prior to the appointment of an Independent
Counsel in December 1986. 3'' Customs wrote a letter
on November 14, 1986, which did not mention
North's requests to narrow subpoenas. ^^

Furmark Visits the CIA: Talk of
"Diversion"

While the investigations precipitated by the Hasenfus
downing threatened to expose the covert Contra sup-
port operation, another event in October 1986 threat-
ened to expose the diversion: Roy Furmark, a busi-
ness associate of Adnan Khashoggi warned the CIA
that, unless certain investors in the Iran arms sales
were repaid, they would publicly disclose what they
knew of the arms sales and the use of arms sales
proceeds for the Contras.

Furmark — who was also a former law client of
Director Casey — met with Casey, at Khashoggi's re-
quest, on October 7 in Casey's office. Furmark said
that Khashoggi and two Canadian investors had sup-
plied financing for the Iran arms sales. ^^ They
claimed to have lost their $10 million advance when
the United States overcharged and then abandoned
the First Iranian Channel in favor of dealing with the
so-called Second Channel.^' Khashoggi wanted Fur-
mark to see if Casey could get the U.S. Government
to make good on this loan.

At their October 7 meeting, Furmark informed
Casey of Khashoggi's role, discussed the financial
problems that had arisen, and said that Khashoggi
was under pressure from the two Canadians who had
participated in the $10 million financing. Furmark
warned Casey that Manucher Ghorbanifar — the initial
go-between for the United States with the Iranians —
was also upset and was threatening to tell members of
the Senate Select Committee on Intelligence (SSCI)
about the arms sales. ^* When Casey suggested that
the transaction sounded like an Israeli arrangement,
Furmark told Casey that North was directing the
deal.^*

288

Chapter 18

Although Furmark had known for some time of
Ghorbanifar's speculation that Iran arms sales pro-
ceeds had been diverted to the Contras, it is not clear
that he shared this speculation with Casey during
their October 7 meeting. Before the SSCI, Furmark
initially testified that he "probably alluded" to the
possibility that some of the money might have gone
to Nicaragua. He stated later, however, that he did
not believe that he had referred to the names of any
countries.'**' North testified that Furmark had told
Casey in early October about the speculation sur-
rounding the diversion to the Contras.""

In the meantime, Charles Allen of the CIA had
heard from North in early September that the First
Channel was being shut down and that the Second
Channel had "flourished into full bloom. "''^ Allen
was disturbed by this news, "because I couldn't figure
out why we would so abruptly shut down the first
channel unless we had a very good plan for shutting
it down in a way that Ghorbanifar and these creditors
of Ghorbanifar would feel assuaged.'"" Allen shared
his concerns with Robert Gates of the CIA on Octo-
ber 1. Gates, too, was disturbed and asked Allen to
brief the CIA Director.**

Allen and Gates arrived in Casey's office together
on October 7, after Furmark had departed. Allen told
Casey of his misgivings. Casey rejoined that he had
just met with Furmark, who had described Khashog-
gi's financial problems with other investors whom
Allen understood to be Canadian. Casey did not men-
tion that funds might have been diverted to the Con-
tras. ^^

In his appearance before the Tower Board, Gates
recalled that "Allen shared his speculation with the
Director about the possibility that some of the money
was being diverted to the Contras. The Director told
him [Allen] to put all of that down on paper." *

A few days later, on October 9, North, back from
the Frankfurt negotiations with the Iranians, briefed
Casey and Gates on the status of the Iran initiative. It
does not appear that, in the presence of Gates, Casey
shared with North Allen's suspicions about the diver-
sion to the Contras.**

Allen's October 14 memorandum provided a
lengthy account of the Iran initiative, including a brief
summary of the recently concluded meetings in
Frankfurt, the status of Ghorbanifar's financial situa-
tion, and a summary of information that Ghorbanifar
might expose. The memorandum did not expressly
allege that the profit from the arms deals might have

gone to the Contras; rather, it recorded Ghorbanifar
as stating that, "some of . . . [the] profit was redistrib-
uted to other projects of the US and of Israel."*

Gates and Casey met with Poindexter the following
day, October 15. '•^ Poindexter read Allen's memoran-
dum.*'' Although Poindexter acknowledged in his tes-
tiony that the memorandum contained the news that
Ghorbanifar or his financiers were saying that their
money went to Central America, and although Poin-
dexter and Casey met alone, Poindexter testified that
he and Casey did not discuss the diversion. Casey
simply recommended, according to Poindexter, that
Poindexter seek the advice of White House Counsel
with respect to disclosure of the initiative. Poindexter,
however, did nothing because he did not trust the
White House Counsel.**

After meeting with Poindexter, Gates and Casey
directed Allen to meet with Furmark the next day,
October 16.*^ Allen met Furmark, and sent a memo-
randum of the meeting to Casey. Allen's memoran-
dum recited Furmark's account of the origins of the
Iran arms transactions and Ghorbanifar's current fi-
nancial condition. Furmark recommended that the
United States consider yet another arms transaction to
maintain credibility with the Iranians and to provide
Ghorbanifar with enough capital to make a partial
repayment to Khashoggi's creditors. As with Allen's
October 14 memorandum, this memorandum con-
tained no specific reference to a diversion of funds to
the Contras. According to Allen, he wished to pro-
tect himself from any indiscriminate use of the memo-
randum.^"

In his meeting with Allen on October 16, Furmark
gave Allen a rundown of the transactions to date. He
claimed the shipment of HAWK spare parts in May
1986 resulted in the release of U.S. hostage Father
Lawrence Jenco.** Furmark warned Allen that the
Canadians would go public with the "back-channel"
arms sales unless the United States shipped additional
weapons through Ghorbanifar so that Khashoggi
could be repaid. ^^

The meeting with Allen was cut short so that Fur-
mark and Allen could join Casey and his wife on an
airplane to New York. En route, Furmark and Casey
again discussed the arms sales in general. ^^ Casey still
did not acknowledge that the United States had any
responsibility for the arms sales, but indicated he was
working on the problem. 5* Furmark suggested, as he
had to Allen, that Casey promote another arms sale to

* Gates. Tower Test., at 19. A week passed before Allen submit-
ted the requested memorandum to Casey.

** Gates, Tower Test , at 22-23. Gates did take advantage of the
opportunity presented by the meeting with North to ask whether
the CIA was involved in private fundraising for the Contras. North
responded that the Agency was "clean." In exonerating the CIA,
North offered a "cryptic comment about Swiss accounts and the
Contras." No one pursued the comment and the meeting conclud-
ed.

*N 10. Gates found the terseness of the Allen memorandum
noteworthy. In testimony before the SSCI, Gates stated: "And in
fact, in the [Allen] memorandum of six or seven or eight pages — I
don't recall how long it is — single-spaced there is only one sentence
that refers to possible diversion of funds .... There is no mention
in the memorandum specifically of a diversion to the Contras. That
reference to me was oral on the 1st [of October] and repeated again
to the Director on the 7th." Gates apparently believed this news
was relegated to such obscurity because it was based on "shaky
stuff." Gates Test., SSCI, at 22, 34.

289

Chapter 18

help Ghorbanifar financially. Casey was noncommit-
tal, but promised to get back to Furmark.^^

North's notebooks show that Furmark's recommen-
dation to generate funds to pay Khashoggi's creditors
received serious consideration. North wrote of a con-
versation with Israeli official Amiram Nir on October
22: "Best way to recoup funds to pay off Furmark, et
al is to overcharge on subsequent deliveries." ^^

On October 22, Charles Allen, George Cave, and
Roy Furmark met in New York. In the course of that
meeting, Furmark raised, for the first time with Allen,
the possibility that funds used to finance the arms
sales might have been diverted to the Contras.^''

Allen and Cave reported their discussion with Fur-
mark to Casey, who appeared "deeply disturbed" by
what he was told. Allen and Cave then jointly pre-
pared a memorandum for Casey to send to Poin-
dexter. Allen's testimony dated the Casey memoran-
dum at October 23.**

This Allen-Cave memorandum set forth detailed ac-
counts (attributed to Furmark) of the early stages of
the Iran initiative and the financing of the HAWK
spare parts transaction. It also referred to Ghorbani-
far's accusation, which Furmark had repeated, that
some of the "bulk of the original $15 miUion price tag
was earmarked for Central America."** The memo-
randum "laid out starkly . . . that Ghorbanifar had
made allegations of diversion of funds to the Con-
tras,"*" but it did not offer an assessment by Casey,
Cave, Allen, or any other CIA official, of the accura-
cy of Ghorbanifar's charges. Furthermore, as with the
previous memorandums, the memorandum made no
reference to Allen's own suspicions that the Ameri-
cans had inflated the price and directed some of the
money to the Contras.

Although Casey spoke to Poindexter by secure tele-
phone about the Allen-Cave briefing on the Furmark
meeting, the memorandum never reached Poindexter.
According to Allen, the memorandum "fell into the
wrong outbox;" it was not discovered until November
25; and Casey was "deeply upset" when he discov-
ered that he had not signed or sent it.®'

Allen and Furmark met once more on November 6.
By this time the feared publicity of the Iran initiative
had occurred. Allen prepared a memorandum for
Casey the following day, which reported that the
Canadian investors — having been deprived of the
threat of exposing the initiative — were now threaten-
ing a lawsuit over their failure to be paid. The memo-
randum also showed that Furmark again alerted Allen
to the remaining trump card in the investors' deck:
linking the overcharges on the HAWK spare parts to
the diversion.*^ Furmark also told Allen of his dis-
covery that Secord was involved in both the arms
sales and the Contra resupply operation. ^^

Allen reported to Casey that Furmark was most
interested in prompting another arms deal so that
Ghorbanifar could recoup his money, and that unhap-
py investors could make some "nasty allegations

against the US Government and key officials" if the
matter went unresolved. On the latter point, however,
Allen added reassuringly that "much of what they
know is speculation and cannot be proven. "®''

At Furmark's request, Casey met with him again on
November 24 at CIA headquarters. Furmark and
Casey reviewed the finances of the Iran arms transac-
tions beginning in February 1986. This review estab-
lished that the transactions had resulted in excess
funds; Casey told Furmark that he did not know
where that money had gone.**

In Furmark's presence, Casey unsuccessfully tried
to reach the President's Chief of Staff Donald Regan.
He then called North and said "there's a guy here
says you owe him $10 million . . . ." North reportedly
responded: "[T]ell the man that the Iranians or the
Israelis owe them the money."®**

Once Casey learned that Furmark and Ghorbanifar
surmised that profits from the Iran arms sales had
gone to the Contras, he advised North. North testified
that this occurred in early October after the Hasenfus
crash.®'' According to North, the meeting with Fur-
mark triggered Casey to instruct North "that this
whole thing was coming unravelled and that things
ought to be 'cleaned up' . . . ." In response. North
testified, he "started cleaning things up;" he "started
shredding documents in earnest after [this] discussion
with Director Casey in early October . . . ."**

The Travelers Check Ledger

As set out in Chapter 2, North received from Contra
leader Adolpho Calero a large number of travelers
checks for distribution to Contra leaders and for a
variety of other programs. North asserted that he
maintained "meticulous records" of the receipt and
disbursement of these checks in a ledger provided by
Casey.®* Fawn Hall and Robert Owen testified to
seeing North make entries in such a ledger.®*

North destroyed this ledger, according to his testi-
mony, at the direction of Casey to protect sensitive
names and information. North told the Committees
that Casey had instructed him sometime between Oc-
tober 1 3 and November 4 to " 'get rid of that book
because the book has in it the names of everybody,
the addresses of everybody. Just get rid of it and
clean things up.' "''°

• After the Attorney General announced the discovery of the
diversion on November 25, 1986. Furmark called Casey after being
subpoenaed by Congress. Casey told him to "just follow us." Fur-
mark Dep„ 7/22/87. at 170.

•• North Test., Hearings. 100-7, Part I. 7/7/87, at 19. Notably, at
a meeting with the Second Channel in Europe on October 29-30,
attended by North, Cave, Secord. and Secord associate Albert
Hakim, North stated that he did not care if Ghorbanifar was paid,
but that "what I'm more interested in is that the people to whom
he owes money get paid." Cave stated that Ghorbanifar owed
those people "10 Million." C 298.

290

Chapter 18

North's explanation of why he destroyed the ledger
is inconsistent with other of his actions. For example,
North preserved his notebooks, which also recorded
the names of those helping the Contras and included
numerous references to payments made to them, as
well as other highly sensitive and classified matters.
When he was dismissed from the NSC staff. North
took these notebooks with him and kept them in a
nonsecure environment, at the same time that he was
destroying the ledger which had been maintained in
an NSC vaulted office.

As a result of this destruction, no written record
exists to verify North's testimony that checks he
cashed for his personal use actually were reimburse-
ments for his out-of-pocket expenses on behalf of the
Contras.''^

The Fall Guy Plan

Throughout the events of the Iran-Contra Affair, de-
ception was viewed as a necessary component. At the
same time, according to North's testimony, Casey rec-
ognized the need for an ultimate coverup in the event
of public disclosure.*

As far back as the early spring of 1984, North said
he and Director Casey had discussed a "fall guy
plan."'' 2 Their discussion took place in the context of
Congress' impending cutoff of U.S. aid for the Con-
tras (the Boland Amendment). According to North,
when "we eventually decided to pursue availing our-
selves of offers from foreign governments [to fund the
Contras], it was seen that there would need to be
someone who could . . . take the fall" in the event of
public disclosure. The idea was to provide North's
superiors with "plausible deniability" — although in
this instance, that term meant avoiding accountability
to the U.S. Government rather than avoiding disclo-
sure to U.S. adversaries.^^

As North's operational role expanded to the Iran
arms sales and the diversion of proceeds derived
therefrom, he testified, he volunteered to be the "fall
guy" for both the Contra support and the arms sales
operations. In his words, "I'm not sure Director

Casey ever said, 'It has to be you, OUie.' It was
probably OUie saying, 'Well, when that [disclosure]
happens, it will be me.' "'''

North made no secret among his colleagues that he
was to be a "scapegoat" or "fall guy" if the Iran or
Contra support activities became public. He made this
comment to at least Poindexter, Robert Earl (one of
North's aides), and Owen.'^

Disclosure of the arms sales in early November
1986 triggered discussions about implementing the fall
guy plan. According to North, shortly after the initial
November disclosures, Casey told him that he [North]
might not be "big enough" to be the "fall guy."
Casey indicated that "it's probably going to go
higher," and he suggested that "Poindexter might
have to be a fall guy."^^ Although North did not
recall a conversation with Poindexter about this spe-
cific aspect of the plan for "plausible deniability," he
did recall that he and Poindexter discussed in early
November the likelihood that both of them would
have to bear the blame."

North testified that he previously had discussed
both the fact and necessity of the "fall guy plan" with
Poindexter and McFarlane (as well as with Casey),
and that he did not recall any discussion with any-
body about the legal propriety of this plan.'* Poin-
dexter testified, however, that he "was not a party to
any plan to make Colonel North or to make me, for
that matter, a scapegoat."''^ He nevertheless admitted
that "[periodically] Ollie would indicate that he was
"willing to take the rap.' "*° McFarlane flatly denied
that any "fall guy plan" ever existed.*^

North testified that, but for the criminal investiga-
tion of the Iran-Contra Affair, he was prepared to go
through with the "plan, resign in disgrace, and take
the heat for the President."*^ (There is no evidence
that the President was aware of or condoned the "fall
guy" plan.) Nevertheless, when an Independent Coun-
sel was appointed and North was the only person
specifically named in the order of investigation.
North, who by then had retained counsel, changed his
mind and decided to protect himself* North testified
that he did not tell Casey or Poindexter of this
change in attitude.*^

•As noted earlier, North's testimony attributing knowledge and
statements to Casey after Casey's death should be viewed with
caution, particularly insofar as such testimony, albeit under oath,
tends to exculpate North.

* North testified that, "I never in my wildest dreams or night-
mares envisioned that we would end up with criminal charges."
North Test., Hearings. 100-7, Part I, 7/8/87, at 145; 7/13/87, at 41.

291

Chapter 18

Chapter 18

1. See Chapter 6.

2. Id. See also. Bastion Dep., 2/13/87, at 7.

3. KL-43 message, 10/05/86, N 438.

4. Revell Dep., 6/11/87, at 60-61.

5. Id., at 61.

6. Id. at 49.

7. Id. at 62.

8. Id

9. Id, at 63.

10. Id

11. Id. at 68-69.

12. SAT Doc. Nos. 463, 1687, 1688, 1690, 1691, 1790.

13. Id

14. Rosenblatt Dep., 9/25/87, at 85.

15. Id. at 86-88.

16. PROF note, 10/17/86, N 18297-98.

17. Rosenblatt Dep., 9/25/87, at 84-85.

18. Id. at 86.

19. Id. at 91.

20. Id, at 93.

21. Id.

22. Id, at 99.

23. Meese Dep., 7/8/87, at 41-44.

24. Id, at 44.

25. Id, at 41-43.

26. Trott Int., 5/11/87, at 1.

27. Memo to Clarke from Webster, 10/31/86, Ex. EM- 14.

28. Id

29. Memo to Weld from Martin, on Investigation of
Southern Air Transport, 11/12/86, J 7738.

30. Ex. Em- 13.

31. Ralph Martin Int., 5/14/87.

32. Id.; Memo from Martin to Weld, Ex. EM-63.

33. See also Chapter 5.

34. Jarrett Int., 4/23/87.

35. Letter from Rafael Lopez to Ralph Martin, 11/14/86,
J 6956.

36. Furmark Dep., 7/22/87, at 122. Khashoggi and one
of the Canadians have denied that the Canadians ever in-
vested in the arms sales. Khashoggi Int., 5/15/87; Eraser
Dep., 4/29/87, at 21, 25-26.

37. See Chapter 22.

38. Furmark Dep., 7/22/87, at 122-126.

39. Id, at 123-24.

40. Furmark, SSCI Test., at 70, 73-74.

41. North Test., Hearings. 100-7, Part I, 1/1/%!, at 19.

42. Allen Dep., 4/24/87, at 443-44, 452.

43. Id, at 452-453.

44. Tower, at B-168.

45. Id

46. Gates Dep., 7/31/87, at 19.

47. Poindexter Test., Hearings. 100-8, 7/15/87, at 55.

48. Id.; Poindexter Dep., 5/2/87, at 196-99.

49. Allen, Tower Test., at 32.

50. Allen Int., 9/23/87, at 28-29.

51. Memo from Allen to DCI, 10/17/86, Ex. EM-57,

at

100-7, Part I, 7/7/87, at 19.

52. Id. at 10.

53. Furmark Dep., 7/22/87, at 135.

54. Id

55. Id., at 133-36.

56. North Notes, Q 2559.

57. Furmark Dep., 7/22/87, at 140-41.

58. Allen, Tower Test., at 33-34.

59. I 196.

60. Tower, at B-169.

61. Id., at B- 169-70.

62. Memo from Allen to DCI, 11/7/86, C 9371.

63. Ex. EM-57, at 6.

64. C 9372.

65. Furmark Dep., 7/22/87, at 167-69.

66. Id, at 168.

67. North Test., Hearings.

68. Id., at 132-35.

69. Hall Test., Hearings, 100-5, 6/8/87, at 482-83; Owen
Test., Hearings, 100-2, 5/12/87, at 332-33.

70. North Test., Hearings. 100-7, Part I, 7/8/87, at 132-
35.

71. Id, at 133-34.

72. Id. Part II, 7/13/87, at 38-39.

73. Id., at 39.

74. Id., at 40.

75. E.g., North Test., Hearings. 100-7, Part I, 7/8/87, at
145; Id.. 7/9/87, at 234; Owen Test., Hearings. 100-2, 5/19/
87, at 366; Earl Dep., 5/22/87, at 149; Poindexter Dep., 6/
17/87, at 243.

76. North Test., Hearings. 100-7, Part II, 7/13/87, at 40.
Id

Id, at 40-41.

Poindexter Test., Hearings. 100-8, 7/16/87, at 120-21.
Poindexter Dep., 5/2/87, at 243.
McFarlane Test., Hearings. 100-7, Part II, 7/14/87, at

77.
78,
79
80
81
205.
82

North Test., Hearings. 100-7, Part II, 7/13/87, at 41.

292

Chapter 1 9
November 1986: Concealment

The Administration's Initial
Response to the Arms Sales
Disclosures

The reports of U.S. arms sales to Iran in early No-
vember 1986 generated conflict within the Govern-
ment. Some officials, including Members of Congress
and the Secretary of State, demanded prompt and full
disclosure. Several individuals on the inside of the
Administration, however, insisted on maintaining tight
control of the information. The President, denying
any arms-for-hostages trade, wanted to say no more
than that. Members of the National Security Council
(NSC) staff and the Director of Central Intelligence
knew that the report from Beirut was only the tip of
the iceberg. Accordingly, their first move was to ex-
ploit the President's desire to protect the hostages
through silence as a way of concealing the truth.
The conflict manifested itself almost at once in an
exchange between Secretary of State George Shultz
and National Security Adviser John Poindexter short-
ly after the news broke.

The Shultz/Poindexter Cables

The Secretary of State was largely without knowl-
edge concerning the Iran initiative. Among other
things. Secretary Shultz testified that he did not know
prior to November 1986 that the United States had
made direct sales of arms to Iran during 1986 or that
the President had signed a Finding authorizing such
sales. He did know, after the fact, that McFarlane had
travelled to Tehran in May, but not that the McFar-
lane mission had carried weapons with it, or that
additional weapons had been delivered thereafter.
Moreover, so far as the Secretary of State was ad-
vised, the failed McFarlane mission had signaled an
end to the Administration's effort to find an opening
to Iran.'

Thus, the report in Al-Shiraa was news to the Sec-
retary of State. He was then in Europe and found
himself peppered with questions from the press about
the revelations in Beirut. The Secretary reported
these questions in a cable to Poindexter, informing
Poindexter that "[t]he big story the press is after is to
establish that the U.S. violated its own policy by

cutting a big secret arms deal with Iran in order to
get our hostages released." Secretary Shultz further
informed Poindexter that, "[i]n accordance with the
agreed guidance," he had refused to answer any relat-
ed questions, stating that all such inquiries should be
directed to the White House. ^

The Secretary went on to say that he had been
"racking my brains all day to figure out a way to help
turn this situation in the best possible direction." To
this end. Secretary Shultz recommended that "the
best way to proceed is to give the key facts to the
public." In addition, apparently based on the arms
shipment reported by Al-Shiraa, the Secretary sug-
gested that "[w]e could make clear that this was a
special, one-time operation based on humanitarian
grounds and decided by the President within his Con-
stitutional responsibility to act for the service of the
national interest — and that our policies toward terror-
ism and toward the Iran/Iraq war stand." ^

Poindexter, who knew the true facts, rejected Sec-
retary Shultz's proposal. In a return cable Poindexter
stated, "I do not believe that now is the time to give
the facts to the public," although he asserted that
"when we do lay out the facts that it will be well
received since it is a good story." Poindexter advised
Secretary Shultz that he had spoken that day with the
Vice President, the Secretary of Defense, and the
Director Casey, and that they all agreed that no state-
ment should be made.*

Poindexter further advised Secretary Shultz that he
had asked the NSC staff to prepare messages to U.S.
allies explaining that U.S. policy toward the Iran-Iraq
war had not changed, and that the Administration
would not comment on the reported arms sales be-
cause of potential danger to the hostages.^

The Administration did, however, issue a statement
on November 4, asserting that "as long as Iran advo-
cates the use of terrorism, the United States arms
embargo will continue." This portion of the White
House statement had been drafted by Poindexter, and
implied that the United States had not sold arms to
Iran.^ When the Secretary of State subsequently re-
viewed this statement, he found it "the kind of tricky
and misleading statement that looks great on the sur-
face, but then you start looking at it more carefully

293

Chapter 19

and you see it is going in a different direction entire-
ly." '

The Public Denials Continue

The issue of public comment on the arms sales was
discussed during Poindexter's morning meetings with
the President on November 6 and 7. The President
agreed that "no comment" was the best policy given
his hope, bolstered by Poindexter, that additional hos-
tages would yet be freed. According to notes of the
briefings taken by Rodney McDaniel of the NSC
staff, the President said that "[n]o way can comment
without further damage to chances of getting hostages
out." *

Accordingly, on November 6, at an unrelated bill-
signing ceremony, the President stated in response to
a reporter's question that, "the speculation, the com-
menting and all, on [the Al-Shiraa] story" had "no
foundation," although his comments fell short of an
outright repudiation of that story. The President fur-
ther stated that the speculation about arms transac-
tions between the United States and Iran "is making it
more difficult for us to get our other hostages free." ^
On November 7, McFarlane sent a PROF note to
Poindexter complaining that he had heard that Chief
of Staff Regan had spoken with the press and "laid
the entire problem at [McFarlane's] feet."* In reply,
Poindexter told McFarlane that he had spoken to
Regan that morning, and that Regan "agreed that he
would keep his mouth shut." Poindexter concluded
that "[w]e have a damned good story to tell when we
are ready. Right now would be an absolutely stupid
time for the Administration to say anything." ^°

The November 10 Meeting at the
White House

Notwithstanding Poindexter's analysis, it soon became
clear that the Administration's preference for total
silence could not be sustained. Pressure was mounting
in the public, the press, and in the Government itself
for an explanation of what had happened. The Presi-
dent would have to make a statement.

On November 10, the President convened a meet-
ing at the White House to establish guidelines for that
statement. The Vice President, Secretary Shultz, Sec-
retary Weinberger, Attorney General Meese, Casey,
Regan, Poindexter and Alton Keel, then Deputy Na-
tional Security Adviser attended." The President
said there was a need for a public statement, but he
instructed his advisers to "stay away from detail." '^

Keel and Regan made notes during the November
10 meeting; Secretary Weinberger wrote a subsequent
memorandum; and Secretary Shultz dictated his recol-
lections of the meeting to his Executive Assistant,
Charles Hill. These records contain no material differ-
ences. They all show that the meeting was marked by
a number of misleading statements and significant
omissions by Poindexter as he purported to lay out
the facts of the Iran initiative.

For example:

• Poindexter discussed only the January 17,
1986, Finding, omitting any mention of the earlier
Finding signed by the President on December 5,
1985, or of the January 6, 1986, superseded Find-
ing.

• Poindexter claimed, falsely, that the Iran initia-
tive had begun when the United States stumbled
upon an Israeli arms warehouse in Europe while
attempting to learn whether the Israelis were
shipping arms to Iran.*

• Poindexter asserted that the first 500 TOW
missiles were shipped from Israel to Iran in
August and September 1985, without U.S. per-
mission, even though the Administration had ap-
proved this shipment.**

• Poindexter stated that the total number of
TOW missiles sold to Iran during the initiative
was 1,000, when the actual number was 2,004.

• Poindexter indicated that the last 500 TOWs
sent in October 1986, had been shipped by Israel
rather than the United States. But in fact, Israel
had acted at the NSC staffs request because the
U.S. shipment was delayed, and the United States
had replenished the Israeli TOWs within days
after the shipment. ^ ^

In other words, as late as November 10, and in the
presence of the President and senior Cabinet officers,
Poindexter either was confused or purposely dissem-
bled. Despite the fact that the President had opened
the meeting by declaring the need for a public state-

•N 7501. PROF from McFarlane to Poindexter, 11/7/86,
20:30:32. After voicing this complaint, McFarlane's note went on to
set forth the so-called "truth" about the Iran initiative. But McFar-
lane made no mention of the November 1985 HAWK shipment.
See Section, "The NSC Staffs Chronologies," infra.

•Oakley Aff., 7/2/87; Ex. GPS-55. This same story had been told
by North to Ambassador Oakley in November 1985 when North
enlisted Oakley's aid in causing a U.S. Embassy in Europe to
intercede with its host government to provide flight clearance for
the HAWK shipment. It was repeated by North in a memorandum
dated December 5, 1985, prior to the December 7 meeting of the
President's top advisers. However, according to the evidence, the
Iran initiative actually began and went forward through the efforts
of McFarlane conducted to a considerable extent without informing
the Secretary of State. When the Secretary of State heard the
warehouse story at the November 10, 1986 meeting, he considered
it "cock and bull." Shultz Test., Hearings. 100-9, 7/23/87. at 30.

••McFarlane testified that the President approved the August-
September 1985 shipments McFarlane Test., Hearings. 100-2. 5/11/
87, at 49. Based on all of the evidence, the Committees believe that
the President did so.

294

Chapter 19

ment, Poindexter continued to argue that "no state-
ment [is] needed, news has peaked, no hearings until
Jan[uary], so [we] should not say anything." '■•

As the group continued to discuss the proposed
public response, Secretary Weinberger noted his sur-
prise that more than 500 TOW missiles had been
shipped. He said he had understood that no more than
500 TOWs would be sent unless all the hostages were
released. Poindexter responded that it "just always
came back to Pres[ident], he agreed to go for-
ward." '^ In this connection, Secretary Shultz ex-
pressed his amazement that he was not informed of
the January Finding until November. ^^ When Poin-
dexter told the group that the weapons shipped were
in "minuscule" amounts. Secretary Shultz responded
that "[i]t is ransom . . . [we] must not gild lily," and
that he was "afraid of technically correct statements
that are not fully descriptive." '''

The meeting concluded as it began, when, accord-
ing to Regan's notes, the President had outlined the
type of statement he wanted:

We have not dealt directly w[ith] terrorists, no
bargaining, no ransom. Some things we can't dis-
cuss because of long-term consideration of people
w[ith] whom we have been talking about the
future of Iran.'*

The President, Attorney General Meese and Casey
all agreed that the statement would emphasize the
strategic component of the arms sales and downplay
efforts to release the hostages.'^

Later that afternoon, Poindexter and Meese re-
viewed a draft White House statement prepared by
Casey.* This draft asserted that U.S. policy "has been
and continues to be to restrain shipments of arms to
either [Iran or Iraq] that could alter the balance or
prolong the war . . . [and] not to reward hostage
takers by meeting their demands." ^° Regan's notes of
the review session indicate that certain information in
the proposed statement was eliminated by unnamed
NSC staffers due to ongoing conversations with the
Iranians in Geneva, leading to the "possible release of
2 [hostages], maybe all 5." The notes further reflect
that Poindexter obtained "sign offs" on the statement
from Secretary Weinberger, Attorney General Meese,
Casey, and the President. He was unable to contact
Secretary Shultz, who was en route to South Amer-
ica.^'

Secretary Shultz received the draft statement
during his trip and advised Poindexter that he object-
ed to the portion that asserted there had been "unani-
mous support for the President's decisions." ^^ By
cable. Secretary Shultz told Poindexter that this char-

• N 8995-96. Prior to this meeting, Poindexter and Casey ex-
changed drafts of a proposed Presidential statement. Casey de-
scribed Poindexter's draft as doing "little more than say we re-
viewed the matter and discovered that we didn't break the law,"
stating that his own draft "says a little more."

acterization was simply inaccurate; he had always
supported the President, but he had opposed the
policy. At Secretary Shultz's insistence, Poindexter
changed the statement to read that there had been
"unanimous support for the President" among his
senior advisers. ^^ Secretary Shultz was not "altogeth-
er comfortable" with this change, although he agreed
to the statement as revised.^*

Phase 2 of the Administration
Response: Limited Disclosure

Preparing for the President's Address to
the Nation

After November 10, the White House began prepar-
ing a formal statement for the President to deliver
personally to the Nation. This statement was dis-
cussed at the daily national security briefing between
Poindexter and the President, both of whom ex-
pressed continued hope that more hostages would be
released that coming weekend. They agreed that the
President's upcoming statement would focus on the
legality of the arms initiative and emphasize that the
arms sales did not constitute ransom. ^^

On the same day, McFarlane sent a PROF message
to Poindexter in which he stated that "the only
way — the only way — the Administration can expect
to come out of this with any element of credibility is
for there to be some evidence that it was worth it to
try to engage moderates in Iran." This required, ac-
cording to McFarlane, a statement from Iran. He rec-
ommended that the United States concentrate all ef-
forts on convincing the Iranians to change their rhet-
oric immediately. McFarlane told Poindexter that he
had "drafted up some words and left them with Ollie
to be sent to Iran." ^^

McFarlane also produced and sent to Poindexter a
draft statement for the President, focusing on the
effort to open a political dialogue with Iranian moder-
ates. ^■' Poindexter wrote back that he had reviewed
the draft with North and that they had agreed there
was a need to show the final product to George Cave
of the CIA in order to "get an 'Iranian reaction' on
it." 28

On November 12, the day before the President was
to address the Nation, he presided over a national
security briefing of Congressional leaders on the arms
sales. The executive branch attendees included the
Vice President, Secretary Shultz, Secretary Wein-
berger, Attorney General Meese, Casey, Regan, Poin-
dexter, and appropriate staff Senate Leaders Robert
Dole and Robert Byrd and House Majority Leader
Jim Wright and Representative Dick Cheney repre-
sented Congress. The President opened the meeting
by stating that no laws were broken, no ransom paid
for hostages, and no officials or agencies within the
U.S. Government bypassed.^*

295

Chapter 19

Poindexter conducted the briefing itself. Once
more, he omitted certain material facts and was af-
firmatively misleading on others. Poindexter contin-
ued to talk in terms of only one Finding, omitting any
reference to the other two signed by the President.
He continued to discuss the transfer of only 1,000
TOWs and 240 HAWKs parts, omitting any reference
to the additional 1,004 TOWs or the November 1985
HAWK shipment. Moreover, Poindexter continued to
intimate that the 1985 Israeli arms shipments to Iran
had been without U.S. authorization or prior knowl-
edge.^"

At the morning security briefing the next day, No-
vember 13, there was discussion of the elements of
the President's upcoming statement, including that the
arms shipments had not altered the balance in the
Iran-Iraq war; that the arms sold were defensive in
nature; and that there would be no additional ship-
ments. There was discussion, too, of whether the total
arms shipped to Iran would have fit in one 747 or C-5
cargo plane. The President also stated, according to
notes of the meeting, that the Administration "should
have gone public sooner." ^'

Poindexter briefed reporters "on background" (not
for attribution) the same day, November 13. Although
Poindexter initially told the reporters that any ship-
ments made prior to January 1986 were undertaken
without any U.S. role "either condoning, winking,
encouraging, or anything of that nature," he acknowl-
edged later in the briefing that "there was one ship-
ment that was made not by us, but by a third country
prior to the signing of [the January 17 Finding]."
Poindexter did not confirm that the shipment was
made by Israel, but did state that the shipment was
made in "our interests." When asked about the exist-
ence of relevant Presidential Findings, Poindexter did
not mention the Finding signed by the President in
December 1985, but instead told reporters that the
President "signed a document that has authorized this
project" in January 1986.^^

The President Addresses the Nation

The President addressed the Nation on November
13. He disclosed that the diplomatic initiative with
Iran had been underway for some 18 months. The
purposes of this initiative, he said, were (1) to forge a
new relationship with Iran, (2) to bring an honorable
end to the Iran-Iraq war, (3) to eliminate state-spon-
sored terrorism, and (4) as part of the new relation-
ship, to attain the safe return of the American hos-
tages held in Lebanon. ^^

The President stated that he had authorized "the
transfer of small amounts of defensive weapons and
spare parts. . . . These modest deliveries, taken togeth-
er, could easily fit into a single cargo plane." He
elaborated that the weapons shipped "could not, taken
together, affect the outcome of the 6-year war be-
tween Iran and Iraq nor could they affect in any way

the military balance between the two countries." He
asserted that since the initiative had commenced,
there had been no evidence of Iranian complicity in
acts of terrorism against the United States. The Presi-
dent also emphasized that the arms initiative was con-
ducted in full compliance with the law, and that all
appropriate Cabinet officers "were fully consulted."
He attacked "the wildly speculative false stories about
arms for hostages and alleged ransom payments." The
President concluded by stating that "[w]e did not —
repeat — did not trade weapons or anything else for
hostages nor will we." ^*

The President thus committed himself categorically
to the proposition that there had been no trade of
arms for the hostages and no violations of law. Cer-
tain members of the NSC staff and of the CIA, in
turn, committed themselves to creating a version of
the facts for internal and public consumption that
would sustain this proposition.

Events Between November 13 and
the November 19 News
Conference

The Secretary of State testified that, throughout the
first weeks of November after the Beirut report, he
believed that the President was being misled and mis-
informed by his staff, particularly Poindexter. Secre-
tary Shultz said he repeatedly argued to the President
and Poindexter that nobody looking at the record
would credit the assertion that the initiative did not
involve arms-for-hostages, and that it was critical
there be no tinkering with the facts. It was, the Secre-
tary said, a "battle royal" to get out the truth. ^*

Secretary Shultz also pressed for a definitive state-
ment that the United States would not under any
circumstances sell any more arms to Iran. He met
with the President on November 14 to urge that he
make precisely that statement, and he repeated this
recommendation in a draft paper delivered to Regan
on November 15.^* But the statement was not made,
nor was Secretary Shultz assured that the arms ship-
ments would be halted. Consequently, when Secre-
tary Shultz appeared on Face The Nation on Novem-
ber 16 and expressed the view that the United States
should not sell additional weapons to Iran, he felt
constrained to answer in response to a question that
he, the Secretary of State, did not have authority to
speak for the Administration on this point. ^'

The next day the White House stated definitively
that there would be no further arms sales to Iran. The
White House also reaffirmed that the Secretary of
State spoke for the Administration on matters of for-
eign policy.^*

Meanwhile, at the Attorney General's request,
Charles J. Cooper, Assistant Attorney General for the
Office of Legal Counsel, had been looking into the

296

Chapter 19

legal issues surrounding the Iranian arms sales.* On
November 12, 1986, Cooper sent a legal memorandum
to the Attorney General that concluded, among other
things, that so long as there was a Finding pursuant to
the Hughes-Ryan Amendment, the arms sales did not
violate the law.^^ In a meeting with Poindexter and
Thompson that same day. Cooper had been shown
only the January 17 Finding and had been left with
the impression that this Finding predated any arms
shipments to Iran.''°

On November 17, Cooper received a draft chronol-
ogy of events in the Iran initiative prepared by the
NSC staff. In reviewing this chronology. Cooper
learned for the first time that arms had been trans-
ferred by Israel to Iran prior to the January 17, 1986,
Finding.'" Cooper informed the Attorney General,
who said that he, too, had been unaware of any arms
shipped to Iran prior to the January Finding.*^

On the following day, November 18, North re-
ceived calls from Alton Keel, Deputy National Secu-
rity Adviser, Poindexter, and Richard Armitage, As-
sistant Secretary of Defense, all concerning the legal
problems raised by the pre-Finding arms shipments to
Iran.

In the morning on November 18, an executive
branch general counsels' meeting was held in the
office of White House Counsel Peter Wallison. This
meeting was attended by NSC general counsel
Thompson, Cooper, CIA general counsel David Do-
herty, and State Department Legal Adviser Abraham
Sofaer. Sofaer and Wallison expressed concern at the
meeting when Thompson refused to provide them
with all of the facts surrounding the Iran arms sales.
Sofaer pressed on this point, and Thompson replied
that he was acting on instructions from Poindexter.
He said that the Congressional leaders would be given
all the information they needed to know, but that
there was no need for the President's counsel or the
State Department's Legal Adviser to know any more
than Thompson was saying.''^

Thompson asserted that, from a political standpoint,
matters "seemed calm and the [Congressional Intelli-
gence] Committees seem to be accepting the position
of the White House." Sofaer did not accept this expla-
nation and told Wallison that Thompson's refusal to
give them a full briefing was "extremely serious."
Wallison agreed and stayed behind at the end of the
meeting to talk with Thompson. Later that day,
Sofaer was notified that Poindexter would brief him
and Undersecretary of State Michael Armacost at
6:00 p.m.*'*

At the 6:00 p.m. briefing, Poindexter laid out more
of the facts to Sofaer and Armacost than Thompson

•Cooper Test., Hearings. 100-6, 6/25/87, at 227. Cooper had
received this assignment from the Attorney General on November
7, and had been advised at the same time that his NSC point of
contact would be Paul Thompson, the NSC's general counsel.
Meese Dep.. 7/8/87. at 53-54.

had disclosed earlier in the day — but still not all of
the facts. For example, Poindexter made no reference
to the pre-January 17 Findings or to the November
1985 HAWK shipment. Sofaer left the meeting highly
concerned that he still did not have the whole
story.'*''

During the same day, November 18, Poindexter
and Casey spoke by secure telephone. A transcript of
their conversation indicates that they discussed meet-
ing to prepare for their Congressional briefings and
for Casey's scheduled November 21 testimony on
Capitol Hill. Poindexter told Casey that the NSC staff
had been "putting together all the chronologies and
all the facts that we can lay our hands on . . . ." *^
With respect to the proposed preparation meeting,
Casey asked whether Poindexter intended to have
many people present, specifically mentioning "State"
and "Defense." Poindexter responded, "I'd like to
spend some time just the two of us. . . . Ed Meese
indicated ... he should want to be helpful and so he
would like to be in at least one of the meetings." *'

Meanwhile, at North's request, McFarlane re-
viewed the draft opening statement to be used by the
President at the news conference scheduled for the
next evening. According to McFarlane, the statement
seemed "to be incomplete in a number of respects,"
and McFarlane sent suggested changes to Poindexter
by PROFs computer. In the proposed changes,
McFarlane denied United States approval of any pre-
Finding shipments.**

Later the same day, November !9, McFarlane
stopped at Poindexter's office to pick up a copy of
the President's opening statement for the press confer-
ence. With at least NSC staffer Howard Teicher and
North present (Keel and Poindexter may also have
been there), McFarlane told North that a problem
remains over "the channeling of money to the Con-
tras." There is no evidence that anyone overheard
McFarlane's statement to North. ■*^

The President's November 19
News Conference

On November 19, the President vouched for facts
that were wrong. In his nationally televised news
conference, the President made the following asser-
tions— all of which were incorrect:

• The President denied any involvement by a
third country in the arms sales. When asked if he
could explain the Israeli role, he replied, "No,
because we, as I say, have had nothing to do
with other countries or their shipment of arms or
doing what they're doing."

• When asked whether he was saying that "the
only shipments with which we were involved
were the one or two that followed your January

297

Chapter 19

17 Finding and that . . . there were no other
shipments which the United States condoned,"
the President responded, "That's right. I'm
saying nothing, but the missiles we sold . . . ."

• The President asserted that 1,000 TOW mis-
siles were transferred (in fact, 2,004 were trans-
ferred), and that the 1,000 transferred TOWs
"didn't add to any offensive power on the part of
Iran."

• The President stated that "everything that we
sold [Iran] could be put in one cargo plane, and
there would be plenty of room left over."

In addition, the President repeated his assertion that
the United States had not traded arms for hostages,
relying on the distinction that the Iranian Govern-
ment itself did not hold the hostages.

Although the President denied any third-country
involvement in the sales and said he could not explain
the role of Israel, the Israeli role had been discussed
prominently in the cover memorandum on the basis of
which the President signed the January 17, 1986,
Finding permitting the sales to go forward. Further,
while the President also stated at his news conference
that the United States had not been involved with or
condoned any shipments prior to the January 1986
Finding, he told the Secretary of State that day that
he had known of the November 1985 shipment of
HAWK missiles to Iran by Israel.*

After the press conference, Charles Cooper tele-
phoned Paul Thompson to initiate a correction of the
President's obvious misstatement that no third coun-
try had been involved in the arms sales. Thompson
assured Cooper that the NSC staff was already aware
of this error and was planning to correct it.*° A
correction was issued from the White House 20 min-
utes later. Even this correction, however, left the
record inaccurate. The correction conceded that a
third country had been involved, but did not state
that the United States had been involved in the sales
by that country prior to the January 17, 1986, Find-
ing, ^i

Commenting on the numerous errors at the press
conference, Regan testified that Poindexter and his
staff had spun so many stories in preparing the Presi-
dent that "this sort of confused the Presidential mind
as to what he could say and couldn't say and what he
should say and shouldn't say." ^^

The Secretary of State, who had watched the press
conference, sought an immediate meeting with the
President. ^^

The President and Secretary of
State Meet on November 20

When he asked the President for a meeting. Secretary
Shultz said that he could demonstrate that a number
of facts had been misstated at the press conference.**
In Secretary Shultz's view, the President's skillfulness
as a communicator was being exploited by the NSC
staff for its own purposes — to spread inaccurate infor-
mation.**

The Secretary and the President met on November
20. Donald Regan was also there. It was, Secretary
Shultz testified, a "long, tough discussion. Not the
kind of discussion I ever thought I would have with
the President of the United States." **

According to Secretary Shultz, he reviewed with
the President the factual errors at the press confer-
ence.* The President "corroborated" the facts con-
cerning his approval of various arms shipments — in-
cluding the November 1985 HAWK shipment.*'' The
President said, however, that "what he expected to
have carried out was an effort to get an opening of a
different kind to Iran and the arms and the hostages
were ancillary to that, that was not his objective." **
Shultz replied, "Well I recognize that, Mr. President,
and that is a good objective, but that isn't the way it
worked." *^

The Secretary also asserted that the President was
being given wrong information, including "informa-
tion that suggested that Iran was no longer practicing
terrorism." ®° He testified that his message overall to
the President was: "You have got to look at these
facts." 8>

The NSC Staff's Chronologies

Information was in fact being prepared by the NSC
staff in the form of "chronologies," documents setting
forth key events relating to the Iran initiative in
chronological order. The NSC staff had begun pre-
paring a chronology shortly after the disclosure of the
Iran arms sales. The chronology started out as a one-
or two-page outline. As time passed, however, the
chronology was transformed into a 17-page single-
spaced document containing background information
and rationales for the various events and decisions.
Although a number of persons worked on the NSC
staff chronologies, not all participated in falsifying the
facts. That was the province of North, McFarlane,
and Poindexter. North testified that the three had
purposefully misrepresented significant events in the
chronologies.^^

•Shultz Test., Hearings, 100-9, 7/23/87, at 44; Ex. GPS-C. Ac-
cording to contemporaneous notes made by Shultz's Executive
Assistant, the President made this statement to Shultz on November
19. 1986 prior to the press conference.

•Shultz Test.. Hearings. 100-9. 7/23/87, at 44. A paper prepared
for Shultz's meetmg with the President detailed the facts that were
at odds with public statements from the White House. Ex. GPS-45;
Sofaer Dep. at 58.

298

Chapter 19

Poindexter acknowledged only that he had instruct-
ed North to omit any reference to the diversion. ^^
Otherwise, both Poindexter and McFarlane claimed
that they tried to paint a true picture in the chronolo-
gies, and that any failures were the result of faulty
memory or, in the case of McFarlane, an effort to
"gild" the facts. '^•' The record refutes this claim — for
the "errors" in the chronologies were not simply in-
correct dates or imperfect renditions of meetings, but
wholesale distortions of key events. Moreover, it was
McFarlane himself who supplied narratives containing
the most extreme misrepresentations, with Poin-
dexter's approval and North's assistance.

The most glaring misrepresentations concerned the
Israeli shipments made before the President's January
1986, Finding — the August-September 1985 shipments
of 504 TOW missiles and the November 1985, ship-
ment of 18 HAWK missiles from Israel to Iran. The
initial versions of the chronology, prepared by North
on November 7 included fairly accurate references to
those shipments. ^^ McFarlane then sent a PROF mes-
sage to Poindexter on November 7 suggesting that
"[i]t might be useful to review what the truth is." But
McFarlane's version was not the "truth":

• He asserted that the August-September TOW
shipments occurred when the Israelis "went
ahead on their own" after McFarlane had disap-
proved; and

• He made no mention at all of the November
1985 HAWK shipment.««

McFarlane's "truth" set the stage for what was to
come. Subsequent versions of the chronology, on No-
vember 12 and 13, picked up the theme of "no prior
U.S. approval" of the 1985 Israeli shipments and
claimed that the United States "acquiesced" in Israel's
TOW shipment only after the release of hostage Ben-
jamin Weir on September 14, 1985. No reference was
made to any Presidential approval of those shipments
or to any of the prior discussions between Israel and
the United States from June through September; nor
was there any reference to the November 1985
HAWK shipment."

In the November 17, 5;00 p.m. edition of the chro-
nology, the authors declared falsely that the United
States was "not aware of the [August-September
TOW] shipment at the time it was made." ^* Howev-
er, this version of the chronology did contain an
accurate reference to the November 1985 HAWK
shipment, except that it was silent on the question of
U.S. knowledge and approval. ^^

Then, three separate discussions occurred on No-
vember 18, between North and Keel, Poindexter, and
Armitage, concerning the legality of the 1985 sales.'"
At 10:30 a.m., Keel and North reviewed the questions
the President might be asked at the press conference
on November 19. Two of the questions were, "Did
Israeli shipments on our behalf violate the law?" and.

"Did this violate the Arms Export Control Act?" At
5:30 p.m.. North spoke to Poindexter, who referred to
the pre-Finding period and told North that the "big
issue then was legality." Then, at 6:00 p.m., Armitage
called and told North that lawyers were asking him
about the Israeli shipments in 1985 and wanted to
know whether the United States knew about them."
Following these conversations, another version of
the chronology was drafted at 7:30 p.m. on Novem-
ber 18. It denied prior U.S. knowledge of the August-
September 1985 TOW shipments and expressly stated
that the November 1985 HAWK shipment was not an
"authorized" exception to U.S. policy. It also con-
tained an augmented misrepresentation of the TOW
shipments. It stated that:

• When informed by Israeli official David
Kimche of a possible transfer of TOWs, the
United States, via McFarlane, refused to acqui-
esce in the transfer or to guarantee replacement
of the TOWS.

• When the United States learned after the fact
of the TOW transfers, a decision was made not
"to expose this Israeli shipment," so that the
United States could exploit the Israeli channel to
Iran to further its own strategic initiative.'^

Later in the evening on November 18, McFarlane
sent Poindexter a lengthy PROF message suggesting
deletions to the November 17 draft chronology and
an insert relating principally to the 1985 shipments.
He recommended that the chronology add that, after
authorizing a "dialogue" with Iran in July 1985, the
President rejected two separate Israeli proposals for
arms transfers (one for a direct sale, the other for
shipment by Israel), and, further, that "[w]e subse-
quently learned in late August the Israelis had trans-
ferred 508 TOW missiles to Iran." '^ North incorpo-
rated McFarlane's insert virtually verbatim in the next
versions of the chronology, prepared on November
19 at 11:00 a.m. and November 20 at 1:00 p.m. and
8:00 p.m.'"

The final two editions included two additional mis-
statements contributed by North: (1) that the Israelis
"told us that they undertook the action, despite our
objections, because they believed it to be in their
strategic interests," and (2) that "[a]fter discussing this
matter with the President, it was decided not to
expose this Israeli delivery . . . ."*

As noted, the November 1985 HAWK shipment
first appeared in a straightforward way in North's
initial November 7 chronology.'^ It next appeared in
the November 17, 3:00 p.m. version of the chronolo-
gy, where it was presented as an Israeli shipment of

•The "decision not to expose" fabrication first appeared, as dis-
cussed earlier, in the Nov. 18, 7:30 p.m. version of the chronology.
It dropped out of the Nov. 19, 1 1:00 a.m. edition, and reappeared in
the Nov. 20 versions with a reference to the President.

299

Chapter 19

18 HAWKs which resulted from "urgent entreaties
from the Iranians" and "raised U.S. concerns that we
could well be creating misunderstandings in
Tehran." ''^ The 5:00 p.m. edition on November 17
kept the same description but added that "[t]hese mis-
siles were subsequently returned to Israel in February
1986, with U.S. assistance."* On November 18, the
chronology recited that the return of the HAWKs
was "by mutual agreement of all three parties." '^

However, following the three conversations North
had on November 18 with Alton Keel, Poindexter,
and Richard Armitage regarding the legality of the
1985 shipments, the story began to change. On No-
vember 18, the chronology asserted that the HAWK
shipment was "not an authorized exception to [U.S.]
policy," and was retrieved "as a consequence of U.S.
intervention." ''* North conceded in his testimony
that these changes in the chronology were an attempt
to deal with the Arms Export Control Act problems
that had been brought to his attention in his earlier
conversations.''^

After McFarlane's lengthy PROF message of No-
vember 18,*° the HAWK shipment reference disap-
peared from the chronology and was replaced in its
entirety with the precise language recommended by
McFarlane — which made no reference to arms at all:

Later in the fall, other transfers of equipment
were made between Israel and Iran although
some of the items were returned to Israel.*'

The November 19, 11:00 a.m. edition of the chronolo-
gy added that, in a December 1985 meeting with an
Israeli official, McFarlane "made clear our strong ob-
jection to the Israelis shipment of HAWK mis-
siles." *^

On November 20, North and others turned to the
proposed testimony that Casey was to give Congres-
sional Intelligence Committees the next day. They
faced the problem that a CIA proprietary airline had
actually carried the HAWK missiles to Iran in No-
vember 1985, but the President had denied U.S. in-
volvement in that weapons shipment at his press con-
ference the day before. Certain members of the NSC
staff developed what Regan later termed a "cover
story:" that the U.S. Government had been told by
the Israelis that the November 1985 shipment carried
by the proprietary was "oil drilling equipment," not
arms.

The "oil drilhng equipment" cover story first ap-
peared in the chronology on November 20 at 1:00
p.m., shortly before North, Poindexter, Casey, and
others met to discuss Casey's testimony. It contained
the following misstatements:

• In mid-November 1985, the Israelis said they
were nearing a breakthrough and asked a U.S.
official for an airline that could discreetly deliver
passengers and "cargo" to Iran.

• Since the United States "had expressed so
much displeasure over the earlier TOW ship-
ment,' the Israelis assured the U.S. Government
that the cargo was "oil drilling parts." Only then
did the U.S. pass the name of a "proprietary"
airline to haul the shipment.

• Not until January 1986 did the United States
learn that "the Israelis, responding to urgent en-
treaties from the Iranians, had used the proprie-
tary aircraft to transport 18 HAWK missiles to
Iran."

• The U.S. Government's "belated awareness"
of this shipment "raised serious concerns that
these deliveries were jeopardizing our objective
of arranging a direct meeting with high-level Ira-
nian officials." So Poindexter "noted our strin-
gent objections to the HAWK missile shipment"
to the Israelis and indicated that the United
States would have to act to have them returned,
as was done in February.*^

Following the November 20 meeting to prepare
Casey's testimony, and the subsequent objections to
the proposed Casey testimony raised by the State
Department, the cover story was amended — in what
is believed to be the last version of the chronology —
to delete all references to oil drilling equipment. The
U.S. authorization of the November 1985 shipment,
however, was still denied.**

The fictional accounts in the chronologies were not
limited to the 1985 shipments. For example, the chro-
nologies omitted the President's December 1985 Find-
ing (which retroactively "authorized" the November
shipment that the United States had supposedly ob-
jected to); affirmatively misrepresented that there had
been consultation with "all appropriate" or "relevant"
Cabinet officers during the initiative; and baldly as-
serted that all arms sales were "within the limits of
established policy and in compliance with all U.S.
law."

All of this was not the result of any memory lapse.
The consequences of this exercise in falsifying the
facts were severe. As North testified, by creating an
erroneous version of the facts in the chronologies,
those responsible were "committing the President of
the United States to a false story. "*^

On November 20 and 21, Poindexter and Casey
would take further steps in the same direction.

•N 9368. These statements were true as far as they went: but the
chronology remained silent on whether the United States had ap-
proved the shipment.

300

Chapter 19

Casey and Poindexter Prepare for
Congress

On November 21, Casey was scheduled to testify
before the House and Senate Intelligence Committees,
and Poindexter was to brief delegatons of the same
Committees. On November 20, a meeting was held in
Poindexter's office to review a CIA draft of Casey's
proposed testimony and coordinate it with Poin-
dexter's upcoming briefing. In attendance were Casey,
Attorney General Meese, Poindexter, North, Cooper,
Thompson, and Robert Gates of the CIA.*" The CIA
brought a proposed insert dealing with the November
1985 HAWK shipment. It said that the CIA had been
told the shipment was oil drilling equipment.*'
During discussion of the insert. North suggested
changing it to say that "no one in the U.S. Govern-
ment" knew at the time that the November 1985
shipment contained arms. According to Cooper,
North also stated at the meeting that the United
States had to force Iran to return the 18 HAWKs that
Israel had delivered in November, after learning a
few months after-the-fact that arms had been
shipped.** Both Meese and North made handwritten
notes of North's points on the draft insert.*^ North's
version was accepted.

The meeting lasted approximately 2 hours. Attor-
ney General Meese had to leave early to make a
speech that evening at West Point. After the meeting
ended. Cooper was asked to come to White House
Counsel Wallison's office. He went there with NSC
general counsel Thompson. Wallison, Counsel to the
President, strenuously objected to not having been
included in the just-concluded meeting.^"

During this session in Wallison's office. State De-
partment Legal Adviser Abraham Sofaer telephoned
Wallison, and indicated that there was a problem with
Casey's proposed testimony. At Cooper's suggestion,
Wallison returned Sofaer's call on a secure line.
Sofaer advised Wallison that Secretary Shultz recalled
a conversation with McFarlane in November 1985, in
which McFarlane made specific reference to the ship-
ment of HAWK missiles from Israel to Iran. Sofaer
testified that he had also spoken with Deputy Attor-
ney General Arnold Burns earlier in the day to ap-
prise him of the discrepancy between Casey's draft
testimony and Secretary Shultz's recollection. Burns
told Sofaer that Attorney General Meese had been
advised of this problem, and was aware of facts that
would explain everything.*

Wallison advised Cooper and Thompson of Sofaer's
report. Cooper then asked Thompson to contact
North and McFarlane to get the facts straight.
Cooper reminded Thompson of North's statement at

•Sofaer Dep. at 38-41. Burns barely recalls the conversation, and
Attorney General Meese has no recollection of talking to Burns
about Sofaer's call. Meese Test., Hearings, 100-9, 7/28/87, at 221;
Meese Dep., 7/8/87, at 70; Burns Int., 7/7/87.

the meeting earlier in the day that no one in the U.S.
Government knew that the November 1985 shipment
contained arms. Thompson agreed to contact North
and McFarlane.® '

Cooper then returned to his office, spoke by tele-
phone to Sofaer, and asked if Secretary Shultz was
certain of his November 1985 conversation with
McFarlane. Sofaer replied that the State Department
had a contemporaneous note written by Secretary
Shultz's Executive Assistant, Charles Hill, of a con-
versation between McFarlane and Shultz on Novem-
ber 18, 1985, which contained the word "HAWKS."
Sofaer told Cooper that if Casey's testimony were
given in its current form, "he [Sofaer] would leave
the Government," to which Cooper replied, "We may
all have to." *^

Cooper then telephoned Thompson, who said that
North and McFarlane each stuck by his earlier story,
that they had no contemporaneous knowledge that
arms were shipped to Iran in November 1985. Cooper
did not know who was right or wrong. Moreover,
Sofaer told Cooper that if Casey testified that no one
in the U.S. Government knew of the weapons ship-
ment. Undersecretary Armacost would have to testify
otherwise.®^

Cooper then placed a secure call to Attorney Gen-
eral Meese at West Point, and the two agreed that the
problem language should be deleted from Casey's
proposed testimony. Attorney General Meese agreed
also with Cooper's suggestion that he return immedi-
ately to Washington and take responsibility for "get-
ting his arms around this . . . ." ^*

Cooper next spoke directly to Poindexter (who al-
ready had heard from Thompson), and Poindexter
agreed that they would have to refrain from making
the incorrect statement. Poindexter said he had at-
tempted to discuss the issue with Casey, but that
Casey was half-asleep when Poindexter called.®^ Ac-
cordingly, Cooper called CIA General Counsel David
Doherty to advise him that the problem statement
should be deleted. Doherty told Cooper that he al-
ready had changed Casey's testimony in that
regard. ^^

In his public testimony, North conceded that the oil
drilling equipment cover story agreed to at the meet-
ing on November 20, 1986, was false. He played
down his role in preparing Casey's testimony, howev-
er, and claimed that he acted promptly in a later
private meeting with Casey to correct it. He testified
that he corrected the proposed testimony even though
"there are a lot of heroes walking around that have
claimed credit" for causing the correction.®'

Cooper's testimony conflicts with North's. Accord-
ing to Cooper, it was North who pushed strongly for
the oil drilling equipment cover story and the claim
that "no one in the U.S. Government" knew that
missiles rather than oil drilling equipment were being
shipped in November 1985. A one-page draft insert in

301

Chapter 19

North's handwriting corroborates Cooper's testimo-
ny.8* So does the fact that the oil drilhng equipment
cover story was inserted into the NSC staffs chronol-
ogy by North at 1:00 p.m. on November 20 shortly
before the meeting with Casey. ®^ Moreover, what-
ever efforts North made later to "correct" Casey's
testimony, Casey told the oil drilling cover story to
both Congressional Intelligence Committees the next
day, modified so as to make it literally true but com-
pletely misleading.

The record makes clear that North, Poindexter,
Casey, and others were engaged in a deliberate at-
tempt to falsify the facts concerning the November
1985 HAWKs shipment. This point was illustrated in
Donald Regan's testimony to the Committees. Regan
testified that, although he was Chief of Staff, he was
never consulted about the President's knowledge of
the November 1985 shipment during the frantic effort
to prepare a statement for Casey's testimony and
Poindexter's Congressional briefing on what the U.S.
Government knew.'"" When asked at the hearing
about the assertion that the U.S. Government believed
that the November shipment contained oil drilling
equipment — Regan dubbed that claim, "the cover
story." '01

Poindexter, Casey, and the
Intelligence Committees:
November 21

November 21 was the day that Casey and Poindexter
appeared before the Intelligence Committees of Con-
gress— the event for which they had attempted to
coordinate their statements on November 20. Their
efforts continued on Friday morning, November 21,
beset by the fact that their plan to present a well-
orchestrated "cover story" about the November 1985
HAWK shipment had broken down.

At approximately 8:00 a.m.. Cooper arrived at the
CIA to ensure that the disputed language regarding
the November HAWK shipment had been deleted
from Casey's Congressional testimony. Cooper met
with Casey. Casey accepted the revisions without
comment. 1°^ After the meeting, CIA Associate Gen-
eral Counsel Jameson whispered to Cooper that
during the November 1985 shipment, one of the pilots
had radioed to the ground that the cargo was weap-
ons.'"^

Poindexter was the first to brief members of the
House and Senate Intelligence Committees. He relat-
ed the cover story, not the actual facts. According to
the memorandums of that meeting, Poindexter main-
tained thai:

• The United States only learned of the August-
September 1985 TOW shipments after the fact,
whereupon the President expressed both his dis-
pleasure at the arms transfer and his appreciation

for the subsequent release of hostage Benjamin
Weir.

• The United States did not learn until January
1986 that Israel had transferred 18 HAWK mis-
siles to Iran in November 1985, and the United
States persuaded the Iranians to return the mis-
siles to Israel in February 1986.

• He (Poindexter) had learned only the day
before that there may have been prior U.S.
knowledge concerning the November 1985 ship-
ment.

• Finally, Poindexter promised the Senate Intel-
ligence Committee that he would check into the
facts and report back. ' °*

Poindexter attempted to explain away his false
statements by claiming during the hearings that he
had forgotten all about the November 1985 arms ship-
ment at the time of this Congressional briefing.'"^
But Poindexter had been personally involved in this
extraordinary shipment of HAWK missiles to Iran.
North had written PROF notes and memorandums/
to Poindexter both before and after the November
1985 shipment explaining the problems in arranging it
as well as the reason the Iranians had immediately
rejected the HAWKs. Moreover, according to his
testimony, on the first day that Poindexter served as
National Security Adviser, December 5, 1985, he had
obtained the President's signature on a Finding specif-
ically designed to authorize, retroactively, and with-
out notification to Congress, the U.S. Government's
assistance with the November shipment and the at-
tempted hostage trade — a Finding Poindexter de-
stroyed only hours after he promised the Congres-
sional Committees he would check into the facts and
report back.'"*

Casey testified next as part of a panel including
Undersecretary of State Armacost and Assistant Sec-
retary of Defense Armitage. In his opening statement,
Casey testified that the CIA was asked in November
1985 to recommend a proprietary to transport "bulky
cargo." The crew was told, he said, that the cargo
consisted of spare parts for the oil drilling fields in
Tehran. The phrase "no one in the U.S. Government
found out that our airline had landed HAWK missiles
into Iran until mid-January" had been deleted from
his opening statement. But Casey gave no indication
that the CIA and NSC staff knew that the shipment
was arms, not oil drilling equipment.'"''

Under questioning by Senate Committee Members,
Casey, like Poindexter, reverted to the cover story:

SENATOR LEAHY: ... On November 25th a
plane owned by a CIA proprietary . . . delivered
18 HAWK missiles from Israel to Iran. I dis-
cussed this at some length with Admiral Poin-
dexter this morning. You referred to it here. The

302

Chapter 19

Admiral did not have many details on it. I think
he said that he learned of this only yesterday, this
shipment by a CIA proprietary of these HAWK
missiles. Now, did the CIA know what was on
that aircraft, the November 25th '85 aircraft?

MR. CASEY: There is some question about that.
I was told yesterday the CIA didn't know it until
later on.

SENATOR LEAHY: Did not know until later

MR. CASEY: Did not know until later on. Did
not know until the Iranians told them some time
in January by way of complaining about the inad-
equacy of whatever was delivered.

SENATOR LEAHY: But my concern is that the
NSC says now that they didn't know what was
going on and that it just found out that the CIA
sent that flight over, and they are trying to figure
out why nobody knew what was on it, and now
the CIA says well, we did this because the NSC
requested it, and we didn't know exactly what
they wanted. Do you understand why somebody
raised the questions wondering whether there
was just plausible deniability being set up here.

MR. CASEY: Hadn't thought about it. I hadn't
thought about it.

SENATOR LEAHY: The question I ask, and I
would hope that the Agency will give me a very
full, clear, specific answer, is did they know at
the time, and if they didn't know at the time,
why not?

MR. CASEY: Well, I have inquired into that
myself, and have been told, and as far as I can
find out, the Agency did not know what it was
handling at the time. Now, I am still going to
inquire further into that." '"*

Before the House Permanent Select Committee on
Intelligence, Casey's testimony concerning the No-
vember HAWK shipment was similarly misleading.
When asked if the Israelis had made any shipments to
Iran requiring advance notification or permission,
Casey referred only to the August-September 1985
TOW shipments. '"s

Casey went out of his way on three occasions
during his House Committee testimony to say that the
NSC staff was "guiding and active in the private
provision of weapons to the Contras." '^°

303

Chapter 19

Chapter 19

1. Shultz Test., Hearings, 100-9, 7/23/87, at 35.

2. Ex. GPS-35.

3. Id.

4. Ex. GPS-36.

5. Id.

6. N 7796-99, Iran Press Guidance from Poindexter to
Keel, 11/4/86; Ex. GPS-37.

7. Shultz Test., Hearings, 100-9, im/il, at 38.

8. N 9028-29. Rod McDaniel Notes, 1 1/6/86.

9. Pres. Docs., 11/10/86, Vol. 22, No. 45, at 1534.

10. N 18467, PROF from Poindexter to McFarlane. 11/
7/86, 22:55:45.

11. Ex. GPS-C.

12. Ex. DTR-41.

13. Id

14. Ex. DTR-41 A.

15. Ex. DTR-41.

16. Ex. DTR-41A.

17. Id

18. Id

19. N 10378-86.

20. N 8996.

21. Ex. DTR-41 A.

22. Ex. GPS-38A.

23. Ex. GPS-38B.

24. Shultz Test., Hearings, 100-9, 7/23/87, at 41.

25. N 7827; N 9030, Notes from National Security Brief-
ing, 11/12/86.

26. N 749, PROF from McFarlane to North, 11/11/86,
00:26:41.

27. N 18494; N 19113.

28. N 18476.

29. Ex. EM-21.

30. Id

31. N9031.

32. Tower, at D-12 & D-13.

33. Pres. Docs., 11/17/86, Vol. 22, No. 46, at 1561.

34. Id

35. Shultz Test., Hearings, 100-9, 7/23/87, at 40; see Ex.
GPS-C.

36. Ex. GPS-45.

37. Shultz Test., Hearings, 100-9, 7/23/87, at 42-43; see
Ex. GPS-42, at 12.

38. Shultz Test., Hearings, 100-9, 7/23/87, at 43.

39. Ex. EM-23.

40. Cooper Test., Hearings, 100-6, 6/25/87, at 228-34.

41. Id

42. Id

43. Sofaer Dep., 6/18/87, at 8-21.

44. Id

45. Id., at 21-28; Sofaer Dep. Ex. 1.

46. C 005.

47. C 006.

48. McFarlane Test., Hearings. 100-2, 5/11/87, at 166-69.

49. Id. at 68.

50. Cooper Test., Hearings, 100-6, 6/25/87, at 237-39.

51. Ex. EM-32.

52. Regan Test., Hearings, 100-10, 7/30/87, at 24-25.

53. Shultz Test., Hearings, 100-9, 7/23/87, at 44.

54. Id, at 44.

55. Id., at 40.

56. Id., at 44.

57. Shultz Test., Hearings, 100-9, 7/23/87, at 45.

58. Id

59. Id

60. Id

61. Id

62. North Test., Hearings, 100-7, Part I, 7/7/87, at 30-33,
35.

63. Poindexter Test., Hearings, 100-8, 7/16/87, at 108; 7/
20/87, at 274.

64. Poindexter Test., Hearings, 100-8, 7/16/87, at 108-09;
7/17/87, at 144; l/lO/il, at 302-03; McFarlane Test., Hear-
ings, 100-2, 5/11/87, at 67, 78-79; 5/12/87, at 93, 106-07.

65. N 5617-20.

66. N 7501.

67. N 9314-15.

68. N 9368.

69. Id

70. Q 2629, Q 2632.

71. North Test., Hearings, 100-7, Part I, 7/7/87, at 17-18;
Q 2629, Q 2632.

72. N 5648.

73. N 12188-90. PROF from McFarlane to Poindexter,
11/18/87,23:06.

74. N 5661, N 2971, N 42315, N 9385.

75. N 5617-20.

76. N 5576.

77. N 8255; N 5592.

78. N 5655.

79. North Test., Hearings, 100-7, Part I, 7/7/87, at 47.

80. N 12188-90.

81. Ex. 57. (RCM).

82. N 5667.

83. N 5679.

84. N 9385.

85. North Test., Hearings, 100-7, Part I, 7/7/87, at 35-36.

86. Cooper Test., Hearings, 100-6, 6/25/87, at 239; Meese
Test., Hearings, 100-9, 7/28/87, at 217.

87. Ex. CJC-6.

88. Cooper Test., Hearings, 100-6, 6/25/87, at 245-46.

89. Meese Test., Hearings, 100-9, im/il, at 218-19.

90. Cooper Test., Hearings, 100-6, 6/25/87, at 239.

91. Id., at 248-49; Sofaer Dep., 6/18/87, at 42-49.

92. Cooper Test., Hearings, 100-6, 6/25/87, at 244-50;
Sofaer Dep., 6/18/87, at 48.

93. Cooper Test., Hearings, 100-6, 6/25/87, at 249-50.

94. Id, at 250.

95. Id. at 251.

96. Id, at 239-52.

97. North Test., Hearings, 100-7, Part 1, 7/7/87, at 37.

98. Ex, OLN-31.

99. Ex. OLN-23.

100. Regan Test., Hearings, 100-10, 7/30/87, at 26.

101. Id, at 24.

102. Cooper Test.. Hearings, 100-6, 6/22/87, at 252.

103. Id, at 266.

104. Exs. JMP-70, JMP-79, JMP-80.

105. Poindexter Test,, Hearings, 100-8, 7/16/87, at 113.

106. Id, at 123.

107. Casey, HPSCI Test., 11/21/86, at 6; Casey, SSCI
Test., 11/21/86, at 9.

108. Casey. SSCI Test.. 11/21/86. at 31-36.

109. Casey, HPSCI Test.. 11/21/86, at 46.

1 10. Id., at 65, See also id., at 42-43, 46,

304

Chapter 20

November 1986: The Attorney General's

Inquiry

The Attorney General's Inquiry Is
Launched

When Attorney General Edwin Meese returned to
Washington on the morning of November 21, he im-
mediately convened his top advisers to discuss the
Administration's conflicting versions of what had ac-
tually happened in November 1985. Present were
Deputy Attorney General Arnold Burns, John Rich-
ardson (the Attorney General's Chief of StafO, Wil-
liam Bradford Reynolds (Assistant Attorney General
for the Civil Rights Division), and Charles Cooper
(Assistant Attorney General for the Office of Legal
Counsel).' Cooper briefed the group on the discrep-
ancies between the proposed Casey testimony and the
facts as recalled by others in the Administration. The
Attorney General decided to propose to the President
that he be commissioned to gather the facts so that
the Administration would be speaking with one
voice. ^

At 9:22 a.m., the Attorney General called Poin-
dexter on a secure telephone and told him to arrange
a meeting among themselves, the President, and
Donald Regan. ^ According to Regan, Attorney Gen-
eral Meese met with him before they went to see the
President on the morning of November 21. Attorney
General Meese told Regan he was having trouble
getting the facts in one place, and that a full investiga-
tion should be made.*

At approximately 11:30 a.m., Attorney General
Meese, Regan, and Poindexter met with the President.
According to Attorney General Meese, he told the
President that the Administration did not have a co-
herent picture of the Iran initiative because the oper-
ation was so heavily compartmentalized. Attorney
General Meese suggested that he be authorized to
gather the facts to present an accurate overview for
the President and the public. The President acceded.
It was agreed that over the weekend the Attorney
General would try to gather the facts in time for the
previously scheduled National Security Planning
Group (NSPG) meeting on Monday, November 24.
Attorney General Meese testified that when he em-

barked on this effort he was acting as "legal adviser
to the President." *

Meanwhile, at 11:00 a.m., Ledeen and McFarlane
met at Ledeen's home to discuss the extent of the
arms sales transactions. McFarlane said he was clear
on every th ng except the November 1985 shipment.®
North appeared at Ledeen's home about 12:30 p.m.,
"in some distress" according to McFarlane.* Ledeen
testified that both North and McFarlane referred to
meetings with the Attorney General.'' McFarlane
agreed to drive North back downtown. During the
drive. North told McFarlane that he was concerned
Ledeen may have made money on the arms transac-
tions, a concern that North denied in his public testi-
mony.* North also told McFarlane that he was going
to have a "shredding party that weekend." McFarlane
testified that he responded, "Ollie, look, you have
acted under instruction at all times and I'm confident
that you have nothing to worry about. Let it all
happen and I'll back you up." ^ North denied using
the term "shredding party," but recalled telling
McFarlane that all key documents already had been
destroyed.'"

Meese arrived back at the Justice Department at
12:45 p.m. and advised Reynolds, Cooper, and Rich-
ardson that the President had authorized him to "get
his arms around the Iranian initiative.""** Meese
then met with FBI Director William Webster on an
unrelated matter. When Webster brought up the con-
fusion surrounding the Iran arms sales. Attorney Gen-
eral Meese advised that the President had asked him
to conduct a factual inquiry because different partici-
pants had different pieces of knowledge to be recon-
ciled. Attorney General Meese declined an offer of
FBI assistance from Webster, stating that he saw
nothing criminal in the arms sales. Webster agreed
that absent evidence of a crime, the FBI should not

♦Meese Test., Hearings, at 100-9, 7/28/87, at 224; Meese Dep., at
82-84. North and Poindexter also characterized Meese's role as that
of "friend" of the President, not Attorney General. North Test.,
Hearings. 100-7. Part II, 7/14/87. at 186-187; Poindexter Test.,
Hearings. 100-8, 7/16/87, at 133-134. Poindexter described Meese's
role as a "special adviser," Id.

••The Attorney General instructed Richardson to keep a log of
all meetings the Attorney General had during this inquiry, includ-
ing the time of the interviews, meetings and those in attendance.
Richardson Dep., 7/22/87, at 34-35.

305

7 7-02 6 0

1 1

Chapter 20

be involved.'^ Attorney General Meese did not relate
the details surrounding Casey's testimony or the possi-
ble violations of the Arms Export Control Act arising
from the 1985 shipments.'^ The Attorney General
also testified that he did not bring in the FBI because
he and Webster concluded that it would not be "ap-
propriate." '*

According to North's deputy, Robert Earl, North
came to his office during the afternoon of November
21 and told Earl that he had just attended a meeting
at the White House, and that the Attorney General
was sending a Justice Department team to the Nation-
al Security Council because the Congressional brief-
ings had raised questions. According to Earl, North
said he had asked Attorney General Meese, "Can I
have or will I have 24 or 48 hours" and Meese re-
sponded that he did not know whether North would
have that much time.^^ The Attorney General re-
called no such conversation with North; North denied
it; and there is no other evidence that North met with
the Attorney General that day.'® Earl testified fur-
ther that North asked for Earl's Iran file, remarking
that "It's time for North to be a scapegoat." Earl
stated that, when he gave his file to North, he could
tell that he would never see it again. Earl was right. ' '
That afternoon, Attorney General Meese selected
his factfinding team. He chose two political appoint-
ees and one person from his personal staff He select-
ed Cooper because he was already looking into the
matter as head of the Office of Legal Counsel, which
provides advice to the executive branch on various
legal matters, including national security. Richardson
was the Attorney General's Chief of Staff Reynolds
was assigned because, in addition to his responsibil-
ities as Assistant Attorney General for Civil Rights,
he coordinated certain national security matters and
was Counselor to the Attorney General.'®

Meese testified that he never considered assigning
attorneys from the Office of Intelligence Policy and
Review, whose job it is to review covert action find-
ings and applications for intelligence surveillance ac-
tivities. Nor, according to the Attorney General, did
he consider assigning additional attorneys to assist
with the formidable tasks of document review and
witness interviews. No members of the Criminal Divi-
sion were included, even though William Weld (As-
sistant Attorney General in charge of the Criminal
Division) told Cooper and Reynolds at a staff meeting
that morning that he thought the Criminal Division
should be involved.'^ Meese testified that it was his
view at the time that there was no reason to believe
any crime had been committed or that any criminal
investigation was required. ^°

At their meeting on Friday afternoon, the factfind-
ing team formulated a list of witnesses to be inter-
viewed. It included McFarlane, North, Secretary
Shultz, Secretary Weinberger, the Vice President,
Paul Thompson, Stanley Sporkin, John McMahon,
Charles Allen, the CIA's Deputy Director for Oper-

ations, the CIA Deputy Chief Counsel, and CIA op-
erations officers. Meese listed items that needed
action, including contacting Poindexter to gather doc-
uments and Casey to arrange interviews of Sporkin
and McMahon. The focus of the inquiry was to be the
November 1985 HAWKs shipment.^'

The NSC Staff Responds by Altering and
Destroying Evidence

Once those at the center of the Iran arms sales
were alerted to the Attorney General's inquiry, they
took steps, in Colonel Earl's words, to "close down
the compartment" — destroy all the documentary evi-
denced^

North met with Poindexter at 1:30 p.m. and then
again at 2:25 p.m. on November 21.^^ Sometime that
same afternoon. North instructed his secretary. Fawn
Hall, to alter a series of official action memorandums
that he had written during the previous year to then-
National Security Adviser McFarlane. These memo-
randums related to North's activities in raising funds
and arranging military assistance for the Contras
during the period of the Boland Amendment. McFar-
lane had told North a year earlier, during the 1985
Congressional inquiry, that these memorandums raised
significant problems under the Boland Amendment. ^''
McFarlane had given North a handwritten list con-
taining the NSC's "System IV" identification numbers
of the problem documents.* North kept McFarlane's
list taped to his desk near the computer terminal
during the ensuing year.^^

Sometime on November 21, 1986, North requested
the originals of the documents on McFarlane's list
from the System IV security officer, who found and
provided North with all but one.** There is no evi-
dence that the System IV security officer knew of
North's purpose in requesting these documents.

North then proceeded to alter the original System
IV documents by hand. The gist of his alterations was
to eliminate references to the funds raised for the
Contras from third countries during the Boland
cutoff and also to eliminate or obscure passages in
the documents that showed the NSC staffs active
role in facilitating the provision of military intelli-

*Hall Test., Hearings. 100-5, 6/8/87, at 478-79; North Test., Hear-
ings. 100-7, Part I, 7/8/87, at 173. Ex. FH-1. The NSC maintains a
document tracking and filing system that includes assigning discrete
numbers to documents prepared by the NSC staff. "System IV" is
utilized for the most sensitive, intelligence-related documents.

••Ex, FH-IA; Ex. OLN-71. The one document that the security
officer could not find (System IV # 40124), he presumed to have
been destroyed and so advised North. In fact, the document, which
had been written in December 1984, was in the files, but the
security officer had checked only the files for 1985. This December
1984 document which North had sought to alter recounted a meet-
ing that North had held with an official of Country 4 to solicit
lethal assistance for the Contras Ex. GJS-1. The document was
provided to the Committees during the Committees' investigation.
See Hall Test.. Hearings. 100-5. 6/8/87. at 278.

306

Chapter 20

gence and other lethal assistance for the Contras
during the same period.^®

North gave the doctored documents to Hall and
instructed her to prepare new originals containing
North's changes. Hall testified that she followed
North's instructions without paying attention to the
nature of the alterations or asking their purpose. She
admitted, however, that she did not feel comfortable,
but assumed North had a valid reason. She stated also
that she did not then know that the Attorney General
had commenced an investigation or that his represent-
atives would shortly be reviewing NSC documents.^'

After making the alterations, Hall destroyed the
original documents and was preparing to replace her
file copies of the original versions of the documents
with copies of the altered originals when she was
distracted by North's shredding of documents and
volunteered to help.*

The document shredding involved North, Hall, and
Earl. North pulled documents from his safe; Hall
shredded them. Earl brought documents down from
his office, and these, too, were shredded.^* Hall asked
North if she should shred his telephone logs, and he
agreed. Hall also shredded PROF notes and KL43
messages.** She could not recall what other types of
documents went into the shredder. But the quantity
was large — approximately one and one half feet of
documents. Indeed, so many documents were de-
stroyed that the shredding machine actually jammed
and Hall needed assistance from the Crisis Manage-
ment Center to reactivate it. Hall testified that, al-
though documents were normally shredded in North's
office, never before had there been such an organized
program of document destruction or such a large
volume of documents destroyed. ^^

Although Hall stated that, when she participated in
the shredding — as in the alteration of documents — she
did not know of the Attorney General's inquiry.
North and Earl certainly knew. Yet they both main-
tained in their testimony that the document destruc-
tion was justified to protect the security of the covert
action or, as Earl put it, "the compartment." ^° But in
fact, the investigators from whom North and Earl
were suppressing this evidence were officials of their
own Government who had been directed to investi-
gate by the President.

•Hall Test., Hearings. 100-5, 6/8/87, at 499-502. Because Hall
ultimately did not complete the alteration process (by substituting
copies of the altered documents for her file copies of the originals),
both versions of the documents were found in the NSC files and
provided to the Committees during the Committees' investigation.
Exs. FH-2 through FH-6A.

••When these PROF notes were destroyed. North and others
apparently believed that those messages were gone forever. They
did not know that, unless messages were deleted from the computer
memory itself, the messages still could be retrieved for a time. Such
retrieval took place, and that is why the Committees were able to
obtain at least some PROF messages that North and others believed
to have been destroyed.

Poindexter, too, destroyed evidence. At aproxima-
tely 3:00 p.m. on November 21, the Attorney General
telephoned Poindexter and requested that he make
available for review all documents relating to the Iran
initiative.^' Poindexter then ripped up the only signed
copy of the President's December 1985 Finding,
which retroactively authorized U.S. participation in
the November 1985 arms shipment. Poindexter admit-
ted at the public hearings that he destroyed this Find-
ing because it described the Iran initiative as unambig-
uously arms-for-hostages, and therefore would have
been politically embarrassing to the President. ^^ It
also would have stripped away the cover story con-
cocted by the NSC staff. It would never reach the
investigators.

Since the President had obviously been aware of
the December 1985 Finding when he signed it, Poin-
dexter could not explain why he thought that destroy-
ing of this Presidential record would nullify its exist-
ence '' — unless he somehow felt confident that the
President would either fail to recall the Finding or
deny that he had ever signed it. As recently as a week
before Poindexter's public testimony, the White
House announced that "[o]ur position is that [the
Finding] never went to the President, period." ^*

Poindexter's participation in destroying evidence
did not stop with the Finding. He also tore up certain
PROF notes possibly used to brief the President,
which had been stored with the Finding. Although
Poindexter said he could not recall their content,
these documents were of sufficient importance to be
locked with the original Finding in Poindexter's
secure safe.^^

In addition, during the afternoon of November 21,
North came to Poindexter with his 1985 spiral note-
book which contained North's contemporaneous notes
regarding the November 1985 HAWK shipment. ^^
Those notes showed that North and others in the U.S.
government were involved with that shipment.^''
Like the Finding, the notes belied Poindexter's state-
ment to Congress earlier that day that the United
States did not learn of the true contents of the ship-
ment until after it was made. Moreover, although
Poindexter testified at the public hearings that North's
notes did not reflect that the President had approved
the HAWK shipment,^* in fact, North's notes of No-
vember 26, 1985 actually read: "R.R. directed oper-
ation to proceed. If Israelis want to provide different
model, then we will replenish." ^* Poindexter did not
object to North's announced intention to destroy the
notebook.*"

North, Poindexter, and their aides were not the
only persons involved in the Iran-Contra Affair to
destroy evidence in November 1986. Documents were
also shredded at the offices of Secord's company,
Stanford Technology Trading Group International
(STTGI). According to the testimony of Secord's Ad-
ministrative Assistant, Shirley Napier, the documents

307

Chapter 20

destroyed at STTGI included steno books, telephone
logs, and telexes. The destruction continued over a
period of days. The participants were Secord, Robert
Dutton, Napier, and an STTGI secretary.*'

Napier originally testified that the shredding activi-
ty occurred early in December 1986.'*^ Several weeks
after her deposition, Napier submitted an affidavit
changing her testimony, based on refreshed recollec-
tion, to place the shredding during the week of No-
vember 17, 1986, "probably the 19th through the
21st" — the same week as the shredding in the White
House.*

North and McFarlane took other actions on No-
vember 21 in response to the Attorney General's in-
vestigation. At 3:15 p.m.. North met again with
Ledeen, this time in North's office, and discussed the
November 1985 HAWK shipment. North knew that
Ledeen could testify to U.S. involvement. He asked
how Ledeen would respond to questions regarding
the shipment. Ledeen replied that he would say he
was aware of the shipment but did not know who
authorized it or how or when the authorization took
place. North said that was fine. North stated also that
he had been saving things for "hi^ grandchildren"
which he would now have to shred.**

The Attorney General's investigation went forward
later that afternoon with an interview of McFarlane
by Meese and Cooper. Attorney General Meese urged
McFarlane to tell the whole truth, assuring him this
was in the President's interest. McFarlane said he
believed that the November 1985 shipment contained
oil drilling equipment until he was told otherwise in
May of 1986. •'^ When asked if he had told Secretary
Shultz in 1985 about the HAWK shipment, McFar-
lane said he could not recall, but did not dispute it.
Cooper testified that neither he nor the Attorney
General told McFarlane that Secretary Shultz had a
contemporaneous note indicating that McFarlane had
told him about the HAWK shipment before it oc-
curred.'''* But McFarlane testified that he learned of
the note from the Attorney General at that same
interview. ■'5 McFarlane's version is corroborated by
the fact that he called the State Department right

•Napier Aff., 5/11/87, at Par. 7. Dutton maintained at the hear-
ing that the document destruction at STTGI was undertaken be-
cause "[w]e had a great concern about the security of the office . . .
It was General Secord's desire that we don't have any superfluous
material laying around the office." But since Dutton also testified
that the only records of his that were shredded were supposedly
duplicates, he could not explain how destruction of only the dupli-
cates preserved operational security. In any event, Dutton did not
testify that the numerous other documents shredded at STTGI
were only duplicates. Dutton Test., Hearings. 100-3, 5/27/87. at
251.

••Ledeen Dep., 6/19/87, at 22. Ledeen also recalled in his depo-
sition that, prior to November 21, North had told him that the
Justice Department was investigating the possibly illegal sale of
HAWK missiles in 1985 and suggested that Ledeen retain an attor-
ney. North told Ledeen that he also had been advised by someone
from the Justice Department to gel an attorney. Id. at 9-10, 27.

after the interview asking for a copy of the note.''*
The note, of course, was highly significant, because it
was the only existing document known to McFarlane
that indicated that U.S. officials did indeed know of,
approve, and had participated in, the HAWK ship-
ment. North and Poindexter apparently believed they
had destroyed or otherwise removed all other such
documentary evidence.

During the Attorney General's interview, McFar-
lane did not volunteer anything about the document
shredding comment from North earlier in the day.
Nor did McFarlane volunteer that he knew that pro-
ceeds of the Iran arms sales had been diverted to the
Contras.'''' McFarlane testified that he should have
told the Attorney General, but it did not occur to him
to mention these facts.''*

At the conclusion of the interview, after Cooper
had left, McFarlane stayed behind to speak privately
to Meese. He told Attorney General Meese that al-
though he had taken full responsibility in a speech
delivered the night before to "protect the President,"
he wanted Meese to know that the President was
"four square" behind the Iran initiative.*^ According
to McFarlane, the Attorney General said it was pref-
erable legally if the President had authorized the early
shipments.^"

Immediately after leaving the Attorney General's
office, McFarlane used a pay telephone outside of the
Justice Department to call North. ^' North's notes of
that call indicate that McFarlane said he was told that
the Arms Export Control Act was not a problem and
that "RR" [Reagan] would be supportive of a "mental
finding." McFarlane sent Poindexter a PROF note
later that evening similarly describing his meeting
with the Attorney General. In that note he stated:

[I]t appears that the matter of not notifying [Con-
gress] about the Israeli transfers can be covered if
the President made a 'mental finding' before the
transfers took place. Well in that sense we ought
to be OK because he was all for letting the Israe-
lis do anything they wanted at the very first
briefing in the hospital. Ed [Meese] seemed re-
lieved at that.^^

While the Attorney General and Cooper met with
McFarlane, Reynolds, and Richardson spent Friday
afternoon at the Justice Department doing routine
work and reading the NSC staffs chronologies.^^ At-
torney General Meese testified that he did not send
anyone to review the NSC documents on Friday
afternoon, despite the short reporting deadline of
Monday afternoon, because "there was no urgency to
it." ^* It was midafternoon anyway and the NSC staff
needed time to prepare their documents for review.*^

After the McFarlane interview, Meese, Cooper,
Reynolds, and Richardson made plans to meet the
next morning. Sometime in the early evening. Secre-
tary Shultz called to tell Meese that he was available

308

Chapter 20

for an interview the following morning. Meese also
called Secretary Weinberger, ^^ who told Meese that
he could be reached that weekend at the hospital to
which his wife had been admitted. Subsequently, At-
torney General Meese spoke to Secretary Weinberger
over the weekend and, although he could not recall
what Secretary Weinberger said, he remembered con-
cluding that Secretary Weinberger had no useful in-
formation.^'

On November 21, Attorney General Meese called
Casey to let him know about the inquiry and what he
would be doing at the CIA. Meese also mentioned he
wanted to meet with Casey over the weekend.^*

Later that evening. Cooper made arrangements for
John McGinnis, an attorney from the Justice Depart-
ment's Office of Legal Counsel, to review intelligence
reports regarding the Iran arms sales. McGinnis re-
viewed these reports overnight and reported back to
Cooper that they indicated that the U.S. was involved
in the 1985 Israeli shipments.^^ According to the At-
torney General's statement during his November 25
press conference, these reports also indicated that
excess profits from the sale had been made available
for some other purpose.®"

As the day drew to a close. North remained late in
his office to meet with Richard Miller, a private fund-
raiser for the Contra cause, who arrived at North's
office as North was packing his briefcase. North
asked Miller to drive him to Dupont Circle. Either
during that drive, or the day before, North told
Miller that the Attorney General had advised him to
get an attorney. The Attorney General denied telling
North to get an attorney; and North testified that it
was Casey who so advised him.®^ Miller dropped
North at the office building of North's attorney. ^^

November 22: Diversion is
Discovered

With the first McFarlane interview behind them, At-
torney General Meese and Cooper began their inter-
view schedule in earnest early Saturday morning. At
8:00 a.m. they interviewed Secretary Shultz and his
assistant Charles Hill at the State Department.®^ Re-
garding the November 1985 shipment. Secretary
Shultz said that on November 18, 1985, McFarlane
told him that Israel was going to send HAWK mis-
siles to Iran in a trade for the release of U.S. hostages.
Secretary Shultz also informed Meese and Cooper
that the President had told him earlier that week that
he [the President] had contemporaneous knowledge of
the November 1985 HAWK shipment.®* Meese and
Cooper asked Hill for the notes of the Shultz/McFar-
lane conversation, which Hill provided on Monday
morning, November 24.®^

Secretary Shultz testified that, during his interview,
he expressed concern that the Iran arms sales might
be connected to the Contras. Secretary Shultz said in

his testimony he based this concern on the fact that
Southern Air Transport's name had come up in the
Contra resupply operation and also in the Iran arms
transactions.®® Secretary Shultz's version of this event
is corroborated by Hill's contemporaneous notes of
Meese's interview of Shultz. Those notes reflect that
Secretary Shultz told Meese: "Another angle worries
me. Could get mixed up with help for freedom fight-
ers in Nicaragua. One thing may be overlapping with
another. May be a connection." ®''

During his public testimony. Attorney General
Meese initially denied that Secretary Shultz had ever
mentioned any connection between the Iran arms
sales and the Contras. When Hill's notes were shown
to the Attorney General at the hearings, Meese
denied that the notes were made at the interview, and
stated they were notes of a later meeting at the State
Department between Shultz and State Department
Legal Adviser Abraham Sofaer.®* During his next
day of testimony, Meese stated that the reference to a
connection between the Iran arms sales and the Con-
tras was only to "a political connection that enemies
of the administration would love to wrap together"
(which also appears in Hill's notes). Attorney General
Meese denied that Secretary Shultz was referring to
any actual connection between the Iran arms sales
and the Contras.®^

Secretary Shultz's version is corroborated by Hill's
contemporaneous notes of Shultz's interview with
Meese. Moreover, on November 23, the day after
Secretary Shultz's interview with Meese, Sofaer told
Cooper that he was concerned that the surplus of
funds from the Iran arms sales had possibly been used
by Southern Air Transport to subsidize the Contra
resupply efort.''"

After Secretary Shultz's interview, the factfinding
team decided that Reynolds and Richardson should
go to the NSC to review documents. They were to
look in particular for documents that would indicate
whether the 1985 shipments were authorized by the
U.S. Government. ''

After Reynolds and Richardson left for the NSC,
Attorney General Meese and Cooper interviewed
Stanley Sporkin, former General Counsel to the
CIA.'^ Sporkin told them that he drafted a Finding
in November 1985 after he learned that the CIA had
assisted in arranging transportation of the HAWK
missiles to Iran.'^

Reynolds and Richardson arrived at the West Wing
of the White House sometime after 11:00 a.m. NSC
General Counsel Paul Thompson escorted them to
North's office in the Old Executive Office Building,
where they met Earl. The Justice Department offi-
cials told Earl they only wanted to see documents
relating to the Iran initiative. Earl pulled out accor-
dion-style brown folders from the shelves behind
North's desk and placed them on the table.'*

309

Chapter 20

Richardson also asked for documents from Poin-
dexter's and Thompson's files. Thompson replied that
they did not have any because as soon as they had
read the documents, they sent them back to the origi-
nating office.''^

Reynolds and Richardson began to review the doc-
uments on the table at approximately noon. Accord-
ing to Reynolds, sometime during the first hour of
their review, Reynolds came across an undated, un-
signed memorandum describing the particulars of a
proposed Iran arms transaction to take place in early
April 1986. He read the memorandum and put it back.
He saw another version of the memorandum with
additional information describing an upcoming ship-
ment of arms to Iran including a financial breakdown
of the transaction. Reynolds did not set aside either of
these memorandums for copying. He recalled that
neither version included any section setting forth the
diversion of arms sales funds to the Contras. To the
best of the Committees' knowledge, these versions
have never been recovered.''®

Reynolds continued his document review of a
folder containing intelligence reports. In the back of
this folder was a white folder stamped with a red
White House label which contained what appeared to
be a third version of the memorandum he had seen
earlier. He quickly flipped through it. He noted that
page 5 included a paragraph stating that $12 million
worth of residual funds from the arms sales would be
used to purchase supplies for "the Nicaraguan Demo-
cratic Resistance Forces." This materiel was needed
to "bridge" the gap between current shortages and
"when Congressionally approved lethal assistance . . .
can be delivered." ''''

Reynolds was shocked. He passed the memoran-
dum to Richardson. Richardson read it and was also
surprised. Reynolds intentionally did not clip the doc-
ument so as not to draw attention to it, but returned it
to the file where he could later find it. He continued
reviewing other documents.''*

At approximately 1:45 p.m. Reynolds and Richard-
son broke for lunch with Cooper and Attorney Gen-
eral Meese. On the way out, they met North. Reyn-
olds told North they had not seen any 1985 files, and
North promised to produce them.''^

During lunch at the Old Ebbitt Grill, Reynolds told
Attorney General Meese and Cooper he had found a
memorandum which indicated that $12 million gener-
ated from the Iran arms sales may have gone to the
Contras. Attorney General Meese and Cooper ex-
pressed great surprise. There was discussion of wheth-
er North wrote the memorandum. The remainder of
the lunch was devoted to a discussion of the 1985
shipments and the data collected by McGinnis. There
was no discussion of securing documents.*"

The Attorney General's methodology for conduct-
ing the inquiry changed at this point. Before discov-
ery of the diversion memorandum, all interviews were
conducted by the Attorney General with another Jus-

tice Department official and notes were taken. There-
after, with the exception of the North interview, all
interviews conducted by Meese were one-on-one,
with no notes taken — including interviews of Casey,
McFarlane, Poindexter, Regan and the Vice Presi-
dent.*

After Reynolds and Richardson had left the NSC
for lunch on November 22, North reviewed more
documents and selected some for shredding. North's
office shredder was jammed, however, and other
likely locations in the Old Executive Office Building
were not open. Later, Earl saw North with a file full
of documents standing beside Paul Thompson. North
indicated he was going to the White House Situation
Room to use the shredder there.*'

North testified that he was actually shredding docu-
ments in his office while Reynolds and Richardson
were present.*^ However, Reynolds and Richardson
denied this, and Earl, as noted, testified that North's
office shredder was jammed.*^

While the Attorney General's team was meeting at
the Old Ebbitt Grill, Casey and Poindexter were also
having lunch together. They were joined by North.
In his testimony, Poindexter recalled very little about
that 2-hour lunch other than that it was initiated by
Casey and that Casey discussed his testimony before
the House and Senate Intelligence Committees the
day before.*''

Reynolds and Richardson returned to the NSC at
approximately 3:30 p.m. where they found North and
Earl. Richardson testified that everything appeared to
be as they had left it.*^

While Reynolds and Richardson reviewed docu-
ments. North worked at this desk and spoke on the
telephone. Richardson took notes of some of these
calls. He overheard North speak to an Israeli using
various code words, including "Beethoven" in refer-
ence to Poindexter. North told the Israeli that a lot
had come out about the Iran initiative already, but the
most sensitive information had not been exposed.*®

During that afternoon. North sat down with Reyn-
olds and Richardson and told them he was ready to
answer their questions. They responded that they
were there only to review documents and the Attor-
ney General would interview North later.*' Accord-
ing to Richardson, North said "he knew he would not
be long for this job." **

Reynolds and Richardson reviewed documents
until approximately 7:15 p.m., at which time they and
North left North's office. Reynolds and Richardson
made plans to complete their review Sunday morn-
ing.*^

•Meese Test., Hearings. 100-9, 7/29/87, at 78-81. Meese testified
that the reason he did not take notes of his interviews with Casey.
McFarlane. Poinde.xter. Regan or the Vice President was that he
was not attempting to solicit a great deal of information, but merely
trying to confirm what North had said. Id. at .1.1 1 -.M

310

Chapter 20

North called Attorney General Meese at 3:40 p.m.
that afternoon to arrange the interview.'"' Meese
asked to interview North on Sunday morning, but
North said he wanted to attend church and take his
family to lunch first. Meese agreed to set the inter-
view for 2:00 p.m.^'

Six minutes after North spoke to Meese on Novem-
ber 22, Casey called Meese and said there were mat-
ters he wanted to discuss with him.^^ The two met at
Casey's home at 6:00 p.m.*' By the time of this meet-
ing, Attorney General Meese had reason to believe
that the CIA's version of Casey's proposed testimony
was almost certainly false. Indeed, by then Attorney
General Meese had interviewed Secretary Shultz,
who had contemporaneous documentation for his
recollection of the November 1985 HAWKs ship-
ment, and former CIA General Counsel Sporkin, who
had been told by Casey's subordinates in November
1985 that missiles were shipped. On another issue, the
Attorney General had strong reason to believe there
was a connection between the arms sales (in which
the CIA had been involved) and the Contras: the
diversion memorandum.

Despite Casey's obviously central position in any
investigation of these matters. Attorney General
Meese chose to meet Casey alone. He took no notes
of the meeting, nor was the meeting otherwise re-
corded. The Committees' information about the meet-
ing is thus derived solely from Attorney General
Meese's testimony.

According to Meese, Casey said that he had been
contacted in October 1986 by a former business asso-
ciate named Roy Furmark. Furmark told Casey that
certain Canadians who had financed the Iran arms
sales had not been repaid and were therefore threaten-
ing to expose the arms sales. Furmark had represented
that the Canadians would claim that the proceeds had
been used for "Israeli or United States Government
projects." *'' The Attorney General explained that
Casey said he had not told him about the Furmark
visit earlier because, before the factfinding inquiry
began, there was no reason to tell the him.®^

In testimony before the Senate and House Intelli-
gence Committees in December 1986, Attorney Gen-
eral Meese was not specifically asked about, and he
did not volunteer any reference to, proceeds being
diverted to Israeli or U.S. projects.*^

Attorney General Meese has consistently claimed
that he did not tell Casey about the diversion memo-
randum, or ask him about the diversion, even though
Meese recognized it as a bombshell as soon as his staff
reported it to him. The reason Attorney General
Meese gave for not asking Casey about the diversion
memorandum was that he thought it inappropriate to
do so until North was questioned. Attorney General
Meese also testified that, despite the fact that Casey
mentioned a claim that proceeds had been diverted to
U.S. projects. Attorney General Meese did not feel
the conversation could logically have led to questions

regarding a diversion of those proceeds to the Con-
tras without revealing to Casey what Meese knew.
Attorney General Meese testified that, "I felt it was
not appropriate to discuss this with anyone, even as
good a friend as Mr. Casey, until I found out what it
was all about." So, in a meeting that lasted between
30 minutes and an hour, Meese, according to his testi-
mony, avoided the subject.*''

While Casey and Meese were meeting. Cooper and
Associate Deputy Attorney General William McGin-
nis were at the CIA interviewing attorneys from the
CIA General Counsel's office and operations officers
regarding the events surrounding the November 1985
HAWK shipment and subsequent Finding.** Cooper
purposely did not ask questions at the CIA about the
diversion for fear it would get back to North.**
Cooper did not mention the diversion memo to
McGinnis.

November 23: Investigation and
Obstruction Continue

The Attorney General's investigation continued to
build on Sunday, November 23 toward the afternoon
interview with North. From 9:00 a.m. to noon.
Cooper and McGinnis completed more interviews at
the CIA. Reynolds and Richardson returned to the
NSC to continue their document review, although
they apparently never did complete it.'""

At the CIA, Cooper and McGinnis interviewed
Charles Allen, Duane Clarridge, George Jameson,
and David Doherty. McGinnis interviewed Clarridge,
who told him that the CIA's involvement in Novem-
ber 1985 was limited to providing to North the name
of a proprietary airline to fly oil drilling equipment to
Iran. Clarridge also explained that he made arrange-
ments for flight clearances.*

Meanwhile, North, who had told the Attorney
General he was not available for an interview until
the afternoon because he wanted to go to church,
called McFarlane Sunday morning and asked to meet
with him. McFarlane was getting ready to leave for
church himself and told North to meet him at his
office at noon. North said he would bring his attor-
ney.'"* North arrived alone at McFarlane's office at
12:30 p.m.. North told McFarlane everything was on
track except for one thing that could be a problem:
the diversion. According to McFarlane, he asked

•Cooper Dep., 6/22/87, at 180. Evidence before the Committees
shows that Clarridge was sent a cable from a CIA Chief in Country
15 on or about November 23, 1985, reporting the HAWKs-for-
hostages November deal. Notably, the cable is missing from the
CIA's files. Hearings, 6/24/87, at 260-73; CI-C27. The missing
cable, if found, would have punctured any claim that no one at the
CIA was aware in November 1985 prior to the HAWK shipment
that the flight clearance problems and the use of a CIA proprietary
airline involved the shipment of weapons to Iran. Id. This episode
is discussed in more detail in Chapter 10.

311

Chapter 20

North if the diversion had been approved and North
repHed that he would not do anything that was not
approved. North said that the diversion was a matter
of record in a memorandum he had written for Poin-
dexter. North did not explain to McFarlane why he
thought the diversion could be a problem in light of
his belief that all documents relating to the diversion
had been destroyed.'"^ On the other hand, North
testified that he recalls only assuring McFarlane that
all diversion documents had been destroyed; he ex-
pressly did not recall telling McFarlane that there
was a memorandum describing the diversion that
might cause a problem.

At that point, attorney Thomas Green arrived at
McFarlane's office. Green told McFarlane he had
been an Assistant U.S. Attorney and had dealt with
problems of this kind before. Green advised McFar-
lane and North to state the story truthfully and let the
chips fall where they may.'"^ Not long thereafter,
Richard Secord arrived as well, but by that time,
McFarlane had to leave for an appointment.

From approximately 12:45 p.m. to 2:00 p.m., Attor-
ney General Meese, Reynolds, Cooper, and Richard-
son met to discuss the upcoming interview of
North. ^"^ North arrived, alone, at approximately 2:15
p.m. Meese did most of the questioning. Richardson
and Reynolds took notes. '°^

The Attorney General began by telling North he
wanted all the facts, and did not want North to
coverup to protect himself or the President. He then
asked North to explain the arms sales from the begin-
ning. North replied with a combination of fact and
fiction. All the while he knew that the Attorney Gen-
eral was acting under orders from the President and
that the Attorney General's findings would be report-
ed back to the President.'"®

North said he was unaware of the first shipment of
504 TOWs until after it occurred. Regarding the No-
vember 1985 HAWK shipment. North said he re-
ceived a call from McFarlane in Geneva who told
him to contact Israeli Defense Minister Rabin to help
Israel move something to Iran. North then claimed
that Defense Minister Rabin told him it was oilrelated
equipment. North sent Secord to help with the ship-
ment. North also called Duane Clarridge at the CIA
to get a CIA proprietary to fly the equipment. When
Secord saw the shipment in Israel, he told North the
cargo was 18 or 19 HAWK missiles. The implication
in North's statements — that he was unaware until in-
formed by Secord that the flight was to contain
HAWK missiles — was false. As North subsequently
admitted in his public hearing testimony, he knew the
nature of the cargo from his first involvement in the
November shipment.""

North also claimed, falsely, that Poindexter knew
nothing of the November 1985 HAWK shipment.
North stated, again falsely, that when he discovered
from Secord that there were HAWKs on the plane he
notified someone at the CIA, possibly Casey.'"*

While lying to the Attorney General about other
aspects of the November 1985 HAWK shipment.
North admitted that his statements about that ship-
ment in the NSC chronology and at the November
20, 1986, meeting to review Casey's draft testimony
were false. As discussed above. North had claimed in
the chronology and at the meeting that the United
States had to force the Iranians to return the HAWK
missiles. In his interview with the Attorney General,
North admitted that it was the Iranians who were
dissatisfied and demanded their money back.'"^

Attorney General Meese then asked North to de-
scribe the money flow. Again, North lied. North said
the money passed from the Iranians to the Israelis
who in turn paid into a CIA account which reim-
bursed the Army for the weapons. North made no
mention of Secord or the Lake Resources account
through which the money had actually passed.""

Then the Attorney General showed North the di-
version memorandum. The first page referred to U.S.
acquiescence in the August 1985 TOW shipment.
Meese asked North to explain if this was an armsfor-
hostages deal. North asserted that, although he dis-
cussed the strategic opening of Iran with President
Reagan, with the President "it always came back to
the hostages." North said the President was drawn to
the linkage between arms and hostages and it was a
terrible mistake to say the President wanted the stra-
tegic relationship with Iran, because the President
wanted the hostages. ' * *

After that exchange, the Attorney General turned
to the diversion. He directed North's attention to the
section of the memorandum describing how the "re-
siduals" would go to the Nicaraguan Resistance.
North appeared to be "visibly surprised." He asked if
they had found a "cover memo." Reynolds said that
none had been found — without first questioning North
as to whether he recalled a cover memo, or to whom
it had been directed, or what it said. After Reynolds
informed North that no cover memo had been found,
the Attorney General asked North if they should
have found a cover memo, and North said "no." ''^

The Attorney General asked North if he had dis-
cussed the diversion with the President. North replied
that Poindexter was the point of contact with the
President."^

Attorney General Meese pointed out that if the
President had approved the diversion. North probably
would have a record of it. North agreed and said he
did not think it was approved by the President. The
Attorney General asked whether other files might
contain a document indicating Presidential approval,
and North said he would check."*

The Attorney General asked North if there was
anything more. North said that only the February
1986 shipment and the second shipment had produced
residuals to the Contras. North also said that only
three people in the Government knew of the diver-

312

Chapter 20

sion — Poindexter, McFarlane, and himself. North said
the CIA did not handle the "residuals" and, though
some in the CIA may have suspected a diversion, he
did not think anyone at the CIA knew. "^ If North's
testimony at the public hearings was truthful, then
these statements, too, were lies. At the hearings.
North testified that Casey knew, approved, and was
enthusiastic about the diversion as early as February
1986.

And of course, North was aware when he spoke to
the Attorney General that Earl knew of the diver-
sion.*

North claimed that the diversion was an Israeli
idea, probably Nir's — another lie refuted by documen-
tary evidence. ' ' ^ He said the money went straight
from the Israelis into three Swiss bank accounts
opened by FDN leader Calero."'' In fact, the divert-
ed funds were deposited to the Swiss account main-
tained by Secord and Hakim. North claimed that the
October 1986 shipment of TOWs did not produce
residual funds because North, over Nir's objection,
charged much less for the weapons. He did this, he
said, because the Contras had $100 million in U.S. aid
and North did not want to create the impression of
private profit.' '*

The Attorney General asked North if there were
any other items he had not told them about and
North responded negatively. However, North volun-
teered that if the diversion were kept quiet, the only
other problem would be the November 1985 HAWK
shipment, which someone ought to say was author-
ized. The Justice Department officials made no
reply.' '^

Attorney General Meese then confirmed to North
that he had to share this information with the Presi-
dent and determine if he was aware of it. Meese again
asked North about other problem areas, including
complaints from people who financed the deals and
lost money. North responded only that Ghorbanifar
had lost money in a "sting." ^^°

At this point in the interview, the Attorney General
left to pick up his wife at the airport. '^^ Cooper
continued further questioning North regarding author-
ity for the 1985 shipments. Cooper asked North if he
believed at the time that the November shipment con-
tained oil drilling equipment. North replied that he
really thought it was munitions, but boasted that he
could nevertheless pass a lie detector test on whether
he thought it was oil drilling equipment. '^^

North also volunteered that Southern Air Trans-
port (SAT) hauled the 1986 arms shipments and that
SAT was being investigated by the Justice Depart-
ment for its involvement in the Contra resupply oper-
ation. ' ^ *

•North Test., Hearings. 100-7, Part I. 7/8/87, at 139-40. Indeed,
North had told Earl during the spring of 1986 that Casey knew of
the diversion. Earl Dep.. 5/2/87, at 37.

The North interview concluded at 5:55 p.m. as the
Attorney General was returning. North was not told
what would happen next.'^'' Although the Justice
Department officials noticed North's surprise that
they had a copy of the diversion memorandum North
had written, no one asked North if he had shredded
or otherwise disposed of documents, nor did the Jus-
tice Department officials take any steps to secure
North's remaining documents.

Later that night, Sofaer called Cooper to find out
the status of the investigation. Cooper asked the basis
of Sofaer's earlier concern about the possibility of
surplus funds being generated from the Iran arms
sales. Sofaer explained that he thought there may
have been a difference between the purchase price
and cost price. Sofaer also volunteered that he sus-
pected that SAT may have been given excess profits
from the Iran arms sales to finance the Contra resup-
ply operation. Cooper did not mention the diversion
memorandum or North's interview. '^^

That evening. North called McFarlane and Poin-
dexter.'^® Afterwards, North shredded additional
documents at his office until at least 4:30 a.m., when a
security guard noticed that North's office had not
been secured for the day. North responded to the
officer's security report by claiming that when the
officer checked the office, North was in the bath-
room.'^''

November 24: Informing the
President

Early Monday morning, November 24, McGinnis
called George Jameson of the CIA to ask certain
limited questions, and Cooper researched possible
criminal violations. Attorney General Meese planned
to meet with the President, the Vice President,
McFarlane, Poindexter, and Regan. '^*

McGinnis continued to speak that morning with
CIA personnel about the money flow. During one of
his conversations, he was told of a rumor at CIA that
the surplus funds had been diverted to the Con-
tras.'^^ McGinnis told Cooper of this rumor. Cooper
then told McGinnis about the diversion memorandum
and the North interview.'^"

Cooper went to the State Department Monday
morning to obtain Hill's notes relating to the Novem-
ber 1985 HAWK shipment. At first Hill was reluctant
to surrender them. He agreed, however, only when
Sofaer told him they were needed for a criminal in-
vestigation.'^'

The Attorney General called the head of the Jus-
tice Department's Criminal Division, William Weld,
at 9:55 a.m. On the previous Friday in an early morn-
ing staff meeting attended by Reynolds and Cooper
among others. Weld had urged that the Criminal Di-
vision should be involved in the weekend inquiry. He
had argued, for example, that the Criminal Division

313

Chapter 20

had already made representations to a court denying
any U.S. Government involvement in arms sales to
Iran, and that the Criminal Division should know the
facts.* Attorney General Meese told Weld during
their Monday morning call that the Criminal Division
was being left out of the Iran investigation on purpose
and not as a result of negligence. Weld inferred that
the Attorney General had been informed that Weld
had argued for Criminal Division involvement. Weld
told Meese that he had registered a concern at the
Friday meeting about Meese's personal involvement
in the investigation, warning: "If you tried to carry
too much water here some might spill on you." '^^

Early Monday morning, Attorney General Meese
called McFarlane to arrange a second interview.**
They met alone at the Justice Department and no one
took notes. '^^ Meese asked if McFarlane knew about
the diversion. McFarlane responded that he learned of
it from North during the Tehran mission in May 1986.
McFarlane told Attorney General Meese that North
claimed to have approval for the diversion.

McFarlane testified that the only other question
Attorney General Meese asked was whether he had
told anyone else about the diversion. Meese, however,
could not recall asking that.'^'* Meese never asked
McFarlane if the President had approved the diver-
sion, nor did he show McFarlane the diversion memo-
randum. Meese did not ask McFarlane why he had
not told him about the diversion during their Friday
interview. McFarlane did not mention that he had
spoken to Poindexter and North after North's inter-
view with the Attorney General. '^^

Attorney General Meese went to the White House
at 11:00 a.m. to meet with the President and Regan
pursuant to an appointment he had made earlier that
morning. Meese testified that he told the President
that his team had found a memorandum at the NSC
which included plans to divert excess funds from the
Iran arms sales to the Contras. Attorney General
Meese also said that North and McFarlane had con-
firmed this diversion. The President, Meese said, was
very surprised. Meese told the President there was
more factfinding to do before he could give him a full
report at the National Security Planning Group
(NSPG) meeting. 136

Regan had a different recollection of the morning
events. Regan testified that Attorney General Meese
told him about the diversion prior to meeting with the
President. Regan described his own reaction to news
of the diversion as "horror, horror, sheer horror." '^7

According to Regan, Attorney General Meese told

him that North had done the diversion, and Regan

said the President needed to be immediately informed.

Attorney General Meese said he did not want to tell

the President until he could nail down some other

things. They went to see the President, but told him

only that the factfinding inquiry had uncovered some

serious problems and that they would need to meet

later that afternoon. They set a meeting for 4:15
p.m. '38

No one took notes of the Attorney General's morn-
ing meeting with the President. Regan recalled that
Meese had papers with him from which he seemed to
be reading. However, according to Regan, Attorney
General Meese never told him there actually was a
memorandum spelling out the diversion. Regan testi-
fied that Meese "kept using the phrase, 'I have got a
few last-minute things to button up before I can give
you the details.' " '39

Attorney General Meese returned to the White
House for the 2:00 p.m. NSPG meeting. Richardson's
notes indicate that prior to that, the Attorney General
met briefly with the Vice President at 1:40 p.m.'*"
Attorney General Meese, however, testified that this
meeting occurred after 4:00 p.m. '■" Continuing the
pattern, Meese met with the Vice President alone and
no notes were taken. Meese reported that the Vice
President was unaware of the diversion.'*^

Back at the Department of Justice, Reynolds and
Cooper had arranged to meet at 2:00 p.m. with attor-
ney Tom Green. '■*3 Green and Reynolds had a long-
standing professional relationship, so Green ap-
proached Reynolds for a meeting.'*'*

Reynolds and Cooper both understood that Green
had spoken to North after North's Sunday interview
with the Attorney General.* Yet Green's version of
the events differed sharply from what North had told
them. First, Green said the idea to divert funds to the
Contras originated with Albert Hakim, while North
had tagged Amiram Nir with originating the plan.
Green claimed there were no illegalities because the
diverted money did not belong to the United States.
Green urged that the facts not be made public be-
cause it would risk the lives of contacts in Iran as
well as the hostages.'*^

Green also recounted other facts which differed
from what North had said the day before. In contrast
to North's version of the money flow. Green ex-

•Weld Dep.. 7/16/87, at 13-14. Cooper and Reynolds each testi-
fied that he had no recollection of such a conversation. Cooper
Dep., 6/22/87, at 123; Reynolds Dep., 8/27/87, at 31-32. However,
Richardson not only recalled the Weld statement, but took notes.
Richardson Dep., 7/22/87, at 24-28; Ex. EM-39,

"McFarlane Test.. Hearings. 100-2, 5/11/87, at 65. McFarlane
spoke to Poindexter prior to his meeting with the Attorney Gener-
al. Right after speaking to McFarlane, Poindexter spoke to North
on a secure telephone. See Poindexter logs.

•Cooper Test., Hearings. 100-6. 6/25/87, at 279-82. Ex. CJC-19;
Reynolds Dep.. 9/1/87. at 37. At first. Cooper had the impression
that Green represented both North and Secord, but later Green
stated he was not the legal representative of either of them for
purposes of that meeting. Cooper Test.. Hearings, 100-6, 6/25/87. at
279-82. Eventually. Cooper decided that if Green represented
anyone, it was Albert Hakim, because Green referred to a long-
standing business relationship with Hakim. Id., CJC-19. It was
Reynolds' impression, however, that Green did not represent any
particular individual during the meeting. Reynolds Dep.. 9/1/87. at
37.

314

Chapter 20

plained that the diversion was accomplished by rout-
ing the money through Hakim's financial network.
Green said that Hakim told the Iranians that in order
to foster good relations, the Iranians should make a
contribution for the use of the Contras or of the
United States. Green also claimed North felt he was
doing the "Lord's work." ***

Sometime on Monday, Reynolds told Meese what
Green had said about the diversion.'*'' Attorney
General Meese, however, testified that he recalled no
mention of the fact that money went through Hakim's
financial network and concluded from what Reynolds
told him that Green "added nothing particularly
new . . . ." '**

At the White House, the NSPG met from 2:00 p.m.
to 3:45 p.m. Present were the President, the Vice
President, Poindexter, Casey, Attorney General
Meese, Secretary Weinberger, Secretary Shultz,
Regan and George Cave. Although the sole topic at
the meeting was the Iran initiative, neither Attorney
General Meese nor Regan mentioned the diversion,
nor did either ask any one present about it.'*^
Meese's notes of the meeting indicate that at one
point Regan asked about the November 1985 HAWK
shipment, and specifically, who had authorized it,
who knew of it, and whether the President was told
of it. Poindexter implied that McFarlane had handled
the Iran initiative by himself from July to December
1985. Poindexter told the group that there was "no
documentation" of the shipment.'^"

After the NSPG meeting, Attorney General Meese
met with Poindexter from 4:15 p.m. to 4:20 p.m. to
find out what he knew of the diversion. Although
North had told the Attorney General that Poindexter
was the point of contact with the President, the At-
torney General chose to meet alone with him and to
take no notes. ' ^ '

Poindexter told Attorney General Meese that
North had given him only enough hints about the
diversion to know what was going on, but that he had
not inquired further. Poindexter testified that the At-
torney General never asked him if the President knew
of the diversion. '^^ Although Meese testified at his
deposition that he thought he had asked that question,
he stated at the public hearings that he had not asked
so direct a question, but only whether anyone else in
the White House knew.'*^ Poindexter testified that
he did not tell the Attorney General he actually ap-
proved the diversion, because he wanted the Presi-
dent and his staff to retain deniability.'^''

Poindexter told the Attorney General that he knew
that when the diversion became public he would have
to resign, and would defer to the Attorney General's
judgment on the timing of his resignation.'*^ Attor-
ney General Meese asked no further questions be-
cause he needed to meet with the President at 4:30
p.m. as scheduled.'*' TTie Attorney General, howev-
er, never went back to Poindexter to obtain additional
details after meeting with the President.

Attorney General Meese met alone with the Presi-
dent and Regan. According to Meese, he told the
President that Poindexter had confirmed the fact of
the diversion.'*'' According to Regan, Meese was
informing the President for the first time of the diver-
sion of funds from the arms sales into Swiss bank
accounts controlled by the Contras.'** Regan said
the President appeared crestfallen. The Attorney
General told the President that the person primarily
responsible was North, but that Poindexter had some
inkling of the diversion and let it happen.'*^

According to Regan, the conversation then turned
to making the information public. Regan suggested
they establish a commission to investigate the facts as
soon as possible. Regan also suggested that the Presi-
dent announce the situation at the press conference
and turn questions over to Meese.'®" The President
said they should think about the matter overnight and
decide how it should be handled.'®'

Attorney General Meese testified that they dis-
cussed the possibility of Poindexter's resignation that
afternoon with the President, and later Meese and
Regan met separately.'®^ Regan said he stayed
behind with the President after Meese left and dis-
cussed the possibility of Poindexter's resignation.
Regan told the President that they would have to
take steps to "clean up the mess," including asking
Poindexter to resign. The President was silent, ac-
cording to Regan, because he "never comments on
something of that nature." By virtue of the President's
silence, Regan inferred that the President had con-
sented to his sohciting Poindexter's resignation.'®^

During the late afternoon, a meeting took place at
the CIA between Roy Furmark and Casey.'®* Fur-
mark described to Casey in detail the financing ar-
rangement of the arms sales. Casey produced for Fur-
mark the CIA bank account information which dem-
onstrated the flow of funds in and out of the CIA
accounts. Casey had questions about Lake Resources
because he had concluded there was only $30,000 left
in the account. Casey called North, in Furmark's
presence, and asked North who actually owed Saudi
financier Khashoggi the money he claimed to have
lost in financing the arms sales. North told Casey that
the Israelis and Iranians owed Khashoggi the
money.'®*

Casey then called Cooper and asked him if he ever
heard of "Lakeside Resources." Cooper responded
that it sounded vaguely familiar but could not recall
specific reference to it in their inquiry.'®®

After Meese left the White House, Regan returned
a call he had received earlier that day from Casey.
Casey told Regan he wanted to see him and suggested
he stop at Casey's office on his way home. There they
met for 20-25 minutes. No one else was present, and
neither Casey nor Regan took notes. Regan told
Casey that the Attorney General had informed the
President that arms sales profits had been diverted to

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Chapter 20

the Contras. Regan said the White House would an-
nounce it pubhcly the next day and he asked Casey to
keep it quiet until then. Casey did not express surprise
at news of the diversion, but he warned Regan of the
potential consequences of going public, such as the
cutoff of Congressional funding for the Contras.
Casey also said that contacts with Iran would be
severed when the Iranians realized they had been
overcharged and the profits diverted. Finally, Casey
expressed concern about the reaction in the Middle
East if the Israeli role were revealed.^®''

November 25: The Public Learns of
the Diversion

By Tuesday morning, November 25, the Attorney
General's investigation was largely over. What had
started as an effort to resolve differing testimony over
the November 1985 HAWK shipment had led to the
discovery of an illicit connection between the Iran
initiative and the secret Contra support activities. Evi-
dence had been destroyed; false statements had been
made; important questions had been skirted or avoid-
ed. Nevertheless, the secret of the diversion had been
uncovered. On this day, the American people would
find out.

Attorney General Meese's day began with a 6:30
a.m. call from Casey, whom the Attorney General
had not yet interviewed about the diversion. Casey
told the Attorney General that Regan had advised
him of the diversion, and asked Meese to drive by his
house on the way to work. '^* The Attorney General
arrived at 6:45 a.m., with Richardson in the car. Rich-
ardson did not go into Casey's house. Richardson
testified that he never sat in on meetings between
Casey and the Attorney General. '^^ Meese once
again held a crucial meeting without witnesses or
notes.

Attorney General Meese testified that, at this meet-
ing, Casey was adamant that the diversion needed to
be publicly announced as quickly as possible. "° This
description of Casey's position is substantially differ-
ent from Casey's position the day before when he met
with Regan.'"

While the Attorney General was at Casey's house,
Regan called to speak to him. Regan told the Attor-
ney General he wanted to meet with Poindexter at
8:00 a.m. to accept Poindexter's resignation.'''^

Meese returned to his car and called Poindexter,
who was just arriving at the White House. He asked
Poindexter to meet him at the Department of Justice,
where they spoke privately for 15 minutes before
Poindexter met with Regan. The Attorney General
told Poindexter the time had come to submit his resig-
nation. Poindexter agreed to resign. They then dis-
cussed North's transfer back to the Marine Corps.
Attorney General Meese told Poindexter he did not
think North had done anything illegal.'''^

Poindexter returned to the White House and was
eating breakfast in his office when Regan came in and
told him to have his resignation ready for the regular
9:30 a.m. meeting with the President. Regan then
asked Poindexter how the diversion could have hap-
pened. Poindexter replied he had thought something
was going on with North. Regan asked why he never
looked into it; Poindexter replied, according to
Regan:

I knew it would hurt the Contras, and the way
those guys on the Hill are jerking around, ... I
was afraid it would hurt them too much, so I
didn't look into it.'''''

In Poindexter's testimony, however, he did not recall
Regan asking him about the diversion.'''^ Both Regan
and Poindexter agree that Regan never asked Poin-
dexter whether the President knew."®

Attorney General Meese met briefly with Cooper
and Richardson.''''' He told Cooper that Poindexter
was going to resign, and instructed Cooper to meet
with White House Counsel Wallison to draft the
President's statement. He asked Richardson to have
Thompson check the White House files to verify that
no documents mentioning the diversion had actually
reached the President."*

Richardson asked Thompson to do a file search of
all relevant documents that went to the President, and
the public announcement was delayed pending its
completion. Thompson returned with some docu-
ments Richardson had not seen before. Richardson
reviewed the documents provided by Thompson from
his own and Poindexter's files, including memos re-
garding the arms shipments and the original January 6
and 17 Findings. Thompson did not explain why he
had not presented those documents during the initial
document review the previous Saturday. No PROF
notes were included. Richardson found nothing perti-
nent to his inquiry.'''^

At 9:30 a.m., the 'Vice President, Regan, Meese, and
Poindexter met with the President. Poindexter told
the President that he was aware of the plan to divert
funds to the Contras, and he tendered his resignation
in order to give the President "the necessary latitude
to do whatever you need to do." '*° The President
told Poindexter that it was in the tradition of a Naval
officer to take responsibility. Poindexter then shook
hands with those present and left. Poindexter testified
that he did not tell the President that he had actually
approved the diversion, because matters were in flux
and he wanted more time to think about it.'*'

After Poindexter left the meeting, those remaining
discussed North's fate. It was agreed that North
should be immediately reassigned to the Marine
Corps. A resignation was not necessary because
North was not a Presidential appointee. No one in-
formed North that he would be reassigned. He
learned of it for the first time while watching the

316

Chapter 20

President's statement and Meese's press conference on
television at noon that day.**^

Sometime that morning Poindexter called North
and, according to North's notes, discussed the disclo-
sure of the Contra connection. North's notes contain a
reference to "put it off on Ghorbanifar." '^^

At 10:15 a.m. the President met with the National
Security Council to brief them on developments.***
From 11:00 a.m. to noon, the President, Regan, Secre-
tary Shultz, Attorney General Meese, and Casey
briefed Congressional leaders. Attorney General
Meese began by telling them about the diversion.
Meese said North was involved with possibly one or
two other NSC staff or consultants. The President
said that this was the only incident of this kind and
that Poindexter, although not a participant, had
known of it and had therefore resigned.'*''

House Majority Leader Jim Wright then asked if
the diversion was done with knowledge or approval
of anyone in the U.S. Government. Attorney General
Meese answered that North had approved it. Repre-
sentative Wright asked about Poindexter, and Meese
responded that Poindexter knew the money was
going to the Contras but did not know the details.
Senate Minority Leader Robert Byrd then asked if
Poindexter's resignation was requested. The President
responded that Poindexter volunteered to resign, in
the Navy tradition.'*®

Senator Nunn expressed concern about NSC staff
involvement in covert operations. The President re-
plied that the NSC staff had served the country well,
citing the opening to China as an example. Senator
Nunn replied that he drew a distinction between a
diplomatic initiative and a covert operation.'*''

Representative Wright then asked if the CIA knew
of the diversion. Casey responded, "No, I didn't."
Casey then volunteered that McFarlane learned of the
diversion in April or May 1986.'**

Representative Wright noted that it strained credu-
lity that the Israelis thought up the diversion on their
own. Meese explained that there was no question that
North or others set it up. Senate Majority Leader
Robert Dole then asked how it was determined there
was an overcharge for the arms sold. Meese replied
that the United States got "dollar-for-dollar" for its
weapons and equipment. He related, however, that
the exact amount of the diversion was not clear.'*®

Just before the President's announcement, Richard
Secord received word from North's office that Poin-
dexter and North were resigning. Secord called Poin-
dexter and urged him not to quit but to "stand in
there and fight" to get it all straightened out. Poin-
dexter told Secord it was too late because he had
already resigned. Secord demanded to speak to the
President but Poindexter told him it was too late,
"they had already built a wall around the Presi-
dent." '3"

November 25, 1986: The Attorney
General's Press Conference

The Presidential statement and subsequent press
conference by the Attorney General began at noon
and lasted approximately 45 minutes. Attorney Gener-
al Meese began the press conference with a disclaimer
of sorts, stating that the inquiry was not yet complete
because "all information was not yet in." Nonetheless,
his responses contained several purported conclusions.

Meese was asked how the diversion came to his
attention. He responded that, through a review of
reports and other materials, there was a hint that
some money was available to be used for another
purpose. He elaborated that the diversion had ac-
counted for some $12 million to $30 million. Meese
was asked if the CIA knew of the diversion. He
responded that none of the statutory members of the
National Security Council knew, including Casey.'®*

Later, in describing the money flow, Meese said the
money went directly from the Israelis into bank ac-
counts held by the Contras. This version of events,
although consistent with North's statements, was con-
tradicted by the diversion memorandum, which de-
scribed how the money would be transferred by the
Israelis into an account maintained by "a private
United States corporation" and then transferred to the
Contras.'®^

Meese was asked about arms shipments prior to the
January 1986 Finding. He responded that there was
one transaction in which Israel shipped weapons with-
out authorization from the United States, and that the
weapons so shipped were returned to Israel. Attorney
General Meese added that the AugustSeptember and
November 1985 shipments were between Israel and
Iran and "did not involve, at that time, the United
States." '93

Attorney General Meese specifically stated that the
President had not known about the November 1985
HAWK shipment until February 1986. Thus the At-
torney General said; The President was informed gen-
erally that there had been an Israeli shipment of
weapons to Iran sometime during the late summer,
early fall of 1985, and then he later learned in Febru-
ary of 1986 details about another shipment that had
taken place in November of 1985, which had actually
been returned to Israel in February of 1986.'®*

These statements were contrary to what he and
Cooper had learned regarding CIA participation in
the November 1985 HAWK shipment and regarding
McFarlane's conversation with Shultz on November
18, 1985. Attorney General Meese's statements were
also contrary to the information Meese had received
from Secretary Shultz on November 22 that the Presi-
dent had told Shultz 3 days earlier that he (the Presi-
dent) had known of the November 1985 HAWK ship-

317

Chapter 20

ment at the time. '''^ Attorney General Meese did not
tell these facts to the press.*

When asked whether the diverted funds were owed
to the United States, Meese responded that all money
owed to the United States had been paid to the
United States. Meese said, "We have no control over
that money. It was never United States funds, it was
never property of the United States officials, so we
have no control over that whatsoever." '^^ Meese
later testified that a good case could be made that
such funds were held in "constructive trust" for the
United States, that is, that all profits reaped belong in
the U.S. Treasury.'^'

Attorney General Meese also stated at the press
conference that, to the best of his knowledge, no
American was present for, or participated in, negotiat-
ing the price of the arms to Iran. Meese's source for
this statement is also unclear. '^^

FBI Director William Webster watched the Attor-
ney General's press conference on television, and
thereby learned of the diversion. After the press con-
ference, Webster walked across the street to the De-
partment of Justice and told Meese that a criminal
investigation was warranted. The Attorney General
stated that he had turned the inquiry over to the
Criminal Division to determine which, if any, statutes
were violated. '^^ Webster then raised the problem of
securing NSC records. Attorney General Meese as-
sured Webster that the Justice Department would
take the appropriate steps to secure the records. Web-
ster went back to the FBI and told his Assistant

Director to gear up for the anticipated investiga-
tion.200

At approximately 2:00 p.m.. Meese met with Burns,
Reynolds, Cooper, Richardson, and Kenneth Cribb
(Counselor to the Attorney General). Associate At-
torney General Trott joined them midway through
the meeting.^"' The group discussed possible viola-
tions of laws, including the Boland Amendment, the
Arms Export Control Act, and the Neutrality Act,
and possible misappropriation of U. S. funds. ^"^ They
also discussed involving the Internal Security Section
of the Criminal Division in the investigation. They
discussed the possibility of granting immunity, al-
though neither North nor Poindexter had refused to
talk to the Attorney General. The Attorney General
instructed Deputy Attorney General Burns to call
Wallison to ensure that documents belonging to
North and Poindexter were secured. ^"^ They agreed
to meet again at 5:45 p.m.

When they actually did meet, at 6:40 p.m., Meese
asked Burns if he had secured the White House docu-

*Ex. EM-54. Meese was asked at the heaiHngs whether he be-
Ueved that Secretary Shuhz should resign for not supporting the
Iran initiative. Meese stated, "any member of the Administration
owes it to the President to stand shoulder-to-shoulder with him and
support the policies he has . . . and I intend to do that. Other
people speak for themselves."

ments. Burns indicated he had not done so and left
the room to make the call.^"* As it turned out. Burns
did not get through to Wallison until the next after-
noon, November 26. Wallison told him the documents
had in fact already been secured by the NSC security
officer. ^"^ A letter requesting segregation of the doc-
uments was not sent until November 28, 1986, 6 days
after discovery of the diversion memorandum. ^°^

Sometime that afternoon, Secord, after being be-
sieged by the press at his office, went to a hotel to
consult with Tom Green. North joined them. North
received two phone calls at the hotel. One was from
the Vice President calling to express his regrets about
North's dismissal. The other was from the President.
North stood at attention while the President spoke to
him.^°'' There is some dispute about the substance of
this conversation. North testified that the President
told him, "I just didn't know," which North under-
stood to be a reference to the diversion.^"* Earl testi-
fied that, when North returned to the office. North
had told him that the President had called and said,
"It is important that I not know." ^°^ North testified
that perhaps he told Earl that the President felt it was
important that North know that he, the President, did
not know of the diversion. ^ ' ° Craig Coy, who was
present when North related the Presidential conversa-
tion to Earl, testified that he did not recall North
saying anything about the President's statements con-
cerning his knowledge.^'' Hall testified that North
told her that President had said, "I just didn't
know." ^'^

There is no dispute, however, that during the
phone call the President told North that he was "a
national hero." ^'^ Indeed, the President has publicly
acknowledged making this statement.^'''

At 4:40 p.m., Mtese was called by Israeli Prime
Minister Peres. The Prime Minister told Meese that
the Government of Israel was concerned about
Meese's claims in his press conference and was about
to issue a statement. Prime Minister Peres said the
Israelis had transferred "defensive arms" at the re-
quest of the United States. He also told Meese that
the Israelis had not paid anything to any Contra ac-
count. The Prime Minister explained that the Iranians
paid directly into an account in Switzerland main-
tained by an American company. He indicated that
Israel — which had been asked by U.S. officials early
on to take the rap if the arms sales became public —
was not going to take the blame for the diversion.^'^

Amiram Nir made the same point in a call to
North. North's notes of that call show that Nir com-
plained about Meese's statements and asked what basis
Meese had for making them. Nir pointed out that, far
from ever telling him that any funds were diverted.
North had always told him there was a shortage of
funds. Indeed, Nir questioned why the Israelis had
been made to pay for replacement weapons if there
was an excess of funds. Nir told North he could not

318

Chapter 20

back his story. He said that statements made by the
Attorney General regarding Israeh deposits to Contra
accounts and other matters were simply false.^'®

At the time of these events on November 25,
McFarlane was in London for a speaking engage-
ment. He heard a news account of the Attorney Gen-
eral's press conference and, after finishing his speech,
called North. North told McFarlane he had met with
the Attorney General and Regan, and, based on that
meeting, he assumed he would be allowed to resign.
North said he learned from watching the press confer-
ence on television that he had been "dismissed." ^'^
McFarlane had written a statement for the press that
he read first to North. The statement said that he had
been led to believe the diversion had been approved.
North confirmed to McFarlane that the diversion had
been approved.^'*

During the afternoon of November 25, the NSC
staff secured North's office. In reviewing her files at
the time. Fawn Hall discovered that she had not
substituted the copies of the documents she had al-
tered on November 21 for the copies of unaltered
versions of the documents in North's files. She also
found PROF notes that were similar to those shred-
ded Friday night, along with minutes of the Tehran
meeting in May 1986 that she had saved to read. Hall
knew that the NSC security staff soon would be clos-
ing the office, so she called North and told him to
come back to the office, indicating to him the urgen-
cy of her request and signalling that it involved a
problem with documents. North said that he and his
attorney would come back to the office.^'*

Before they arrived, Hall took the documents up-
stairs and placed copies of the altered documents
inside her boots, inexplicably leaving the originals of
the altered versions on her desk. She then went to
Earl's office and solicited his help in pulling the
PROF notes from he pile of remaining documents.
Earl was going to put the PROF notes in his jacket,
but Hall told him she would do it. She then told him
to watch the open entrance to his office while she hid
the PROF notes under her clothes. Earl assured her
that the documents were not visible. ^^^

North and his attorney then arrived at North's
office, where North took a phone call in his private
office with only Hall present. Hall asked North if he
could detect anything against her back, and he said he
could not. Hall left the office with North and the
attorney. Their briefcases were inspected by the NSC
security staff, and they were allowed to pass. In the
hallway. Hall indicated to North that she wanted to
give him the documents. He told her to wait until
they were outside. ^^'

Hall, North, and the attorney walked outside. Hall
made a motion to North (she was planning to pass the
documents), but the attorney said, according to Hall,
"No, wait until we get inside the car." Once in the
car. Hall pulled out the documents, gave them to
North, and told North that she had not finished sub-

stituting the altered documents for the originals. The
attorney drove them to their cars and, according to
Hall, asked her what she would say if asked about the
shredding. Hall replied that she would say "We shred
every day," to which the attorney said, "Good." ^^^

There is no evidence as to whether the attorney
knew in advance that Hall had documents on her
person. That evening, the attorney withdrew from
North's representation. ^^^ Subsequently, North's new
attorney returned documents to the NSC.

November 26: Criminal
Investigation Underway

By Wednesday morning, November 26, Meese was
prepared for the investigation to enter a new phase.
At 9:15 a.m., he met with Justice Department attor-
neys Burns, Trott, Reynolds, Cooper, Bolton, Cribb,
Korten, Weld, and Richardson. The Attorney Gener-
al began the meeting by announcing to Weld that this
was the day for the handoff of the investigation to the
Criminal Division. Weld said he wanted to assign the
investigation to two experienced attorneys in the
Public Integrity Section, which typically handles
prosecutions of public officials and Independent
Counsel inquiries. ^^* Attorney General Meese stated
he also wanted Deputies Mark Richard and John
Keeny to participate.

Attorney General Meese then assigned Cooper as
an additional member of the prosecution team. Attor-
ney General Meese explained that he wanted to be
kept informed. Richardson instructed the group that if
anything came up that was "hot," they were to tell
the Attorney General immediately.^^^ However, the
Attorney General testified before the Tower Board
that he did not request briefings because he felt this
case should be referred to an Independent Coun-
sel.^^* Attorney General Meese also testified, to the
Senate Select Committee on Intelligence, that he sug-
gested from the start that an Independent Counsel be
appointed.^^' Yet the relevant Justice Department of-
ficials do not recall when the Attorney General took
that position. ^^* In fact, there was much discussion of
appointing a "special counsel," who, unlike an Inde-
pendent Counsel, would have been under the control
of the Attorney General. ^^®

At approximately 11:00 a.m., Meese spoke with
Webster and requested that the FBI enter the case. At
2:45 p.m., the Attorney General called a meeting at
the Justice Department, that included representatives
of the Criminal Division and the FBI. The Attorney
General described the weekend inquiry and answered
questions. The Attorney General also designated the
criminal investigation team members. ^'^

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Chapter 20

November 27: A Thanksgiving
Phone Call

November 27 was Thanksgiving. Fawn Hall received
a telephone call at home from Jay Stephens, an attor-
ney on the White House Counsel's staff.^^' Press
reports had appeared claiming that documents perti-
nent to the Iran-Contra Affair had been shredded at
the NSC. Stephens asked Hall whether those reports
were true. Hall told Stephens exactly what she had
earlier told North's attorney her response would be to
such a question: "we shred everyday." Hall admitted
during the public hearings that she misled Stephens to
believe that nothing unusual had occurred. ^^^

Final Steps

The NSC security officer had secured North's office
on Novmeber 25. The FBI took over joint custody of
the documents at the NSC on Friday, November

2g 233*

Also on November 28, Hall went to the office of
North's new attorney to deliver messages that North
had received.23* When Hall returned to the NSC,
Craig Coy introduced her to FBI agents, who asked
to interview her over the weekend. Hall left her new
office that evening with NSC aide Robert Earl, and
they agreed not to tell the FBI about the removal of
documents from the NSC offices. The next day, after
learning that Earl had retained an attorney, Hall ar-
ranged for one as well.^^^

On Monday, December 1, William Reynolds had
plans to meet alone with Tom Green again. When
Weld and Richard heard of this, they opposed the
meeting because Reynolds was no longer supposed to
be involved in the investigation. They also pointed
out that Reynolds might be a fact witness and should
therefore not be negotiating with defense counsel.
Weld called Reynolds to express his opposition, but
Reynolds insisted on meeting with Green. He did,
however, agree to have William Hendricks (Deputy
Chief of the Public Integrity Section of the Justice
Department) present. Weld consulted with Trott, who
said that so long as Hendricks was present, the situa-
tion should be "survivable." **

•Mark Richard had advocated serving subpoenas on the NSC
staff and others. His concern was that, if documents were altered or
destroyed, a prosecutor might be unable to charge obstruction of
justice because the defendant could claim that he or she was not
aware of any investigation and therefore did not intend to obstruct
justice. Richard Dep., 8/19/87, at 176-77. Indeed, as noted earlier,
during their public hearing testimony, both North and Poindexter
made a point of saying they believed Meese was acting as a friend
of, or counselor to, the President, as opposed to acting as Attorney
General, during the factfinding inquiry. North Test., Hearings 100-
7, Part I. 7/7/87, at 19; Poindexter Test., Hearings. 100-8, 7/16/87,
at 133.

••Weld Dep.. 7/16/87. at 40. Reynolds, however, maintains that
he never intended to meet with Green alone and that it was he who

During the meeting. Green said he knew 93 percent
of the story and did not feel the President would be
embarrassed if the whole truth came out. Green made
clear now that he represented Secord. Green said that
Secord preferred to tell his story to the Justice De-
partment rather than to Congress.^^®

Green wanted immunity for Secord. He argued that
if the Justice Department did not grant immunity and
Secord's story did not come out, the press would feed
on the situation and create the suspicion that the
President and Regan knew more than they claimed
they did.237

Reynolds and Hendricks asked Green about the
1985 arms shipments. Green responded that the Presi-
dent authorized the first shipment and that McFarlane
probably authorized the second shipment. Turning to
the January 1986 Finding, Green said it was broad
enough to authorize the "commercial activity in this
enterprise." ^^®

Going back to the November 1985 shipment. Green
said McFarlane did not impart to others the truth
about the cargo. He said CIA "subordinates" were
told the cargo was oil drilling equipment. ^^^ Con-
cerning the Contra resupply operation. Green said
that only unappropriated funds were used and that
private individuals were used to raise and collect
money to support the airlift operation.^*"

Hendricks asked Green about the possibility that
the U.S. sale of arms was used as leverage against
third countries to force them to send money to the
Contras. Green said he knew nothing of that. Green
said that the residuals to the Contras were an "unex-
pected result" that emerged from the arms sales,
rather than being "cooked up" by the operation.^*'

Hendricks suggested that because Secord was such
a "great American," he should come forward without
immunity. Green rejected that idea. Hendricks re-
sponded that there were problems in granting Secord
immunity, and noted the prior criminal investigation
against Secord. ^''^

Reynolds asked how many people Green thought
should be immunized. Green said it should be limited
to Secord, North, and Hakim. Green said he could
secure the approval of Hakim's and North's lawyers.
Green assured them that he did not want to embarrass
the President and was not trying to "snooker"
anyone. ^'•^

Hendricks noted that it would be inappropriate to
immunize anyone while there was an ongoing prelimi-
nary inquiry for an Independent Counsel appointment.
Green asserted that Secord, North, and Hakim were
not covered under the law that grants jurisdiction to
the Independent Counsel. Green predicted that if an
Independent Counsel were appointed, all the princi-

insisted that someone from the Criminal Division be present. Reyn-
olds Dep., 9/1/87, at 67.

320

Chapter 20

pals would "clam up." Green noted that time was of
the essence. The meeting ended at 12:15 p.m.^*''

At 2:20 p.m., Meese met with Burns, Cooper,
Bolton, Cribb, Weld, Hendricks, and Richard to dis-
cuss the investigation. This meeting focused on
whether to apply for an Independent Counsel. There
was concern that North and Poindexter might not be
persons covered by the Independent Counsel statute.
The consensus, however, was that sufficient evidence

of a conflict of interest existed that the Justice De-
partment should apply for an Independent Counsel.
Weld took it upon himself to draft the application that
night. Weld mentioned only North in the application
as a possible target because he felt there were insuffi-
cient facts to name others. ^''^

On December 19, an Independent Counsel was ap-
pointed.

321

Chapter 20

Chapter 20

1. Ex. EM-43.

2. Cooper Test., Hearings. 100-6, 6/25/87, at 250-52;
Meese Test., Hearings. 100-9, 7/28/87, at 200-01.

3. Poindexter telephone logs.

4. Regan Test.. Hearings. 100-9, 7/30/87, at 224; Regan
Dep., 7/15/87, at 44.

5. Ledeen Dep., 6/19/87, at 19.

6. McFarlane Test., Hearings. 100-2, 5/11/87, at 176-77;
McFarlane Dep., 7/2/87, at 55.

7. Ledeen Dep., 6/19/87, at 19.

8. North Test., Hearings. 100-7, Part I, 7/9/87, at 226.

9. McFarlane Test., Hearings. 100-2, 5/13/87, at 213-14.

10. North Test.. Hearings. 100-7, Part I, 7/8/87, at 146.

11. Cooper Test., Hearings. 100-6, 6/25/87, at 250;
Cooper Dep., 6/22/87, at 130.

12. Webster Test., SSCI, 4/8/87, at 167-68; Meese Dep.,
7/8/87, at 91.

13. Meese Test., Hearings. 100-9, 7/28/87, at 413-14;
Meese Dep., at 80.

14. Meese Dep.. at 91.

15. Earl Dep.. 5/2/87, at 65.

16. Meese Test., Hearings, 100-9, 7/29/87, at 335-36;
North Test.. Hearings. 100-7, Part I, 7/8/87. at 144.

17. Earl Dep.. 5/2/87, at 64.

18. Meese Test., Hearings. 100-9, 7/28/87, at 225-26;
Meese Dep.. at 88.

19. Weld Dep., 7/16/87, at 19-20.

20. Meese Test., Hearings. 100-9, 7/28/87, at 226; Meese
Dep.. at 91.

21. Ex. EM-42.

22. Earl Dep.. 5/22/87, at 151-52.

23. Poindexter schedule.

24. See Chapter 6.

25. McFarlane Test., Hearings. 100-2, 5/11/87, at 76; Hall
Test., Hearings. 100-5, 6/8/87, at 479-80, 491; Ex. 40
(RCM).

26. Compare Exs. FH-2 through FH-6 (originals) with
Exs. FH-2A through FH-6A & FH-5B (altered).

27. Hall Test., Hearings. 100-5, 6/8/87, at 488-90, 496-97.

28. North Test.. Hearings. 100-7. Part I, 7/7/87, at 15-17;
Hall Test., Hearings. 100-5, 6/8/87. at 502-03; Earl Dep., 5/
2/87, at 63-64.

29. Hall Test., Hearings. 100-5. 6/8/87, at 503-05.

30. North Test.. Hearings. 100-7, Part I, 7/7/87, at 226-
27; Earl Dep., 5/2/87, at 67.

31. Meese Test., Hearings. 100-9, 7/28/87, at 226-27;
Meese Dep., at 87; Ex. JMP-18.

32. Poindexter Test., Hearings. 7/15/87, at 42-44, Poin-
dexter Dep., 5/2/87, at 113.

33. Poindexter Test., Hearings. 100-8, 7/15/87. at 20-23.

34. Wash. Post, 7/11/87, at A13.

35. Poindexter Test., Hearings. 100-8. 7/16/87, at 118.

36. Id., at 72.

37. North Notes. Q 2640, 11/21/86.

38. Poindexter Test., Hearings. 100-8, 7/16/87, at 116.

39. North Notes, Q 1354, 11/26/87.

40. Poindexter Test., Hearings. 100-8, 7/16/87, at 114.

41. Napier Dep.. at 66-68; Corbin Dep., at 7-14; Dutton
Test., Hearings, ini/%1, at 129-31.

42. Napier Dep., at 60-68, 104-05.

43. Ex. CJC-15.

44. Cooper Dep., 7/1/87. at 11, 13-14.

45. McFarlane Test., Hearings, 100-2. 5/12/87. at 95;
McFarlane Dep.. 7/2/87, at 44-45.

46. McFarlane Dep., 7/2/87, at 57-58; Sofaer Dep., 6/18/
87, at 62-63.

47. Meese Test., Hearings. 100-9, 1/2%/Sl. at 229-30;
McFarlane Test., Hearings. 100-2. 5/13/87, at 165.

48. McFarlane Test., Hearings. 100-2, 5/11/87 at 71-73,
83; McFarlane Dep., 7/2/87, at 52.

49. McFariane Test., Hearings. 100-2, 5/11/87, at 71;
McFarlane Dep., 7/2/87, at 52.

50. McFarlane Test., Hearings. 100-2, 5/11/87, at 71-72;
see Meese Test., Hearings. 100-9, 7/28/87, at 230-31.

51. McFarlane Dep., 7/2/87. at 11. 53.

52. Ex. RCM-66.

53. Richardson Dep.. 7/22/87, at 47.

54. Meese Dep., at 120.

55. Meese Test.. Hearings. 100-9. 7/29/87, at 227.

56. Chron. of Justice Dept. Inquiry, 7/26/87.

57. Meese Dep., 7/8/87, at 104-05.

58. Id. at 108-12; Meese Dep.. at 106.

59. Cooper Dep.. 6/22/87, at 144-45.

60. Ex. EM-54.

61. Meese Dep., at 103; North Test., Hearings. 100-7. Part
I, 7/8/87, at 142; Meese Test., Hearings. 100-9, 7/29/87, at
54.

62. R. Miller Dep., 6/23/87, at 11-15.

63. Ex. CJC-1.

64. Ex. GPS-C.

65. Cooper Dep., at 149-50.

66. Shultz Test.. Hearings. 100-9, 7/23/87, at 414-15.

67. Meese Test., Hearings. 100-9. 7/29/87, at 414-15.

68. Id. at 286. 288.

69. Id. at 414-15.

70. Sofaer Dep.. 6/18/87, at 70; Cooper Test., Hearings,
100-6, 6/25/87, at 265.

71. Richardson Dep., 7/22/87, at 50-51.

72. Meese Test., Hearings. 100-9, 7/28/87, at 234; Meese
Dep., 7/8/87, at 109-10.

73. Ex. CJC-1 8.

74. Richardson Dep., 7/22/87, at 64.

75. Id. at 65-69.

76. Reynolds Dep., 8/27/87, at 68-74.

77. Ex. EM-44.

78. Reynolds Dep., 8/27/87, at 79-85; Richardson Dep.,
7/22/87, at 74.

79. Reynolds Dep., 8/27/87, at 87; Richardson Dep., 7/
22/87, at 81-82.

80. Meese Test., Hearings. 100-9, 7/28/87 at 35; Cooper
Dep., 6/22/87, at 159-63.

81. Earl Dep., 5/2/87, at 79-80.

82. North Test., Hearings. 100-7. Part I, 7/9/87, at 183-
84.

83. Reynolds Dep.. 8/27/87. at 100-02; Richardson Dep.,
7/22/87. at 188-91; Earl Dep.. 5/2/87, at 79.

84. Poindexter Test.. Hearings. 100-8. 7/21/87, at 70-71.

85. Richardson Dep., 7/22/87, at 88-89.

86. Id. at 92-93.

87. Id. at 93.

88. Id. at 95; North Test., Hearings. 100-7. Part I. 7/7/
87, at 39.

89. Reynolds Dep., 8/27/87, at 1 10; Ex. EM-43.

322

Chapter 20

90. Meese Test., Hearings. 100-9, 7/28/87, at 236.

91. M, at 239-40.

92. J 9419.

93. Meese Dep., at 116.

94. Id., at 122-23.

95. Meese Test., Hearings. 100-9, 7/28/87, at 109-16.

96. Meese Test., SSCI, 12/17/86, at 75; HPSCI, 12/19/
86, at 21.

97. Meese Test., Hearings. 100-9, 7/28/87, at 236-39.

98. Ex. CJC-1.

99. Cooper Test., Hearings. 100-6, 6/25/87, at 317;
Cooper Dep., 6/22/87, at 184.

100. Ex. CJC-1; Reynolds Dep., 9/1/87, at 89; Richard-
son Dep., 7/22/87, at 128-29.

101. North Test., Hearings. 100-7, Part II, 7/14/87, at
223-24; McFarlane Dep., 7/2/87, at 61-62.

102. North Test., Hearings. 100-7, Part II, 7/13/87, at
200-01.

103. McFarlane Dep., 7/2/87, at 64.

104. Ex. EM-47.

105. Meese Test., Hearings. 100-9, 7/29/87, at 240; Reyn-
olds Dep., 9/1/87, at 26.

106. North Test., Hearings. 100-7, Part I, 7/8/87, at 141-
43; 7/9/87, at 240-43.

107. Meese Test., Hearings. 100-9, 1/1%/%!, at 240-41;
Cooper Test., Hearings. 100-6, 6/25/87, at 261; North Test.,
Hearings. 100-7, Part I, 7/9/87, at 240.

108. Ex. EM-47.

109. Cooper Test., Hearings. 100-6, 6/25/87, at 245-46;
Ex. EM-43.

1 10. Meese Test., Hearings. 100-9, 7/28/87, at 244-45.

111. Id.. 1/19/?,1, at 411-12; Ex. EM-43.

112. Cooper Test., Hearings. 100-6, 6/25/87, at 262;
Meese Test., Hearings. 100-9, 7/28/87, at 242-43, 248.

113. Meese Test., Hearings. 100-9, 7/28/87, at 245-46;
Cooper Test., Hearings. 100-6, 6/25/87, at 262.

114. Meese Test., Hearings. 100-9, 7/29/87, at 246.

115. Id, at 128.

116. See Chapter 15.

117. Meese Test., Hearings. 100-9, 7/28/87, at 243-45.

118. North Test., Hearings. 100-7, Part I, 7/8/87, at 108.

119. Meese Test., Hearings. 100-9, 7/28/87, at 246;
Cooper Test., Hearings. 100-6, 6/25/87, at 264.

120. Ex. EM-47.

121. Reynolds Dep., 9/1/87, at 31.

122. Cooper Test., Hearings. 100-6, 6/25/87, at 261; Ex.
EM-47.

123. Ex. EM-47.

124. Cooper Test., Hearings. 100-6, 6/25/87, at 264;
Reynolds Dep., 9/1/87, at 31.

125. Sofaer Dep., 6/18/87, at 69-70.

126. Poindexter Test., Hearings. 100-8, 7/16/87, at 82;
North Test., Hearings.\00-1. Part I, 7/9/87, at 151.

127. North Test., Hearings. 100-7, Part I, 7/9/87, at 257-
58; Barbara Browne Aff. 9/4/87, at 1.

128. Cooper Test., Hearings. 100-6, 6/25/87, at 265-67;
Cooper Dep., 6/22/87, at 210.

129. McGinnis Interview, 4/24/87; Cooper Test., Hear-
ings. 100-6, 6/25/87, at 266.

130. Cooper Dep., 6/22/87, at 185; Ex. CJC-1.

131. Sofaer Dep., 6/18/87, at 71.

132. Weld Dep., 7/16/87. at 23-24.

133. Meese Test., Hearings. 100-9, 7/28/87, at 250; Meese
Dep., at 140.

134. Meese Test., Hearings. 100-9, 7/28/87, at 250;
McFarlane Dep., 7/2/87, at 67.

135. Meese Dep., at 141-42.

136. Meese Test., Hearings. 100-9, 7/28/87, at 251; Meese
Dep., at 144-45.

137. Regan Test., Hearings. 100-10, 7/30/87, at 30.

138. Id. at 29; Regan Dep., 7/15/87, at 54-55.

139. Regan Test., Hearings. 100-10, 7/30/87, at 29; Regan
Dep., 7/15/87, at 55-57.

140. Ex. EM-43.

141. Meese Test., Hearings. 100-9, 7/29/87, at 139.

142. Id. at 77-78; Cooper Test., Hearings. 100-6, 6/25/87,
at 108-09; Cooper Dep., 6/23/87, at 24.

143. Ex. CJC-1.

144. Reynolds Dep., 9/1/87, at 35-37.

145. Cooper Test., Hearings. 100-6, 6/25/87, at 280-81;
Cooper Dep., 6/23/87, at 31-33.

146. Cooper Dep., 6/23/87, at 33; Ex. CJC-19.

147. Cooper Test., Hearings. 100-6, 6/25/87, at 281-82.

148. Meese Dep., at 137.

149. Meese Test., Hearings. 100-9, 7/28/87, at 252; Meese
Dep., at 149.

150. Ex. EM-49; Meese Test., Hearings. 100-9, 7/28/87, at
252.

151. Meese Test., Hearings. 100-9, 7/29/87, at 254; Meese
Dep., 7/8/87, at 146.

152. Poindexter Test., Hearings. 100-8, 7/16/87, at 120.

153. Meese Test., Hearings. 100-9, 7/28/87, at 254; Meese
Dep., at 147.

154. Poindexter Test., //ear/ngi, 100-8, 7/16/87, at 119-20.

155. Id

156. Meese Test., Hearings. 100-9, 7/28/87, at 253.

157. Id.. 7/29/87, at 234; Meese Dep., 7/8/87, at 149.

158. Regan Test., Hearings. 100-10, 7/30/87, at 75-76;
Regan Dep., 7/15/87, at 62.

159. Regan Test., Hearings. 100-10, 7/30/87, at 30; Regan
Dep., 7/15/87, at 62.

160. Regan Test., Hearings. 100-10, 7/30/87, at 30-31;
Regan Dep., 7/15/87, at 64.

161. Meese Test., Hearings. 100-9, 7/28/76, at 255.

162. Meese Dep., at 150-51.

163. Regan Test., Hearings. 7/30/87, at 78-79; Regan
Dep., 7/15/87, at 68-69.

164. Furmark Dep., 7/22/87, at 167.

165. Id. at 168.

166. Cooper Test., Hearings. 100-9, 6/25/87, at 283;
Cooper Dep., 6/23/87, at 37-38.

167. Regan Test., Hearings. 100-10, 7/30/87, at 31-32;
Regan Dep., 7/15/87, at 73-75.

168. Meese, Tower Board, 1/20/87, at 41.

169. Richardson Dep., at 133-34.

170. Meese Test., Hearings, 100-9, 7/28/87, at 255; Meese
Dep., at 154.

171. Regan Test., Hearings, 100-10, 7/30/87, at 31-32;
Regan Dep., 7/15/87, at 74-76.

172. Meese, Tower Board, 1/20/87, at 42.

173. Poindexter Test., Hearings. 100-8, 7/16/87, at 88.

174. Regan Test., Hearings, 100-10, 7/30/87, at 43; Regan
Dep., 7/15/87, at 69.

175. Poindexter Test., Hearings, 100-8, 7/16/87, at 120.

176. Regan Test., Hearings, 100-10, 7/30/87, at 86-87;
Poindexter Test., Hearings. 100-8, 7/16/87, at 89.

177. Meese logs; Richardson Dep., 7/22/87, at 136.

178. Richardson Dep., 7/22/87, at 138.

323

Chapter 20

179. Id., at 138-41.

180. Poindexter Test., Hearings. 100-8, 7/16/87, at 121.

181. /rf.,at 121-23.

182. Regan Test., Hearings. 100-10, 7/30/87, at 34, 60;
Regan Dep., 7/15/87, at 69-70; McFarlane Dep., 7/8/87, at
69; North Test., Hearings. Part I, 7/9/87, at 125.

183. North Notes, Q 2647.

184. Meese schedule.

185. Ex. EM-53.

186. Id., at 4, 9.

187. Id, at 7.

188. Id, at 10.

189. Id, at 17, 20.

190. Secord Test., Hearings, 100-1, 5/5/87, at 135.

191. Ex. EM-54.

192. Reynolds Dep., 9/1/87, at 61-62.

193. Ex. EM-54.

194. Id

195. Ex. GPS-C.

196. Ex. EM-54.

197. Meese Test., Hearings, 100-9, l/l'i/%1, at 259.

198. Ex. EM-54.

199. Webster Int., 4/28/87; Webster Test., SSCI, 4/8/87,
at 131.

200. Webster Int., 4/28/87.

201. Ex. EM-43.

202. Ex. EM-55.

203. Richardson Dep., 7/22/87, at 145.

204. Cooper Test., Hearings. 100-6, 6/25/87, at 268-69.

205. Burns Int., July 7, 1987.

206. Cooper Test., Hearings. 100-6, 6/25/87, at 270.

207. Secord Test., Hearings, 100-1, 5/5/87, at 135-36.

208. North Test., Hearings, 100-7, Part I, 7/8/87, at 1.

209. Earl Dep., 5/22/87, at 145-47.

210. North Test., Hearings, 100-7, Part I, 7/8/87, at 93.

211. Coy Dep., 6/1/87, at 22-26.

212. Hall Test., Hearings, 100-5, 6/8/87, at 506-07.

213. Id, at 297.

214. Time Magazine, 12/8/86, at 18.

215. Ex. EM-56.

216. North Notes, Q 2650-51.

217. North Test., Hearings, 100-7, Part I, 7/9/87, at 233.

218. McFarlane Test., Hearings, 100-2, 5/11/87, at 79-80,
McFarlane Dep., 7/8/87, at 69.

219. Hall Test., Hearings, 100-5, 6/8/87, at 508-09.

220. Id, at 509-10.

221. Id, at 510.

222. Id

223. W.,at 511.

224. Weld Dep., l/\6/%l, at 34-35.

225. Id, at 34-35.

226. Meese, Tower Board, 1/20/87, at 49.

227. Meese Test., SSCI, 12/17/86, at 14.

228. E.g.. Trott Dep., 7/2/87, at 69-70; Richard Dep., 8/
19/87, at 181-83.

229. Richard Dep., 8/19/87, at 182-83.

230. Weld Dep., 7/16/87, at 35.

231. Hall Test., Hearings, 100-5, 6/9/87, at 523.

232. Id

233. Trott Dep. 7/2/87, at 62-63.

234. Hall Test., Hearings, 100-5, 6/8/87, at 511.

235. Id, at 512-13; Earl Dep., 5/2/87, at 94.

236. Reynolds Dep., 9/1/87, at 66-72.

237. Id, at 72; Id. Ex. 3.

238. Reynolds Dep., 9/1/87, Ex. 3.

239. Id

240. Id

241. Reynolds Dep., 9/1/87, at 70-71.

242. Id, at 72.

243. Reynolds Dep., 9/1/87, Ex. 3.

244. Id.

245. Weld Dep., 7/16/87, at 42.

324

PartV
The Enterprise

Chapter 21
Introduction to the Enterprise

By the summer of 1986, the organization that Richard
Secord ran at Lt. Col. Oliver L. North's direction
controlled five aircraft, including C-123 and C-7
transports.' It had an airfield in one country, ware-
house facilities at an airbase in another, a stockpile of
guns and military equipment to drop by air to the
Contras, and secure communications equipment ob-
tained by North from the National Security Agency
(NSA).2

Flying the planes were veteran pilots and crew,
many experienced in covert operations. At any given
time, about 20 airmen were paid consultants to a
Panamanian corporation formed by Secord and
Albert Hakim at North's direction; their salaries were
paid from secret Swiss accounts controlled by Secord
and Hakim. ^

In Robert Dutton, a recently retired U.S. Air Force
lieutenant colonel, the organization had an expert in
special operations.* Dutton was reporting to an NSC
official, Oliver North, and a retired Air Force gener-
al, Richard Secord, both of whom indicated that the
operation was authorized by the President of the
United States.^ This private air force was but a part
of the organization that Secord and Hakim called the
"Enterprise."

This part of the Report explores the activities of
the Enterprise and addresses questions such as: Where
did the Enterprise get the money? How did it spend
it? Who profited? What amount of the Iranian arms
sales proceeds was spent on the Contras (the so-called
"diversion")? What happened to the $10 million that
Brunei contributed? What other covert operations did
the Enterprise conduct or plan?

Witnesses testifying before the Committees could
not easily define the Enterprise. To Hakim, Secord's
partner, the Enterprise was a covert organization with
a chain of command headed by North; it was also a
business with a chain of Swiss accounts that he set up
and partially owned. ^ Secord first described the En-
terprise as the group of offshore companies that car-
ried out the Iran and Contra operations, but later
testified that it was fair to describe the Enterprise as
his own covert operations organization formed at the
request of North and Poindexter to carry out all of
the operations described in his testimony.'' Secord
declared that he "exercised overall control" over the

Enterprise, but acknowledged that he depended upon
North's support.®

North described Secord's network of offshore com-
panies as a private commercial organization, but he
also stated that it was the starting point for the cre-
ation of an organization that would conduct activities
similar to those of the Central Intelligence Agency
(CIA), including counterterrorism.^ Poindexter never
defined the Enterprise, but stated that he found attrac-
tive the idea of a "private organization properly ap-
proved, using nonappropriated funds in an approved
sort of way." '°

Secord consistently turned to the same group of
individuals in order to accomplish the tasks that
North assigned to him. Albert Hakim, an Iranian-born
American citizen, was his partner and, by agreement,
Secord and Hakim were to share equally in any En-
terprise profits. Hakim controlled the Enterprise's
bank accounts, i' Rafael Quintero, a Cuban exile for-
merly associated with the CIA, handled the logistics
of arms deliveries from various locations in Central
America. '2 Glenn Robinette, a former CIA officer-
turned-consultant, investigated those who made accu-
sations about operations of the Enterprise and per-
formed other tasks, among them, installation of a se-
curity system at North's residence.'^ Thomas Clines,
a former CIA official-turned-investor and consultant,
served as the primary broker for the Enterprise's arms
transactions.'*

The relationships were not new. Secord had been in
contact with the group throughout his career; appar-
ently he trusted these individuals and they trusted
him.'^ Secord, as an Air Force officer, and Clines, as
a CIA officer, worked together in the late 1960s when
both were assigned to the CIA station in Laos, and
developed a close relationship.'®

When Secord returned from Laos he was stationed
at the Pentagon. Clines took the opportunity to intro-
duce him to a number of Clines' CIA associates, in-
cluding Quintero.''' Clines also introduced Secord to
Edwin Wilson, a former CIA officer who had become
enormously successful in international business deal-
ings.'® In the mid 1970s, Secord was stationed in Iran
where he exercised substantial influence over purchas-
ing decisions of the Iranian Air Force. '^ At about
this time, according to Hakim, Wilson bought, or was

327

Chapter 21

given, an interest in one of Hakim's companies and
Wilson became "acquainted" with Hakim's "Iranian
operations." ^° Hakim's Iranian operations included,
among other things, an effort to sell electronic intelli-
gence systems to the Iranian Government.^' The op-
erations also involved payoffs to Iranian Air Force
and Army Generals through "bearer letters" and
numbered Swiss accounts. ^^ Hakim and Secord
claimed that they first met on unfriendly terms in
1976 or 1977 when Secord recommended against a
contract that Hakim proposed to the Iranian Govern-
ment.^^

After Secord returned from Iran, his relationship
with Wilson became more involved.^* In 1981,
Secord and Clines became subjects of a Department
of Justice conflict-of-interest and bribery investigation
stemming from their relationship with Wilson. In ad-
dition, in 1982, Clines became a target of a Depart-
ment of Justice investigation concerning fraudulent
overbillings of the U.S. Government by the Egyptian
American Transport Company (EATSCO), 49 per-
cent of which was owned by Clines. ^^

Secord retired from the Air Force in May 1983
because the Wilson story and the ongoing Justice
Department investigation had placed a cloud over his
military career. ^^ Two months later, EATSCO plead-
ed guilty to criminal and civil overbilling charges.
Clines, on behalf of the corporate entity that held his

49 percent interest, paid a $10,000 criminal fine and a
$100,000 civil fine as part of the settlement. In July
1984 the Justice Department closed the EATSCO
case and in January 1986, it closed the conflict-of-
interest and bribery investigation of Secord and
Clines. 2' No indictments or other prosecutorial action
followed.

Hakim kept in communication with Secord after
Secord left Iran. When Hakim learned that Secord
was considering retirement, he tried to recruit Secord
as a partner to revive his security sales company,
Expantrade. By offering security systems to foreign
governments, Hakim believed that "you have a deep
penetration in that government and therefore you can
do a lot of business." ^*

Secord agreed with the concept and in May 1983,
immediately upon his retirement, joined Hakim.
Secord became Hakim's equal partner in a new com-
pany, Stanford Technology Trading Group Interna-
tional (STTGI), headquartered in Vienna, Virginia,
outside of Washington, D.C. STTGI, relying on Se-
cord's contacts, tried to develop contracts in the secu-
rity field in Saudi Arabia and elsewhere. ^^ In 1984,
when North recruited Secord to help with arms
supply to the Contras, Hakim and Secord found a
major project that would steadily grow more com-
plex— as the ensuing chapter shows. ^^

328

Chapter 21

Chapter 21

I,

219

2,
3,
4,
5

Dutton Test., Hearings. 100-3, 5/27/87, at 212, 217,

Id., at 208-09, 212-13.
Id. at 207.

W., at 204-05, 206-07.
Id at 204, 211.

6. Hakim Test., Hearings, 100-5, 6/3/87, at 213, 6/5/87, at
548; Hakim Dep., 5/22/87, at 114-15, 5/23/87, at 259.

7. Secord Test., Hearings, 100-1, 5/7/87, at 172, 200-01.

8. Id at 172.

9. North Test., Hearings, 100-7, 7/10/87, at 314-15; Hear-
ings. 100-7, 7/8/87, at 117-18.

10. Poindexter Test., Hearings, 100-8, 7/15/87, at 58-9.

11. Secord Test., Hearings, 100-1, 5/7/87, at 155 (50/50
partners in Enterprise profits); at 172 (control over bank
accounts).

12. Id 6/5/87, at 53.

13. Robinette Test., Hearings, 100-6, 6/23/87, at 3-4, 5.

14. Secord Test., Hearings, 100-1, 5/5/87, at 52-53.

15. Secord Test., Hearings, 5/6/87, at 50; Id., at 172.
Secord knew Robinette through Clines. Robinette testified
that he had been a friend of Clines for more than 35 years.
Robinette Test., Hearings, 100-6, 6/23/87, at 2.

16. FBI Summary of Secord Interviews, FB389-92; Clines
FBI Interview, FB 407, 404-08. Clines refused to provide
testimony to the Committees without a grant of limited
immunity, which immunity the Committees declined to pro-
vide. Staff Memorandum: "Order to Testify Notwithstand-
ing Fifth Amendment Privilege - Tom Clines," 3/13/87.

17. Quintero FBI Int., 8/30/82, FB597-98. Quintero stated
that at first Secord was not friendly but that their relation-
ship grew much closer over the years. At the time of the
interview, Quintero stated that he, Clines and Secord had
gotten together about nine times during the course of the
year. FB597-98.

18. FB389-92. The principal source of Wilson's wealth
turned out to be arms deals. During 1983, Wilson was
convicted of conspiring to sell arms and explosives to Libya
as well as conspiring to murder the federal prosecutor and
six witnesses in his trial. Washington Post, 1/10/84, at A4.
See generally, Washington Post, 3/14/83, at A17.

19. U.S. Air Force Biography of Secord, N16289.

20. Hakim Dep., 5/22/87, at 28-29. Hakim claims that
Wilson infiltrated his organization through Hakim's associ-
ate Frank Terpil. Hakim said that he kicked Wilson and
Terpil out of his organization in 1976 or 1977. Hakim Dep.,
5/22/87, at 32.

21. Id at 17-18.

22. Ex. AH43 (legal brief submitted on Hakim's behalf by
his attorneys in the course of a civil suit).

23. Hakim Dep., 5/22/87, at 19-20; Secord Test., Hear-
ings, 100-1, 5/5/87, at 47. CIA files disclose that in August
of 1976, CIA officer Ted Shackley tried to arrange for
Secord to assist Hakim in his efforts to obtain security
contracts with the Iranian government in return for Hakim
providing intelligence for the CIA. Under Shackley's pro-
posal, Clines was supposed to introduce Hakim to Secord.
Shackley's proposal was rebuffed by a CIA official, in part
because Hakim had taken advantage of the Iranians by
selling them "unneeded over sophisticated equipment at ex-
orbitant price[s]." C7 147-59; Shackley Dep., 9/21/87, at
284-300. Hakim testified that Wilson introduced him to
Clines and Shackley and that Wilson set up this arrange-
ment on the understanding that he, Wilson, would receive a
share of any profits made by Hakim. Hakim also stated that
the meeting never occurred and that he did not remember
who he was supposed to be introduced to in Iran. Hakim
Dep., 5/31/87, at 229-33.

24. Wilson provided Secord with nearly exclusive use of
a private plane for almost a year. FBI Report on Wilson's
aircraft used by Secord, FB393, 389-90. Clines arranged for
Wilson to buy a townhouse (originally sold to Secord by
Clines) from Secord so Secord could recover the original
investment. FB390.

25. Senate Committee Staff Memorandum, Subj:
EATSCO and Secord/Clines Investigations, EN 199, FB404.

26. Secord Test., Hearings, 100-1, 5/5/87, at 55.

27. FBI Closing Memorandum, Subj: EATSCO, FB2204;
FBI Closing Memorandum, Subj: Clines and Secord,
FB5038-39.

28. Hakim Dep., 5/22/87, at 45-47.

29. Hakim Dep., 5/22/87, at 44-45; Secord Test., Hear-
ings, 100-1, 5/5/87, at 47; Zucker letter regarding STTGI
security project, STG9141.

30. Clines and Secord maintained a close friendship. In
1984, when Clines needed $33,000 to pay the $100,000
EATSCO civil fine, Secord loaned him $33,000. Robinette
acted as the courier of Secord cashier's check which was
converted into a Clines cashier's check made out to the U.S.
Treasury. Senate Committee Staff Memorandum Subj;
EATSCO fine, 10/12/87, EN 69-72; Robinette, Test. Hear-
ings, 100-6, 6/23/87, at 27-9.

329

Chapter 22
The Enterprise

Almost $48 million flowed into the Enterprise. It
came from contributions directed to the Enterprise by
North from Carl "Spitz" Channell and Richard
Miller, third countries, and others. It came from the
sales of arms to the Contras and missiles to Iran. It
came from the sale of weapons to the CIA. The total
would have been at least $10 million greater had the
Brunei contribution not been misdirected.

All of the Enterprise's money went into Swiss bank
accounts managed by an expert in handling money,
Willard Zucker, and was protected by the world's
most stringent secrecy laws. But the Enterprise did
not rely solely on Swiss law to preserve the confiden-
tiality of its operation. Zucker created a maze of com-
panies through which money could be passed without
trace. The corporate operations of the Enterprise
were befitting of its covert charter.

One of the main objectives of the Committees was
to penetrate this secrecy — to find out where the
money came from, and where it went; and thus, to
learn about the operations and organization of the
Enterprise.

In the financial records of the Enterprise, the Com-
mittees found that:

— The plan — which North attributed to Casey — to
create a worldwide private covert operation organiza-
tion, with significant financial resources, was being
implemented through a network of offshore compa-
nies administered in Switzerland.

— The Enterprise took in nearly S48 million during
its first 2 years. Its income-generating capacity came
almost entirely from its access to U.S. Government
resources and connections: the contributions directed
to it by North, the missiles sold to Iran, and the
brokering of arms to the Contras as arranged by
North.

— The Enterprise generated a substantial amount of
its income from the sale of arms to Iran. Before its
operations came to a halt, the Enterprise managed to
divert at least $3.8 million from the Iran arms sale
profits to the Contras.

— The Enterprise spent almost 535. 8 million. It used
its resources to finance covert operations not reported

to Congress as required by law and, in some in-
stances, not disclosed to the President.

— The income of the Enterprise exceeded its ex-
penditures by $12.2 million.

— Secord, Hakim, and Clines took self-determined
"commissions" from the $12.2 million surplus to
reward themselves for their work on arms deliveries
to the Contras and the CIA. The commissions totaled
approximately $4.4 million, with an average markup
of about 38 percent over the cost of the arms — not 20
percent as asserted by Secord.

— Contrary to their testimony that they only took
"commissions" out of the Enterprise accounts. Hakim
and Secord also took approximately $2.2 million from
the $12.2 million surplus for personal business ven-
tures and personal use. One of these business ventures
involved plans to sell weapons to the Contras at sub-
stantial profits; another called for the sale of weapons
to Iran.

— $5.6 million of the $12.2 million surplus was left
in Enterprise accounts managed in Switzerland when
the Enterprise ceased its operations in November,
1986. An additional $2.2 million from earlier commis-
sion payments and profit distributions remained in
separate accounts managed in Switzerland for the
benefit of the individual members of the Enterprise.

In the following seven sections, the Committees
describe these findings in detail. The first section de-
scribes the Enterprise's records and explains the net-
work of companies and bank accounts through which
the Enterprise operated. The second traces the
sources of the Enterprise's funds and North's role in
generating them. The third describes the Enterprise's
expenditures. The fourth examines the diversion. The
fifth shows what happened to the "surplus," the
excess ($12.2 million) of revenues over expenditures,
and discusses Hakim's efforts to pass money to North.
The sixth section describes where the Enterprise
funds are now, and the seventh tells the story of what
happened to the misdirected Brunei contribution.

331

Chapter 22

Section 1: The Swiss Connection,
the Secret Accounts and
Companies, and the Covert Charter

The Swiss Connection

The Enterprise's records were maintained by Com-
pagnie de Services Fiduciaries (CSF). CSF is a Swiss
fiduciary company,' owned and administered on a
daily basis by Willard I. Zucker, a U.S. citizen and
former Internal Revenue Service (IRS) lawyer who
has resided in Switzerland for 20 years. ^ CSF estab-
lishes tax haven offshore companies to hold the funds
of its clients, satisfying the necessary formalities and
keeping the books. It also accepts its clients' funds,
keeping them in its name with a bank or investment
house.

A Swiss fiduciary company has no exact counter-
part in the United States. The client employing a
Swiss fiduciary such as CSF — which uses Panamanian
or Liberian companies, Swiss bank accounts, and off-
shore trust accounts — buys a triple layer of secrecy, a
formidable barrier against identification of the loca-
tion of money. ^

Starting in 1971, Zucker provided banking-type
services to Hakim. •• The Zucker-Hakim relationship
continued into the 1980s; thus, Zucker's services were
available when Secord became Hakim's partner in
1983. As early as June 1984, Zucker visited the
United States and met with Secord about a Hakim-
Secord business project that involved supplying mili-
tary equipment to an unnamed resistance group. ^

Zucker was a discreet, efficient, and rapid channel
for moving money. By merely telephoning Zucker in
Switzerland, Hakim, and later Secord,® could order
the movement of funds from Swiss bank accounts to
the destination of their choice without a paper trace
to either of them. With bank accounts in international
tax havens and financial centers, CSF would simply
issue a check from the most appropriate location.''
When necessary. Hakim could direct Zucker to set up
a new Swiss bank account and an offshore shell com-
pany to act as the nominal owner of the account. If
Secord or Hakim wanted $50,000 in cash that could
not be traced to a Swiss account, Zucker could ar-
range for that, too; Zucker would call upon business
associates and other U.S. contacts to provide the cash
and Zucker, in turn, would reimburse his sources.*

Thus, Zucker — who had a license to practice law in
the United States, all the powers of a Swiss fiduciary,
an inside knowledge of the IRS, and experience in
meeting the needs of clients such as Hakim — was a
covert operator's model banker, accountant, lawyer,
and money manager.

The Secret Records

Zucker kept track of Enterprise funds on a series of
ledgers, referred to herein as the CSF Ledgers. After

being granted limited use immunity, Hakim provided
the Committees with copies of the CSF Ledgers for
the period from December 1984 until May 1986.
Hakim also provided the Committees with copies of
certain supporting documentation, including bank
statements from Swiss banks, bank wire transfer
records, incorporation documents, and fiduciary
agreements.

For the most part, accountants for the Committees
were able to verify the data contained in the CSF
ledgers provided by Hakim. Methods employed in-
cluded extensive analysis of the Swiss banking records
provided by CSF through Hakim, corroboration by
independent third parties, and analysis of relevant
documentation obtained from banks in the United
States.^

Zucker maintained three types of ledgers for the
Enterprise. A "General Ledger" showed expenditures
and receipts for each of the Enterprise's companies.
"Capital Ledgers" tracked the distributions from En-
terprise bank accounts to several individuals, includ-
ing Hakim, Secord, and Clines. "Fiduciary ledgers"
accounted for funds held by CSF (in its own bank
accounts) in a fiduciary capacity on behalf of the
Enterprise and various individuals, including Secord
and Hakim. '°

Secord and Hakim testified that they reviewed
parts of the CSF Ledgers on several occasions. They
were thus able to keep track of Enterprise income,
expenditures, and "capital" distributions (which
Zucker called profit distributions), despite the com-
plexity of the banking structure. ' '

The Covert Charter

North testified that as early as 1984 Casey wanted
to establish an offshore entity capable of conducting
operations in furtherance of U.S. foreign policy that
was "stand-alone" — financially independent of appro-
priated funds and, in turn. Congressional oversight.'^
During the first half of 1985, the Enterprise simply
purchased arms and resold them to the Contras at a
profit, which was distributed to its partners. It had no
continuing assets of its own and conducted no oper-
ations apart from selling arms to the Contras. During
this period. North steered contributions from Country
2 to accounts controlled by Contra leader Adolfo
Calero in Miami. Calero transferred over $11 million
to an Enterprise company named Energy Resources,
Inc.'^ Energy Resources paid approximately $9 mil-
lion for arms which were delivered to the Contras,
and the profit of over $2 million was distributed to
Secord, Hakim and Clines.

Starting in July of 1985, however, the donations
raised by North were no longer sent to Calero's ac-
count, but were sent directly to accounts of the En-
terprise. Using these funds, the Enterprise then begun
to take shape as the "stand-alone" self-financed entity
capable of conducting covert actions for the U.S.

332

Chapter 22

Government which Casey, according to North, had
envisioned. In April and mid-May 1985, three new
companies were established: Lake Resources, Gulf
Marketing, and Udall Research Corp; and in Septem-
ber 1985, Albon Values and Dolmy Inc. were added
to the roster. '■* Most of the funds from Energy were
eventually moved to Lake. Lake became the funnel
for contributions to the expanded Enterprise organiza-
tion.

As the network of companies and accounts grew,
North asked Secord to produce a chart setting forth
the organization of the Enterprise as envisioned by
Casey. As North put it:

A: Director Casey had in mind, as I understood
it, an overseas entity that was capable of con-
ducting operations or activities of assistance to
U.S. foreign policy goals that was a stand-
alone—

Q: Self-financed?

A: That was self-financing, independent of appro-
priated monies and capable of conducting activi-
ties similar to the ones that we had conducted
here. . . .

Q: Did I understand you to say . . . that the
chart that you had drawn by Hakim, which is
Exhibit [OLN] 328, was a chart to reflect that
concept?

A: . . . that chart was something that I had
asked General Secord for.

Q: Was it intended to reflect the concept as de-
scribed by Director Casey?

A: Yes.is

Hakim testified that in February 1986, with the
assistance of CSF, he had the chart drawn on a com-
puter and then gave it to Secord.'® (See figure 22-1)

The chart was the blueprint for the off-the-shelf
covert organization that Casey envisioned. It depicts
three types of companies: collecting companies, treas-
ury companies, and operating companies (collectively
the "Enterprise Companies"). Hakim stated that the
idea was that each collecting company would serve as
the sole receiver of funds for the Enterprise for a
period of time. When the first collecting company
became too visible it could be cast aside and the next
company would be taken off the "shelf and brought
into use. Thus, secrecy would be preserved.'''

The treasury companies show the global scope of
the plan. Each treasury company was responsible for
holding funds for operations in a distinct region of the
world: South America, the Middle East, and
Africa.'^ Africa was included because, according to
Hakim, Secord said — allegedly in jest — "who knows,

if we do a good job, the President may send us to
Angola."'®

Each of the regional treasury companies. Hakim
explained, would supply funds to "operating compa-
nies" within their respective regions. Each operating
company would perform specific operations, and thus,
the exposure of any single company would not bring
down the entire network. For example, Toyco was to
be used for the purchase and sale of weapons — euphe-
mistically called "toys" — for the Contras, while Udall
was to be used to run the air resupply operations.^"

The final element of the chart, the section for re-
serves marked with an "R," reflects the plan for con-
tinuing operations — the essential ingredient for an
"off-the-shelf," "self-sustaining" organization. Hakim
stated that the "R" stood for the "Reserves" that
were to hold the capital necessary for the Enterprise
to become self-sufficient.^' Appropriately, the chart
provides that the reserves would be held by CSF
Investments Ltd., the Bermuda branch of CSF that
invests and manages funds of CSF clients. ^^

The financial records of the Enterprise show that
Hakim and Secord attempted to follow the frame-
work set forth in the chart. Time pressures, however,
sometimes led to the use of a company for a different
purpose from the one intended. ^^

Lake Resources served as the collecting company
for the Enterprise starting in the summer of 1985. ^^
Gulf Marketing was supposed to replace Lake as a
collecting company when Lake became too visible.
But these plans were interrupted by the exposure of
the Iran initiative in November and the closing down
of the entire Enterprise.

Gulf did serve, however, as an intermediate ac-
count through which funds were passed to operating
companies. 2^ Dolmy was never put into use as a
collecting company; rather, when the orders came
from North to purchase a ship for a covert operation,
Hakim pulled Dolmy off the shelf because he did not
have another operating entity available. He explained:

I was always hit with surprises. These surprises
created a lot of headache and difficulty in the
total system, gave a lot of difficulty to CSF and
its staff. The requirement was to purchase a ship.
They wanted things done always yesterday.
There was not enough time.^®

In Central America, where activity was the most
intense, the Enterprise fully developed the network of
companies set forth on the blueprint. Albon Values,
the Central American treasury company, directed $4.3
million of its funds to two Central American operat-
ing companies: Toyco S.A. and Udall Research Cor-
poration.^'' Performing their operational roles,
Toyco^* purchased arms for the Contras and made
payments to Contra leaders, while Udall, among other
things, bought and operated the aircraft for the resup-
ply operation. Udall also leased land in Costa Rica,

333

Chapter 22

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Chapter 22

where it built an emergency airstrip for the aircraft
dropping supphes in Nicaragua. ^^

In short order, Zucker could create or dissolve a
corporation as circumstances required. When the air-
strip was publicly denounced by the newly-elected
government in Costa Rica, and it was revealed that
Udall owned the airstrip and that "Olmstead" was its
agent. North wrote to Poindexter:

[Last night, the Minister of Costa Rica an-
nounced that] authorities had discovered a secret
airstrip . . . which had been built and used by a
Co. called Udall Services for supporting the Con-
tras .... Damage assessment: Udall Resources,
Inc. SA, is a proprietary of Project Democracy
[North's euphemism for the Enterprise]. It will
cease to exist by noon today. There are no USG
fingerprints on any of the operations and Olm-
stead is not the name of the agent — Olmstead
does not exist. ^°

Hyde Park Square served as a switching point be-
tween the Iranian and Contra operations. Beginning
on April 17, 1986, proceeds from the Iranian transac-
tions were moved through Lake into Hyde Park
Square, and then transferred to other accounts for the
Contras and other covert operations. As a result,
Hyde Park Square, shown on the chart as a Middle
East treasury company, also became a collecting com-
pany that fed other accounts.^'

Hakim and Secord also carried out the last step of
the chart: the creation of "Reserves" totaling $4.2
million. As contemplated in the chart, the Reserves
were held by CSF Investments Limited, Zucker's
Bermuda subsidiary. Like a brokerage house, CSF
Ltd. invested the Reserves in short-term deposits and
in stocks. Pursuant to a written agreement, CSF was
required to invest and spend the money in any
manner directed by Hakim. ^^ The Reserves are dis-
cussed in greater detail below, as is a special compa-
ny, Defex SA, that does not show up on Hakim's
chart.

Section 2: Income Generation

Table 22-1 and Figure 22-2 summarize the sources of
the Enterprise income, from December 1984 to De-
cember 1986.

The details of each of these income-raising efforts
are set forth in other chapters of this Report. The
summary here demonstrates that every single source
of Enterprise income involved North and the use of
U.S. Government resources. Indeed, Secord flatly ac-
knowledged this connection. ^^

Initially, North arranged for Calero to receive con-
tributions and to purchase arms from Secord.^* Later,
the Enterprise received Contra contributions directly
and used them to buy arms for the Contras. ^^ Then

Table 22-1.— Enterprise Income ' 1985 and 1986

Source Amount

Arms Sales to the Contras (Calero) $11,348.926

Total $11,348,926

Donations for the Contras:

Institute for North-South Issues (Miller) 60,000

IBC (Miller) 429,839

IC. Inc. (Miller) 1,307,691

Country 3 2,000,000

Joseph Coors 65,000

Total 3,862,530

Arms Sales to Iran:

Second Channel 3,600,000

Israel 2,685,000

Khashoggi 25,000.000

Total 31,285,000

Other:

Arms Sales to the CIA 1,200,000

Interest Income and Miscellaneous 262,637

Total 1,462,637

Grand Total Income 47,959,093

' Based upon analysis of the CSF ledgers and supporting bank records,
H6378-79.

Poindexter and North agreed to use the Enterprise as
the agent for the Iranian initiative,'* with North pric-
ing the sales at a markup that generated excess funds
for the Contra resupply operation and other Enter-
prise activities. ''' Through a conduit, the CIA became
a source of funds for the Enterprise when it pur-
chased weapons originally destined for the Contras.'^
Indeed, North tried to get the CIA to provide more:
When the Boland Amendment expired and Congres-
sional funding for the Contras resumed, he tried to
persuade the CIA to purchase the Enterprise's aircraft
and airstrip. ^^ The only money the Enterprise was
able to earn on its own was about $254,000 in invest-
ment income on the money that came from its U.S.
Government connections.

North helped generate the Enterprise's revenues,
and, in turn, Secord and Hakim accommodated
North's requests for funds and services. At North's
request, the Enterprise bought a ship, sent radios to a
foreign political party, and provided money to Drug
Enforcement Administration (DEA) agents for a
covert operation. ''° Hakim testified that, as a result of
these kinds of demands, he was not sure who was
making the decisions about the use of the Enterprise's
funds — North acting as an official of the U.S. Gov-
ernment, or he and Secord.*' As Hakim put it: "who-
ever designed this structure, had a situation that they
could have their cake and eat it too. Whichever they
wanted to have, a private organization, it was private;
when they didn't want it to be a private organization
it wasn't."*^

335

Chapter 22

Figure 22-2.

Enterprise Income

($47.96 Million).

Arms Sales to the

Contras (Calero)

11.35

Arms Sale to
Central

Intelligence

Agency

1.2

Contra Donations
3.86

Interest and

Other Income

0.26

(in millions)

Arms Sales to the

Contras (Calero)

23.7%

Arms Sale to

Central
Intelligence

Agency
2.5%

Contra Donations
8.1%

Interest and

Other Income

0.5%

Source: Compagnie de Services Fiduciaires ledgers.

336

Chapter 22

The Cash Balances

The Enterprise companies built up substantial cash
balances, which totaled almost $5.5 million by the
time the operations came to a halt in December
1986.*^ Table 22-2 summarizes the ending monthly
cash balances for the Enterprise companies and the
Reserves. Hakim testified that he understood that
North wanted a pool of funds available in Switzerland
for the Contras and any other purpose he might des-
ignate.*'* Secord testified that he was "generating
money to keep the Enterprise going. '"'^ Later, in an
interview, he elaborated:

The majority of the money was in [the Enterprise
accounts] to provide operating capital for a very,
very large enterprise which owned a ship, and
which was preparing to buy a two million dollar
707, and which was preparing to set up perma-
nent headquarters in Europe for a joint Iranian-
American commercial venture.*®

Table 22-2. — Estimated Ending Monthly Cash
Balances '

operations. Table
the expenditures.

22-3 and Figure 22-3 summarize

Month
Ending

Enterpnse ^
Companies

Reserves

Total

Dec. 84..
Jan. 85...

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

Jan. 86...

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

$10,957

418,939

$10,957
418 939

344,591

344,591

3,543,489

3,543 489

4,128 476 . .

4 128 476

1,573,472

1.573,472

1,515,879

1,515,879

1,316,089

1,316,089

725,123

725 123

1,561,631

1,561,631

1,123,709

1,123,709

918,867

918,867

513,595

513 595

394,166

394,166

6,755,693

6,755,693

4,106,152

$2,000,000

6,106,152

2,462,197

2,000.000

4.462,197

8,799,871

2,000,000

10.799,871

5,269,057

4,200,000

9,469,057

2,019,829

4,200,000

6,219,829

612,383

4,200,000

4,812,383

1,144,218

4,200,000

5.344,218

1,944,486

4,200,000

6,144,486

1,441,331

4,200,000

5,641,331

1,299,127

4,200,000

5,499,127

' Based upon an analysis of the CSF Ledgers and supporting bank
account records. During the month of May the bank account balances went
as high as $23 million; the money was rapidly spent, however, pursuant to
the Iran arms transactions. Endmg monthly balances, shown here, present a
more accurate picture of cash freely available to the Enterprise.

2 Includes funds controlled by Energy, Lake, Gulf, Udall, Albon. Dolmy,
ACE, Hyde Park. ToyCo, Stanford Tech Services, S.A., and Defex SA,
ACE was created for the Contra air resupply operation. Stanford Tech
Services paid American Express bills for Hakim and Secord.

Section 3: Expenditures

All told, the Enterprise spent almost $35.8 million —
out of the nearly $48 million it took in — on covert

Table 22-3. — Enterprise Expenditures'

I CENTRAL AMERICA:

Arms Purchased for Sale to Calero:

Defex" $7,487,606

Transworld Arms 1,390,532

Total 8,878,138

Arms Purchased and Donated to Southern

front Defex 864,407

Air Resupply;

C-123 (Doan Helicopter) 475,000

C-123 (Hanson Sale) 250,000

Maule Aircraft (Maule Air) 183,238

Caribous (Propair Inc.) 1,096,966

Airfield 125,000

Southern Air Transport ' 1,991,512

Corporate Air Services 437,688

Aero Contractors 70,756

East 657,804

Central American Contractor 192,233

Quintero 198,376

David Walker 1 10,000

Other* 73,367

Total 5,861,940

Contra Leaders and Others:

Calero 200,000

Contra Leader 59,500

Contra Leader 155,000

Calero's Broker 200,000

Contra Leader 50,000

Total Contra 664,500

Legal Support:

Shea and Gardner 20,000

Tom Green 90,000

Sharp, Green, and Lankford 1,671

Total 1 1 1,671

Other 130,217

Total 16,510,873

2. MID-EAST (IRAN ARMS):

Payments to CIA for Arms 12,237,000

Israel = 732,250

Southern Air Transport 1,151,000

Aeroleasing 226,998

CIA Proprietary Airiine 127,700

Related Costs 457,700

Advance to Richard Second 260,000

Total 15,192,648

3. WORLD WIDE:

Erria (North Africa) 743,409

DEA Agents 30,150

Radios for foreign government 100,000

Defex 2 (Arms sold to CIA) 2,226,987

Total Contra 3,100,546

4. OTHER 967,953

Total Expenditures 35,772,020

' Based upon an analysis of CSF ledgers and supporting bank account
records, H6344-62.

^ These expenditures include payments to Alkasser totalling $15 tnillion
According to Richard Secord. Alkasser is an agent for Defex and the $15
million covered arms purchases from Defex- The expenditures also include
prepaid transportation costs-

' According to Southern Air's records, this includes $598,390 for delivery
of arms to Calero and the Southern Front.

♦ Includes $48,165 which, as of 10-22-86, remained in ACE's bank
account.

* Payment for leasing of aircraft.

337

'7-026 0 -

12

Chapter 22

When asked about the cash balances, North testified
that Casey wanted the Enterprise to become a self-
sustaining operation so that "there [would] always be
something there which you could reach out and
grab ... at a moment's notice."*'' But North also
said that he was surprised by the size of the balance,
adding, "I am not willing at this point to accuse
anybody.'"'* He also acknowledged that he had been
told in September 1986— even though the cash bal-
ances were then approximately $5.3 million — about a
shortage of money available for the Second Channel
Iranian initiative.*^

Throughout 1985 and the first half of 1986, Enter-
prise cash surpluses, including the Reserves, were in-
creasing. They reached their height in May 1986. As
of May 1, 1986, the funds in the accounts of the
collecting companies, treasury companies, operating
companies (collectively the "Enterprise companies")
and the Reserves, contained approximately $10.8 mil-
lion.

In October 1986, at the same time New York busi-
nessman Roy Furmark was threatening to expose the
initiative if the Iran arms financiers were not paid,
the Enterprise companies and the Reserves still had a
total cash balance in the vicinity of $6.1 million.

Central American Expenditures ^°

In the beginning, the Enterprise simply sold arms to
the Contras. Its Contra arms-brokering operation —
complete with an offshore company and an offshore
account — was only the first stage for the full-service
covert organization that, according to North, Casey
envisioned.^'

From December 1984 through July 1985, Calero
transferred $11.3 million to Secord.^^ Secord used the
money to provide five arms shipments, described by
Secord as Phases I through IV (one of the five ship-
ments was a supplement to a previous one).^^ Secord
spent a total of $9.4 million for the arms he sold to
Calero, including transportation costs; however, the
total cost — including commissions for Secord, Hakim,
and Clines— exceeded $11.3 million; the shortfall was
made up with other Enterprise funds, including dona-
tions from the private fund-raising network.^*

From February until May 1986, the Enterprise pur-
chased approximately $3.1 million of military equip-
ment from Defex, a Portuguese arms supplier. ^^ It
delivered some of the arms, paid for largely by the
Iranian weapon sales and third-country contributions,
in three airlifts which took place in March, April, and
May 1986 (described by Secord as phases V through
VII). ^^ Additional arms purchased during the same

period (the "stranded shipment") never reached the
Contras.^''

In addition, the Enterprise spent approximately $5.9
million for air resupply operations, which had been
planned by North, Secord, Clines, and Quintero in
July 1985. It acquired an air force, purchasing two C-
123 cargo aircraft, two Caribou aircraft, and three
Maule aircraft.^*

More than $1.5 million (out of the $5.9 million) was
transferred by the Enterprise to various vendors
through Amalgamated Commercial Enterprises
(ACE), a Panamanian company established by Rich-
ard Gadd to pay for the Caribous, air crews and other
expenses associated with the resupply operation. Ac-
cording to Gadd, he was originally told by Secord
that he, Gadd, would own the aircraft through ACE,
but Secord later changed his mind and the Enterprise
retained ownership through its Udall Corporation.*^

Operating the airplanes was expensive: the Enter-
prise paid Corporate Air Services a total of $437,688,
directly and indirectly, for the crews used in the
resupply operation. Southern Air Transport received
approximately $2 million for aircraft spare parts, fuel,
and other services in connection with the resupply
operation.^" Eagle Aviation Services and Technolo-
gy, Inc. (EAST), another Gadd company, received
$657,804 for providing other air services.®'

David Walker, a British expert in guerrilla warfare
recruited by North, received $110,000 for his services
on May 5, 1986.^^ Secord noted that during the July
meeting in Miami it was decided that the resistance
needed "to get into some of the urban areas." ®^
North testified that in 1985, he authorized Walker to
perform military operations "in Managua and else-
where in an effort to improve the perception that the
Nicaraguan resistance could operate anywhere that it
so desired."^* Later, Walker provided two techni-
cians to help carry out a military operation in Nicara-
gua.®^ Secord and Hakim testified that in 1986
Walker provided air crews for the resupply oper-
ation.®"

The Enterprise acquired land for an airstrip in
Costa Rica for a down payment of $125,000 and a
purchase money mortgage of $4,875,000. A Central
American contractor who constructed the airfield, re-
ceived payments totaling $192,233 from February
through July 1986.®^

The Enterprise disbursed funds to a number of
Contra leaders. It paid $50,000, $155,000, and $59,500,
respectively, to three Contra leaders, and $400,000 to
Calero and his broker for food supplies and other
expenses.®* North may have had even more complex
plans for payments to the Contras.®^ Figure 22-4
summarizes expenditures related to the Contras.

338

Chapter 22

Figure 22-3.

Enterprise Expenditures, December 1984
through December 1986

($35.77 Million)

Worldwide
3.1

(in millions)

Other
0.97

Worldwide
8.7%

Other
2.7%

Source: Compagnie de Services Fiduciaires ledgers.

339

Chapter 22

Figure 22-4.

Expenditures Relating to the Contras

($16.5 Million)

Contra Leaders
and Others

^-^^^ ^■'"'^^

Other
0.1

Legal Support ^/

0.1 ^=

/ Air Resupply
^ 5.9

Arms Purchased
y^ for Calero

(in millions)

^L Arms Donated
^^.^-^ to Southern
■r Front
0.9

Contra Leaders

and Others

4.20/0

Legal Support /
0.60/0 ^H=

/ Air Resupply
35.80/0

Other
O.60/0

^ Arms Donated
^i^_^to Southern
BB|^ Front

5.50/0

V

Arms Purchased
for Calero

V 53.30/0

J

Source: Compagnie de Services Fiduciaires ledgers.

340

Chapter 22

The Mideast: Expenditures for the Iran
Operations^"

The Enterprise was involved in every NSC-con-
nected shipment of weapons to Iran from November
1985 on. The net surplus generated by these transac-
tions for the benefit of the Enterprise was $16.1 mil-
lion.

The first transaction, the Israeli November 1985
HAWK shipment, generated a net surplus of
$850,317. The transaction began when an Israeli inter-
mediary deposited $1,000,000 into the Lake Resources
account on November 20, 1985. Eighty Israeli owned
HAWKs were to be transported by the Enterprise to
Iran in four separate shipments. Only 18 HAWKs
were delivered, however, before the Iranians termi-
nated the transaction. The Enterprise incurred charter
expenses of $127,700 for the delivery of the 18
HAWKs, and $21,983 for a private jet for Secord.
This left the Enterprise with $850,317. According to
Secord, the Israelis told North that the extra money
could be used for "whatever purpose we wanted."''
After discussing the matter with North, Secord
agreed to use the money for the Contras and testified
that he did so.''^

The Enterprise's role in the next transaction — the
sale of the 1,000 TOWs in February — was more
active. The Enterprise was the "commercial cut-out"
for the CIA, receiving the money for the missiles
from Ghorbanifar, paying the CIA for them, and de-
livering them to Iran. The net surplus from this trans-
action was approximately $5.5 million. As it did with
the Calero arms sales, the Enterprise received pay-
ment to cover the cost of the arms before the arms
were purchased. Between February 7 and 18, 1986,
Khashoggi (who was financing Ghorbanifar) trans-
ferred a total of $10 million to the Lake Resources
account for the shipment. On February 10 and 11,
Secord directed a total payment of $3.7 million to the
CIA for the TOWs. In addition, payments totaling
$484,000 were made to Southern Air for the delivery
of missiles from the United States to Israel; one pay-
ment of $185,000 was made to the Israeli Ministry of
Defense to transport the TOWs from Israel to Iran;
another payment of $100,000 was made to the Israeli
Ministry of Defense for other related activities; and
$31,500 was paid to an Israeli bank for miscellaneous
expenses.

The Enterprise's role was the same in the third
transaction — the deliveries of the HAWK replacement
parts to Iran in May and August 1986, and the ship-
ment of TOWs to Israel to replenish the TOWs sold
to Iran in September 1985. The net surplus from this
transaction was approximately $8.3 million.

Khashoggi financed the May transaction for Ghor-
banifar. transferring $15 million to the Lake Re-
sources account on May 14 and 16, 1986, for the
HAWK parts. On May 15 and 16, the Israeli Ministry
of Defense transferred a total of $1,685,000 to the

Lake Resources account for the TOWs.'^ After Kha-
shoggi's first payment was received, Secord directed
the Enterprise to pay $6.5 million to the CIA to
cover the cost of the HAWK spare parts and the
TOWs. In order to pay for the delivery of the
HAWK parts, the TOWs, and McFarlane's trip to
Iran, the Enterprise paid $667,000 to Southern Air
and $447,250 to the Israeli Ministry of Defense.
Dutton received $40,000 to cover the cost of the
crew and other expenses on the Israel-to-Iran leg of
the mission. Secord also appears to have received
$260,000 which was apparently related to the Iran
transactions.''*

Finally, the Enterprise paid $205,015 for expenses
of chartering corporate aircraft for Secord and North
in connection with their negotiations with the Irani-
ans.

The fourth and final transaction consisted of the
shipment of 500 TOWs from U.S. stocks to Iran
through the Second Channel. The net surplus was
$1.4 million. The Second Channel advanced $3.6 mil-
lion to Hyde Park Square on October 29, 1986, for
the TOWs. Hyde Park, in turn, paid the CIA
$2,037,000 for the missiles and incurred other ex-
penses aggregating $161,240.

Worldwide Projects

The Enterprise's expenditures were not limited to
Central America and the Middle East. In May 1986,
North directed Secord to purchase a ship for other
covert operations. Accordingly, the Enterprise spent
$743,409 on the purchase and operation of a Danish
vessel named the Erria.''^

North directed a project with DEA agents to try to
free certain hostages which contemplated paying
bribes and, indirectly, a $2 million ransom to their
captors. North turned to businessman and philanthro-
pist H. Ross Perot, who agreed to provide $2 million
for the project. In addition. North called upon the
Enterprise which paid $30,150 to the DEA agents for
their expenses.'^

At North's request, the Enterprise paid $100,000 for
radios supplied to a political party of a foreign
nation.'' Another project involved an attempted
propaganda effort in a foreign country. North dis-
closed to the Committees in an executive session that
a number of other projects were in the planning
stages.'*

The North Residence Security System

Another Enterprise expense was a home security
system, which cost approximately $16,000, for the
residence of Oliver North. As early as September
1985, North reported harassment which he attributed
to anti-Contra demonstrators, including damage to
part of the fence around his home and one of his
cars.'^ In the spring of 1986, the press reported that

341

Chapter 22

Abu Nidal, the international terrorist and assassin, had
placed North on his "hit" list. When the FBI advised
North that it was not authorized to provide protec-
tion, North made a request to Poindexter for assist-
ance. Poindexter did not follow up on the matter.*"
According to the Marine Corps, North did not re-
quest protection for his home from the Corps, an
option that was available to him.*' North told Secord
about the problem and Secord offered to help.*^

Secord asked Glenn Robinette, an ex-CIA officer
with experience in electronic surveillance and securi-
ty, for assistance. Secord had hired Robinette in late
March to do investigative work related to the Avir-
gan and Honey lawsuit, at a fee of $4,000 a month
plus expenses. Robinette examined the North resi-
dence and met first with Mrs. North, then with North
and Secord. Robinette proposed a security system de-
signed primarily to provide protection from trespass-
ers, not terrorists, at a cost of $8,500. According to
Robinette, North responded to the effect, "Please try
to keep it along those lines. Remember, I am a poor
lieutenant colonel."*^

Robinette paid the installers of the system, which
included a remote control electronic gate, approxi-
mately $13,900— $6,000 in May and roughly $7,900 on
July 10th when the installation of the system was
complete. At the time of each payment, Robinette
reported to Secord, rather than North, for reimburse-
ment because he was "working for Secord." Secord
reimbursed Robinette for his time and expenses with
$7,000 in cash and a $9,000 check drawn by Zucker
from Enterprise funds and mailed to Robinette at Se-
cord's request.*'*

On August 6, 1986, at a meeting in the White
House, North told Members of the House Permanent
Select Committee on Intelligence, who were inquiring
about his involvement with the Contras, that he had
installed, at his own expense, a security system to
protect his family from anti-Contra demonstrators. ^^

North testified that a bill never came for the securi-
ty system and that he assumed that "an accommoda-
tion was worked between Mr. Robinette and General
Secord to make a gift out of [the] security system."**
Secord, in an interview, denied that he made the gift
or approved it. From Secord's viewpoint, there was a
misunderstanding: Robinette asked for his expenses
and Secord never realized that those expenses were
for the security system rather than for investigative
work.*' Robinette testified as follows:

Q; When you went to General Secord to seek
reimbursement [for the final payment to the secu-
rity company], you told him what you were seek-
ing reimbursement for, didn't you?

A: Yes, sir.

Q: He knew he was paying you for the security
system, didn't he?

A: That would be my understanding, sir. I usual-
ly told him what I was asking to be paid for.

Q: There is no question about it, is there?

A: No, sir, there is no question about it.**

In December 1986, North realized that the gift of
the security system "just didn't look right."*" By that
time. North had been named in the Justice Depart-
ment application for the appointment of an Independ-
ent Counsel. North called Robinette and asked him to
send a bill.®° Since the system had already been paid
for, Robinette assumed that North wanted to make it
appear that he (North) had actually paid the bill.
Robinette, who told Secord that he was going to send
North a bill, sent North two back-dated bills of pay-
ment due, dated months earlier but actually written
and delivered at the same time in December 1986."'

North, in turn, wrote two back-dated letters, de-
signed to fit with Robinette's bills, which told a false
story about financial arrangements relating to the se-
curity system. In the first, dated May 18, 1986, but
written in December 1986, North stated that it was
his understanding that he could pay for the system
either through 24 monthly installments or by making
his house a demonstration unit. North concluded the
letter by informing Robinette that he was selecting
the second option. In the second letter, dated October
I, 1986, but also written in December, North apolo-
gized for the delay in responding to the first and
second notices and reminded Robinette that he
wished to pay for the system by making his home
available as a demonstration unit."^ In his testimony,
North stated that he typed at least one of the letters
on a demonstration typewriter in a typewriter store,
rather than using a home typewriter."^

On the morning of March 16, 1987, as Robinette
went out to get his morning paper, he was inter-
viewed by a reporter about the driveway gate which
was part of the North security system. Robinette
stated that he installed the gate for North at no
charge, hoping that North "might steer business his
way" and that he would be able to put in gates for
North's neighbors."* Later in the day. North called
Robinette, asking to meet with him on the following
day at his lawyer's office, and requesting that Robin-
ette bring copies of the back-dated letters."^

Robinette gave the letters to North's attorneys, but
did not say they were spurious. Robinette then went
to see Secord who, upon learning that Robinette had
sent North a bill for the security system, stated, "You
did the right thing." That same afternoon Robinette
received a call from North's attorney, who told him
not to protect North, and to "tell the truth, tell the
truth, tell the truth." He also advised Robinette to get
an attorney. Robinette did so. Later, after receiving
immunity, he related the above-described events to
the Independent Counsel and the Committees."®

342

Chapter 22

North testified that in fabricating the letters in De-
cember 1986, "I did probably the grossest misjudg-
ment that I have made in my life."^'' He added that
he had acted, in accepting the system, to protect his
family and told the Committees, "If it was General
Secord who paid the bill . . . you guys ought to write
him a check, because the Government should have
done it to begin with."^^ North offered no explana-
tion as to why he also created the false record, other
than that the gift "just didn't look right." ^^

Unexplained Cash Expenditures

The CSF ledgers record expenditures of approxi-
mately $902,110 during the period from March 1985
to October 1986 without identifying their specific pur-
pose. Two transactions accounted for the bulk of
these funds. The first involved a $260,000 cash dis-
bursement on May 21, 1986.'°° In the second transac-
tion, $310,000 was withdrawn from the Hyde Park
account on July 18, 1986.'°' The ledgers state that in
both cases, the funds were "in transit," but where
they went is unknown. In addition, the Enterprise
transferred $152,200 to an account called Codelis.'°2
Finally, Hakim, Secord, and Clines received cash to-
taling $179,610 from various Enterprise accounts;
these transactions were listed as "business expenses,"
and were in amounts of up to $50,000 each.'°^

Section 4:
Much?io4

The Diversion — How

The Iran arms sales generated a $16.1 million surplus
for the Enterprise. The Enterprise managed to spend
part of that money, $3.8 million, for the Contras
before its operations were stopped.

As of November 19, 1985, the day before the first
money from the Iran arms transactions was deposited
into the Enterprise, the Enterprise had a cash balance
of approximately $1 million. From November 20,
1985 through December 1986, the Enterprise received
an additional $2.4 million in donations for the Con-
tras. During the same period, the Enterprise spent
approximately $7.2 million on behalf of the Con-
tras.'°* The shortfall — $3.8 million — was diverted
from the Iran arms sale surplus. '°^

The diversion did not take place by accident. In
fact, North helped set the price of the arms so that a
surplus would be created which could be used for the
Contras. '°'' According to Secord, North consistently
instructed him to use the surpluses generated from the
Iranian arms sales for the Contra project.'"® North
apparently thought that at least $6 million of the Iran
surplus from the May transaction alone would be used
for the Contras. He sent Poindexter a PROF note on
May 16, saying that the Enterprise had "more than $6
million available for immediate disbursement." '°^
Poindexter testified that he believed that the Enter-

prise was giving the Contras all of the surplus from
the Iran arms sales. "°

Section 5: Profits— Who Made
What

Brealting the Code Names

Hakim was both a promoter and a salesman: The
Enterprise was a great opportunity to make a great
deal of money and, he said, at the same time, to serve
both his new country, the United States, and his
native country, Iran. Hakim added:

I never pretended to undertake the tasks I was
asked to perform for philanthropic purposes and
I made that clear to all of those with whom I
[w]as involved — including General Secord, Lieu-
tenant Colonel North, the CIA, and the Irani-

The Enterprise fulfilled Hakim's objective: without
risking any of its own or Hakim's money, the Enter-
prise made extraordinary profits through weapons
sales. Its revenues of $48 million exceeded its expenses
by $12.2 million. Secord preferred to speak of this
money as "residuals" or "surplus" rather than profit
because he did not want to be called a "profiteer.""^

Not only was the structure and operation of the
Enterprise cloaked in secrecy, so was the distribution
of its profits. The CSF records indicate that $6.8
million of the $12.2 million "surplus" was distributed
as profits directly or indirectly to five entities:
"Albert Hakim, Korel Assets, C. Tea, Scitech, and
Button.""^ In addition, $4.2 million was transferred
to CSF to be held in a fiduciary capacity for the
Enterprise as "Reserves.""* The balance, $1.2 mil-
lion, remained at the end of 1986 as undistributed cash
in the Enterprise's operating companies. ' ' *

Each of the five entities had a Capital Ledger.
Each time funds were distributed from Enterprise ac-
counts to one of the five entities, the date and the
amount of the transfer were recorded in that ledger.
Generally, the funds were wired from Enterprise ac-
counts either to a bank account controlled by one of
the five entities or CSF, where at least four of the
five entities had entered into individual fiduciary
agreements. The fiduciary agreements provided that
CSF would manage the money of each entity and
return all or part of the money to the entity or its
representative upon demand. Hakim produced records
of a CSF fiduciary fund for Korel, Hakim, Scitech,
and Button, including ledgers for each fund."®

Only Hakim's Capital Ledger was in his own
name.'" Hakim stated that C. Tea was the code
name for Thomas Clines, ' ' * who handled the Contra
arms procurement for the Enterprise. ' ' ® The records
bear that out. '2° Hakim testified that Scitech was the

343

Chapter 22

offshore arm of the Secord/Hakim firm STTGI and
that it was equally owned by Secord and Hakim. The
records also support that statement.'^' Hakim also
testified that Korel stood for Secord, and Button
stood for North. '^^

Korel Assets

Hakim testified that Korel Assets was a corporation
that held Secord's profit share. '^^ The records of the
Enterprise support Hakim's testimony. Profit distribu-
tions to Korel match, often to the last dollar, distribu-
tions to Secord's equal partner, Hakim.

According to the CSF Ledgers, $1.62 million was
transferred out of the Enterprise accounts for the
benefit of "Korel Assets." Most of this money was
distributed to the Korel Assets Fiduciary Fund where
it remained unspent. However, $269,000 was trans-
ferred either directly from the Enterprise accounts or
indirectly through the Korel Fiduciary Fund to the
U.S. or elsewhere. The Committees have traced most
of this money to: Secord's personal bank account (in-
cluding payments for a personal airplane) ($74,600);
payments for Secord's Porsche ($31,825); payments
for a stay by Secord at a health farm ($3,075); and
cash withdrawals where Secord signed the withdraw-
al slips ($33,000). 124 An additional $126,492 went for
other purposes. '^^

Secord testified that he was unaware that Korel
Assets stood for him and that it held his profit
share. '^^ He claimed that the money he personally
received from Switzerland came through Hakim as
personal loans or as payments for work unrelated to
the Enterprise. Hakim never mentioned Korel to
Secord. As far as Secord was concerned, the money
for the Porsche was a loan from Hakim (even though
Secord signed no note and paid no interest), and the
money for the airplane was Secord's share of a con-
sulting fee. '^'' Hakim denied that the money for a
Porsche was a loan and indicated that in both cases
he took the money from Secord's profit share. '^*

Secord testified that he was originally an equal
profit participant with Hakim in the Enterprise, and
that the same 50/50 profit-sharing arrangement ap-
plied to any profits from any Enterprise company,
including Korel Assets.'^* According to Secord, CSF
initially held his profits under his name. Then, some-
time in July or August 1985, he orally foreswore his
interest in any profits of the Enterprise. '^° He stated
that after he foreswore his profits, he "left to Hakim
to do with [them] as he wished." If Hakim placed the
money in a CSF fiduciary fund called Korel Assets
for him, Secord was unaware of it. In addition,
Secord asserted that Hakim calculated profits on the
Contra arms deals, and that Secord had no specific
knowledge about the profit distributions. ' ^ '

Hakim confirmed part of what Secord said. Hakim
stated that Secord orally relinquished his interest in
any profits, not in mid- 1985, but in "early to mid

1986."^^^ Hakim noted, however, that he ignored
Secord's oral waiver and he continued to treat the
money held by Korel Assets as Secord's profit share
that Secord could claim at any time.'^* Secord,
Hakim declared, was not a good businessman who
could keep track of money; rather, "he was born a
general and will die a general."'^''

Hakim denied that he was the one ultimately re-
sponsible for profit distributions and indicated that
Secord was aware of Korel and its function. Hakim
testified that Secord was the final authority on profit
distributions (commissions were distributed to Korel,
Hakim and C. Tea through August 1986). '^s And,
according to Hakim, Secord inspected the profit en-
tries of the Enterprise books, including those of Korel
Assets, as late as May 1986.^^* Hakim also stated that
Secord's profits were distributed to Korel Assets with
Secord's specific approval so as "to eliminate personal
contact to those funds." '^''

Except in a few cases, '^* Secord's name does not
appear on the CSF documents produced by
Hakim. 139

"Button"

On May 20, 1986, the Enterprise transferred
$200,000 to "B. Button." The money was wired out
of an Enterprise account to CSF, which agreed to
hold the funds for "B. Button" under a CSF fiduciary
agreement. The transfer was recorded in the Button
Capital Ledger as a distribution for the benefit of
Button. 1*°

Hakim's explanation of the Button money changed
during his deposition. He initially testified that the
Button fund was set up to pay death benefits for the
pilots in the Contra air operation and that Button
meant "Button up or something."'*' When told of a
handwritten note by Zucker referring to "Mrs. Belly
Button," Hakim said that Button meant "bellybutton"
and gave an almost incomprehensible explanation.'*^
Hakim, who denied that Button stood for anyone's
name, failed to explain why "Button" had a Capital
Ledger, as if it were sharing profits.

Two days later. Hakim stated that the $200,000 was
a death benefit for Mrs. North and her family in the
event of North's death. The Capital Ledger "Button"
referred to distributions for the benefit of North.
Shortly thereafter. Hakim produced the "B. Button"
fiduciary agreement which showed that $200,000 was
being held by Zucker for B. Button. And after being
shown the reference to "Mrs. Bellybutton," Hakim
admitted that it was the code name for Mrs. North.
(Button was short for North's codename — Bellybut-
ton.)

Hakim testified that he had proposed to Secord that
a $500,000 death benefit be set up in connection with
North's trip to Tehran in May 1986, but that Secord
had rejected the proposal telling Hakim that he did
not "understand a soldier's life." Hakim then pro-

344

Chapter 22

posed $200,000, and Second acquiesced.'*^ Hakim
said that his motive was humanitarian: he had become
extremely fond of North (whom he had met only
once) and wanted to relieve North's anxieties about
his family. He asserted he never told North about the
Button Fund, but did say if North did not return from
Tehran "as long as one of us is alive you need not
worry about your family."'**

The death benefit for North had not emerged in
Secord's prior interviews and public testimony. When
asked about Hakim's testimony, Secord acknowledged
that Hakim told him of the need for "insurance cover-
age" for North. Secord claimed that he told Hakim
that they "couldn't set up an insurance coverage for
Ollie North," but that North could be covered by the
$200,000 death benefit fund which had been set up in
November 1985 for the pilots involved in the resup-
ply operation.'*^ He recalled opposing the notion of
a $500,000 fund. »*6

North offered a third version. He testified that in
early March, just after he met Hakim, Hakim told
him, "If you don't come back, I will do something for
your family."'*''

The matter did not end with the creation of the
Button Fund. Hakim also testified that he sought a
way to give money to Mrs. North for the education
of the North children, after he learned from Secord
that North was worried about college costs. Hakim
testified that he decided to offer Mrs. North $15,000,
representing the annual interest on the $200,000
Button account, and that he asked Zucker to try to
pass money to Mrs. North in a "legal, proper way."
According to Hakim, Zucker telephoned Mrs. North
directly, and told her that he was representing an
anonymous admirer of her husband who wanted to
help her family financially and that he wished to meet
with her in Philadelphia.'**

Secord gave a different version. He testified that
Hakim never said anything to him about giving
money to Mrs. North, but had mentioned only that
Zucker was a "wizard" at making money for other
people, and that he might be able to advise Mrs.
North on investments.'** Secord stated that he told
Hakim that the Norths did not have any money to
invest, and that you could not make "chicken soup
out of chicken feathers."'*" Although Secord consid-
ered it a "bad idea," Hakim insisted that he ask
North.'*' Secord called North at least twice about
the matter.'*^ In particular. Hakim spoke to Secord
about the "requirement" to put a North child in col-
lege. As a result, Secord testified, Mrs. North met
with Zucker when he came to Philadelphia in the
spring.'*^ North testified that he sent his wife to
Philadelphia for the meeting with Zucker, but that

[t]he purpose, as I understood it, of that meeting
was that my wife would be in touch with the
person who would, if I didn't return, do some-
thing for my family.'**

There are three reports, all second hand accounts,
of the meeting between Mrs. North and Zucker. (Mrs.
North, invoking her spousal privilege, declined to tes-
tify, and Zucker refused to meet with the Commit-
tees.)'** According to Hakim, Zucker reported that
he looked at the North family structure to see if there
would be a legal way to pass money, but was unable
to identify a family member to serve as the con-
duit.'** Secord testified that North told him that "the
trip to Philadelphia had been a waste of time and a
train ticket and his wife was more confused now than
she normally was."'*' North testified that Zucker's
meeting with his wife focused on "a general descrip-
tion of my family," and that Zucker telephoned Mrs.
North in June: "The lawyer called again and asked
for the name of an adult executor for our family."
North said he told his wife not to call back.'**

Hakim, however, continued to pursue the matter.
He testified that he "started to really focus on this" in
the fall of 1986. '*9 Hakim testified that Zucker came
up with the idea of having a client of his, a real estate
developer, employ Mrs. North. Hakim stated that he
told Zucker, "if the guy doesn't have an opening,
cannot pay for it, we will pay for it. In other words
we [would have] paid the guy to pay her so she
would work."'*" In September, Zucker called a
Washington lawyer, David Lewis. Lewis testified that
he visited Zucker in Geneva on October 10, 1986.
Zucker asked Lewis if he had a client who could pass
money to the wife of a White House official disguised
as compensation for her services in a real estate trans-
action. The money, Zucker explained, was due her
husband. The husband's name, to the best of Lewis'
recollection, was Lt. Col. North.'®' Zucker said that
Lewis' client would be reimbursed through a Swiss
account, or any other account in the world. '^^ Lewis
demurred. He reported this attempt to the Commit-
tees and the Independent Counsel in February 1987
after he realized the significance of the conversation.
Secord testified that he knew nothing about this
effort.'"

No money, so far as the Committees can determine,
was ever passed to the Norths by Zucker or Hakim.
$15,000 was transferred, however, to STTGI on May
5, 1986. The transmittal instructions contained the no-
tation, in Zucker's writing, "Mrs. Bellybutton."'"*

There is no evidence that North knew of the effort
to pass money to his family through Lewis. Hakim
stated, "I put a wheel into motion and then if North's
family wanted to open the door . . . they could. If
they wanted to close the door . . . they also could do
that."' 6*

The Surplus

The $12.2 million in Enterprise surplus was distrib-
uted in a number of ways. (See Figure 22-5, Break-
down of $12.2 million surplus). The CSF ledgers indi-
cate that Secord, Hakim, and Clines took part of the

345

Chapter 22

Figure 22-5.

Breakdown of $12.19 Million Surplus

(in millions)

Button

Fund

0.2

Source: Compagnie de Services Fiduciaires ledgers.

346

Chapter 22

surplus as commissions on arms sales to the Contras.
But Secord and Hakim did not stop with the self-
determined commissions. The ledgers also indicate
that they took part of the $12.2 million as seed money
for risky personal business ventures, for personal ex-
penditures, and for the Button fund. Finally, Secord
and Hakim transferred part of the surplus to CSF to
be held as Reserves for future projects by Hakim,
Secord, and North.

The Commissions

Approximately $4.4 million of the Enterprise profits
went to Secord, Hakim, and Clines as commissions on
arms sales to the Contras and the CIA — even though
North testified that he did not intend to make anyone
a rich man from the sales.'®® Apparently, Secord and
Hakim never negotiated with Calero'®'' or anyone
else for these commissions; they simply took what
they wanted out of the general pool of money in the
Enterprise accounts. Hakim described the basic ar-
rangement in his testimony as follows:

Q: Your gross income comes from third parties,
contributions from third countries, private contri-
butions, profits on the sale of arms to Iran.

So really as far as the profit that you take or the
leftover in the enterprise you really negotiate
with yourself as to the amount of profits, do you
not?

A: That is correct.

Q: And that makes it very flexible for you as to
whether or not you want to claim 75 percent or
50 percent or 30 percent, isn't that basically the
situation?

A: You are correct, sir. . . .

Q: You simply negotiate with yourself?
A: Yes.'6»

As noted, Secord described each arms shipment as
a separate phase, Phases I-VII. The final shipment for
the Contras, purchased in August of 1986, never made
it to the Contras and thus Secord did not describe it
as a "Phase"; here, it is referred to as the Stranded
Shipment.'®^

The CSF ledgers indicate that on Phases I through
IV, Secord and Hakim allocated themselves and
Clines a total of approximately $2.7 million, equal to
31.6 percent of the cost of the arms alone and 28.7
percent of the cost of arms including delivery.''"

Calero testified that he received the impression
from Secord that there were no such commissions,
and considered it a "revelation" when he heard
Secord testify.''" North testified that under Casey's
plan those involved in the Enterprise were entitled to
"reasonable compensation.""^

On Phases V through VII and the stranded ship-
ment, once again, Secord and Hakim allocated com-
missions to themselves and Tom Clines from funds in
the Enterprise accounts. The CSF ledgers indicate
that the commissions totalled $1.7 million, which was
equal to 56 percent of the cost of the arms alone and
49 percent of the cost of arms and delivery to Central
America.'''^

Secord testified that the Enterprise's mark up on its
arms sales to the Contras, excluding transportation,
ranged between 20 and 30 percent and "averaged out
almost exactly to 20 percent.""'' According to CSF
ledgers, the commissions on all the arms purchased
for the Contras averaged 38 percent when transporta-
tion costs are excluded."^

Table 22-4 shows the mark-up on arms shipments
to the Contras.

Table 22-4. — Mark-up on Arms Purchased for Contras According to CSF Ledgers

Commis- Commis-
sions as a sions as a
percent of percent of
total cost arms cost

Phase

Cost of

Related

Total

Cost of arms

transpor-

delivery

Total costs

commissions

tation

costs 1

per ledger

I-IIP $6,491,159 $566,385 $98,100 $7,155,644 $2,446,493 34.19 37.69

IV 2,044,258 118,500 73,220 2,235,978 252,000 11.27 12.31

Total Phases I-IV 8,535,417 684,885 171,320 9,391,622 2,698,493 28.73 3^

V 222,003 121,000 10,000 353,003 345,000 97.73 155.40

VI 229,279 120,000 66.780 416,059 229,303 55.11 100.01

VII 413,158 0 142,127 555,285 301,168 54.24 72.89

Stranded shipment 2,227,001 0 0 2,227,001 861,327 38.68 38.68

Post phase IV 3,091,441 241,000 218,907 3,551,348 1,736,798 48.91 ^6^

Grand total 11,626,858 925,885 390,227 12,942,970 4,435,291 34.27 38.15

' Related Transportation Costs includes 'bonuses' paid to Quintero. for assistance on arms deliveries and other miscellaneous expenses. SC4103. Secord
Test. 5/5/87 at 54,

^ The commissions paid on phases I-III were in lump sums for all three phases and cannot be accurately allocated to the individual phases.

Source: CSF Ledgers, bank documents, and information provided by Secord and Hakim.

347

Chapter 22

Hakim arranged for several commissions and profit
distributions to be made through an off-the-chart
company, Defex SA, which did not appear on the
CSF chart in North's safe. The choice of name was
not random. Defex (Portugal) was a major arms
dealer from whom the Enterprise bought weapons.
Defex SA was owned by the Enterprise and, accord-
ing to Hakim and Secord, had no connection with
Defex (Portugal). Hakim testified that when he trans-
ferred funds to Defex SA, "people" would think that
the funds were being used to purchase arms from
Defex (Portugal). '^^ Secord testified that Defex SA
was a "cover mechanism" set up by Hakim to dis-
guise the source of money paid to arms dealers.^''''

Hakim could not remember exactly whom he was
trying to confuse — maybe Eastern bloc arms dealers,
he suggested. The ledgers indicated that one of the
main uses of Defex SA was for distributing profits.
Often, commissions were moved into the Defex SA
account, creating wire records and ledger entries that
looked like payments to Defex. Then the profits were
wired out of Defex SA to members of the Enter-
prise.'''^

The final commission distribution was for the
"stranded shipment." In August 1986, the restrictions
of the Boland Amendment were about to be lifted and
the CIA was to resume its role as arms supplier to the
Contras. Hakim and Clines decided that they should
have one last distribution. They made it a large one.
The purchase price of the weapons was about $2.2
million."^ The weapons were purchased, but deliv-
ery to the Contras was never completed. Hence, the
weapons were known as the "stranded shipment" and
were ultimately sold for a $1 million loss to an inter-
mediary who later sold the weapons to the CIA.'*"

But the loss was not limited to $1 million. Hakim
testified that he and Clines proposed that the group
reward itself for their work with a fee of $861,327,
which is equal to 39 percent of the cost of the weap-
ons. According to Hakim, Secord approved the com-
mission and the division of profits among the group.
The profits were split on a 30/30/30/10 basis:
$258,398 each to Hakim, Korel Assets, and Clines,
and $86,133 to Scitech.'*'

Table 22-5 shows who received the commissions.

Table 22-5. — Commissions on Arms Sales to Contras

Phase

Date of

Distribution from

Enterprise

Korel

C-Tea

STTGI

and

SciTech '

Total
Commissions
per ledgers

Total

Commissions

per Secord

and Hakim

I-III 2 2/85-12/85'

IV ' 12/17/85

V < 2/7/86

VI(a) 5 4/22/86 •*..

VI(b) 5/20/86

Vll(a) « 6/3/86 •• ....

Vll(b) 6/20/86 ••..

779,691

$814,793

$507,090

$344,919

32/33/21/14

$2,446,493

$2,239,114

100,800

100.800

50,400 .

40/40/20/ 0

252.000

252.000

165,000

165,000

15.000

48/48/ 4/ 0

345.000

150.000

50,000

50,000

25.000

16,000

35/35/18/11

141.000

0

26,490

26,490

26,490

8,833

30/30/30/10

88.303

88.303

79,167

79,167

79,167

26,390

30/30/30/10

263.891

263.891

11,183

11,183

11,183

3.728

30/30/30/10

37,277

37,277

Subtotal

Stranded shipment ' 8/27/86 *♦

Total

1,212,331
258,398

1,247,433
258,398

714,330
258,398

399,870
86,133

34/35/20/1 1
30/30/30/10

3,573,964
861,327

3,030,585
861,327

1,470,729 1.505,831 972,728 486,003

33/34/22/11

4,435,291

3,891,912

' 50/50 Secord/Hakim companies.

2 Profit distributions for Phases I-III were paid in lump sums and cannot be accurately divided among phases. Shown here is the total sum of money
distributed to Korel. Hakim. C Tea. and STTGI/Scitech during the period from February 1985 to mid-December 1985 That sum falls into the 40/40/20 ratio
described by Secord (when the Scitech/STTGI share is divided among Secord and Hakim), and is substantially verified by Secords's estimated total profit for
Phases I-III ($2,239,114), The last distribution for this period, which went to Hakim, was paid on 12/17/85; the CSF ledger entry for this 12/17/85
distribution reads "Bal Ace, Phases I-II-III",

" Secord described the Phase IV profit as an December shipment with a total profit of $252,000; accordingly, the May 20. 1986, distribution which totaled
$252,000 has been allocated to Phase IV

' Hakim testified that the February 7. distribution was a profit distribution (Hakim. Dep. 5/22/87. at 122-24). The Committees have allocated the
February 7, 1986. distribution to Phase V by process of elimination — alt of the other distributions fit with other phases.

'Secord described Phase VI as an April shipment with a total profit of $88,303, Thus, the May 20. 1986. distribution which totaled $88,303 has been
allocated to Phase VI, The Committees have assumed that the April 22, distribution was a profit distribution because it fails into a 40/40/20 ratio described by
Secord (when the STTGI/Scitech share is allocated equally among Korel and Hakim) The Committees have assumed that the April 22. 1986. distribution was
part of the Phase VI profit because the distribution occurred in April (the date of the shipment, according to Secord).

• Secord reported a total profit of $301,194 on Phase VII (a May shipment according to Secord) Since the June 3. 1986. and June 20. 1986 distribution
total this amount, they have been categorized as Phase VII shipments,

' Secord did not report the amount of profit for the stranded shipment; however. Hakim was shown the ledgers and slated that the August 27. 1986.
profit distribution was for work done on the Stranded Shipment,

• Defex, S A was used for one of the transfers. $522,820 on 7/24/87. to Korel,
•' Defex. S,A was used for these distributions..

Source: CSF Ledgers, bank documents, and information provided by Secord and Hakim.

In most cases, the CSF Capital Ledgers did not
specifically identify the reasons for particular distribu-
tions. The ledgers simply tracked the distribution of

money in Enterprise accounts to Secord, Hakim,
Clines, and other persons. A total of $6.6 million was
distributed to Secord, Hakim, and Clines, while Table

348

Chapter 22

22-5 shows only $4.4 million in commissions. The
difference is additional profit distributions which
Secord and Hakim took from Enterprise accounts for
business ventures and personal use. To distinguish
commission withdrawals from personal and business
venture withdrawals, the Committees relied on a
number of factors, including notations in the ledgers,
Hakim's testimony, information provided by Secord,
and a careful analysis of distributions. '*^

Other Profit Distributions^^^

In addition to commissions, the partners took more
than $2.1 million in profit distributions from the En-
terprise accounts. Apparently, $420,000 of this money
was used by Secord, Hakim, and Clines for personal
and other purposes. The balance, approximately $1.7
million, was invested in a variety of business ven-
tures.'**

While most of these business ventures had no con-
nection to the Enterprise, one venture involved pro-
posed sales of military equipment to the Contras and
another contemplated sales of military equipment to
the Iranians. Zucker played an active role in the ven-
tures as an adviser.'** In at least one case, he was
also a potential partner. This section describes these
business ventures in greater detail.

A. Tri-American Partnership '*«

In the spring of 1986, $150,000 was transferred
from Albon Values to Tri-American Arms, a partner-
ship among Secord (representing Hakim's interest as
well as his own), Larry Royer, and Dan Maros-
tica.'*'' Secord and Hakim each participated in the
development of ambitious plans for Tri-American.'*®

Initially, they planned four projects requiring sever-
al million dollars in venture capital. They included
the manufacture of submachine guns, a biotechnology
speculation, a real estate investment, and the "bulk
manufacturing of opium alkaloids."'*®

To explain the source of the venture capital. Hakim
and Secord put out a cover story — an organization
called the Arab Development Project would be back-
ing Stanford Technology Trading Group in the ven-
tures. In fact, as Hakim testified, the funds were to
come out of the Enterprise.'*"

Royer and Marostica testified that the initial phase
of the machine gun project called for manufacturing
4,000 guns for the Contras; the projected cost of the
weapons was $3 million and the projected profit to
Tri-American was $4.2 million.'*' Secord flatly
denied, however, that one of the purposes of Tri-
American was to sell weapons to the Contras.'*^

The real estate investment involved the purchase of
timber property in the Northwest. After cutting Mar-
ostica out, Secord, Hakim, and Royer pursued the
project through a company bearing the initials of
their last names, SRH, Inc. According to Royer, the
project called for purchasing land for $5.7 million and

a $1 million down payment to obtain financing for the
purchase. In addition, Royer stated that the project
required $5 million in working capital.'*^ Hakim tes-
tified that CSF was planning to extend a multimillion
dollar loan to SRH, Inc., for the project — and that
the loan was to be collateralized by Enterprise funds.
The project was abandoned after the Iran-Contra
story appeared in the press.'**

B. Stanford Technology Trading Group, Inc.

Secord and Hakim ran a great deal of their business
activities out of the offices of Stanford Technology
Trading Group, their jointly-owned company. As
noted, Hakim and Secord founded the company with
the purpose of developing security contracts in for-
eign countries. They did not have much success. The
Enterprise supported the entire budget of the compa-
ny, which ran up bills (including salary) of more than
$500,000 from the summer of 1984 to the fall of 1986.
A total of $582,206 (including commissions of
$214,000 and S50,000 for the laser sight described
below) was distributed from the Enterprise's oper-
ating accounts to Stanford Technology Trading
Group from February 1985 through November
1986. '** Secord drew a salary of $6,000 a month.
Hakim drew $5,000 a month, Dutton received $3,283
a month, and rent was $3,868 a month. '^^ Keith
Phillips, whom Secord hired to pursue security con-
tracts in Saudi Arabia, received $37,000 from Enter-
prise accounts.'*''

Secord acknowledged that Stanford Technology
Trading Group received approximately $400,000 to
$500,000 from Switzerland, but claimed that these
were loans from CSF arranged by Hakim.'** Hakim
testified that disbursements to Stanford Technology
Trading Group started out as loans from CSF but
that the loans were repaid by the Enterprise; in effect,
"money was pumped from the Enterprise into
STTGI."'**

C. The Scitech Fund

Hakim described Scitech as an offshore company that
would use its capital to further Secord/Hakim busi-
ness projects. 2°° CSF held a fiduciary fund for Sci-
tech with $271,984 from commissions on arms sales
and an additional $250,000 from Enterprise ac-
counts, ^t" A $100,000 down payment for the SRH,
Inc., real estate deal came from the Scitech fund.^°^

D. Laser Sight

In the fall of 1986, Hakim, apparently with Secord's
assistance, attempted to market a laser night-vision
sight for military use. Hakim approached Forways,
Inc., a manufacturer of military spare parts, to see if
the company could produce the sight. Zucker, a 25
percent owner of Forways, had brought Forways to
Secord's attention as early as June of 1984. In August

349

Chapter 22

of 1986, after a Hakim visit to Forways for a demon-
stration of the laser sight, the Enterprise wired
$50,000 as "seed money" to Forways for the manufac-
ture of the sights. But the money was not used by
Forways. Instead, it was immediately sent to Stanford
Technology Trading Group. ^°^

E. Forways

Throughout 1986, Zucker experienced problems
with one of his Forways partners, Jacob Farber.^"*
According to Hakim, in the fall of 1986, he and
Secord made plans to purchase most of Farber's inter-
est in Forways so that they would obtain a one-third
interest in the company. At the same time, as negotia-
tions were ongoing with the Second Channel, Hakim
gave a set of Forways catalogues to the Second
Channel negotiators and told them "once things get
going, then we will be able to sell directly from
Forways."^°^ Hakim denied that he mentioned any
specific product. ^"^ The records of Forways show
that from the fall of 1985 through the fall of 1986, the
company attempted to buy — and apparently succeed-
ed in some cases — quantities of HAWK spares parts
in Europe. ^°'

In early October, Farber sold his shares to Zucker
for $750,000. Shortly thereafter, Zucker wrote a
memorandum to the officers of Forways stating that
Secord and Hakim would probably buy the bulk of
the Farber shares, thereby obtaining a one-third inter-
est in Forways. Zucker also stated in the memoran-
dum that he expected Forways to have record-break-
ing sales and profits in the coming year — at levels
inconceivable to the new officers of Forways. ^°^

In early November, $760,000 of Enterprise money
was apparently transferred to CSF: on November 5,
1986, $500,000 moved out of Hakim's fiduciary fund
to an unknown location and, on November 10, 1986,
$260,000 moved out of one of the operational compa-
nies to an unknown location. The $500,000 block of
funds had been previously earmarked for a joint
Hakim/Secord investment. The $260,000 transfer was
recorded in the ledgers with the notation "CSF In
vest. — Forways."^"^

Hakim denied that the Secord-Hakim purchase of
the Farber shares was ever completed, and in March
of 1987, Zucker wrote a note to an officer and direc-
tor of Forways indicating that after the Iran/Contra
story broke, he stopped the Hakim-Secord part of the
transaction.^'" However, there is no record of the
$760,000 ever being returned to the Enterprise or any
of the fiduciary funds.

F. The Iranian Market

The amounts distributed to Hakim and Secord do
not tell the full story of their ambitions, which Hakim
made no effort to hide. Hakim saw the Iranian market
as providing spectacular opportunities for wealth. He
testified that he hoped to obtain for Secord and him-

self at least a 3 percent share of the annual $15 billion
Iranian market if commercial relations with the
United States could be renewed. By using money
from the Enterprise, including the reserves to
"grease" the way with the Second Channel, and by
proposing compromises to North and Iran, Hakim
was not only promoting a solution to the impasse
over the hostages, but also pursuing his and Secord's
own commercial interests. The ultimate goal, as
Hakim admitted, was not the millions he actually took
from the Enterprise during 1985 and 1986, but the $15
billion-a-year Iranian market.^"

The Reserves

The Enterprise transferred $4.2 million to CSF to
be held in three fiduciary accounts referred to as the
"Reserves."^ 1^ A large part of the Reserve monies
appear to have come from the proceeds of the Iranian
arms sales.

According to the CSF fiduciary agreements. Hakim
was the owner of the Reserves; Secord testified, how-
ever, that the Enterprise was the beneficial owner of
the Reserves and Hakim acknowledged that the Re-
serves were treated as the Enterprise's money.^'^
Table 22-6, Distributions to Reserves, shows the
amount of each Reserve, the operational company
from which the monies were taken, and the date each
Reserve was established.

Table 22-6. — Distributions to Reserves^**

Reserve

Date

Reserve! 3/05/86 $2,000,000 Gulf Marketing

Reserve 2 6/18/86 2,000,000 Hyde Park

Reserve 3 6/18/86 200,000 Hyde Park

^'* Based upon CSF Ledgers.

Hakim testified that Reserve 2, containing
$2,000,000, was to be used to pay money to persons
associated with the Second Channel. According to
Hakim, if the Second Channel initiative was success-
ful, the money was to be invested for those persons in
the joint Iranian-U.S. venture which was being
planned; if the Second Channel was unsuccessful, it
would be used as baksheesh.^ '^ Reserve 1, containing
an additional $2,000,000, was to be used for any pur-
pose, including "operational purposes."^ '^

The CSF fiduciary agreement governing Reserve
1 — the one for covert operations — provided that
should Hakim die, Secord would have direct control
over it and should Secord die. North would have
direct control. Should North die, the remaining por-
tion of the Reserve would be divided equally among
the estates of all three men. The instructions to CSF
were irrrevocable without the consent of all the bene-
ficiaries.^''' Hakim said that in setting up Reserve 1,
he simply followed the structure of the Enterprise

350

Chapter 22

from top to bottom as he understood it — with North
on the top.^'*

The CSF fiduciary agreement governing Reserve
2 — dedicated to the commercial venture with the Ira-
nians— provided that upon the death of Hakim,
Secord would control the Reserve, and if Secord
should die, the remaining portion of the Reserve
would be divided among the estates of Hakim and
Secord. Again, the instructions to CSF were irrevoca-
ble without the consent of Secord.^ '^

Initially, Secord testified that the two $2,000,000
Reserves established as insurance for Israeli aircraft
were largely restricted to that use.^^° In fact, the
Israelis did demand a guarantee against loss of $2
million for each airplane used in the Iranian arms
transfers — a guarantee which was explicitly released
on August 3, 1986.^^' Later, Secord indicated that
the Reserves were used for all of the Enterprise's
operations. One of the continuing operations named
by Secord was "a joint Iranian-American commercial
venture."^^^

North testified that he specifically requested that
some Reserve funds be put aside for a number of
special activities. ^^^ Those activities included recov-
ering military equipment, setting up a propaganda op-
eration in foreign countries, and influencing domestic
politics in foreign countries.^^*

Secord and North testified briefly about the origin
of the Hakim "wills" — the provisions for continuing
control over the Reserves in the event of Hakim's
death. Secord told the Committees that he knew
Hakim had made arrangements to cover a catastrophe
but professed ignorance of the details.^^^ North
claimed to have been totally in the dark as to the
arrangements. He noted, however, that at one point
he asked Secord what would happen to the money if

"both you guys go down on some airplane flight."
According to North, Secord responded, "Don't
worry, arrangements will be made so that these oper-
ations can continue. "^^* Hakim claimed that he told
North that if he. Hakim, died. North would be in
total control. ^^'

Neither Secord nor Hakim had a clear recollection
of the purpose of Reserve 3 containing $200,000.
Hakim suggested that it might have been set up to
cover "death benefits" for those working on the re-
supply operation, or as a set aside for a Secord-Hakim
business venture. Secord remembered setting aside
$200,000 for death benefits. He insisted, however, that
there was only one such fund and it was converted
into the Button fund. The purpose of Reserve 3 re-
mains a mystery.^ ^*

Section 6: Where Is The Money
Now^^Q

The Enterprise generated a surplus of $12.2 million.
Some of this surplus went directly to Secord, Clines,
and Hakim. Substantial funds, $7.8 million, however,
remained under management in Switzerland when the
Enterprise ceased its operations. This money was ap-
parently frozen by Swiss authorities at the request of
the Justice Department.

Of the $7.8 million, approximately $2 million is held
in CSF fiduciary accounts for the benefit of Hakim,
Korel Assets and Scitech. Approximately $200,000 re-
mains in the Button account and another $4.2 million
is held as reserves for the Enterprise by CSF. The
balance, $1.2 million, is in the Enterprise's Swiss bank
accounts, unallocated for any purpose. Table 22-7
shows the location of the $7.8 million.

Table 22-7.— Individuals and Entities that Control Unspent Enterprise Funds

Description

Transferred

from
Enterprise

Investment
Income

Withdrawals

Balance
12-31-86

Total

Cash in Enteiprise Companies $1,227,173 $1,227,173

Reserves Held by CSF:

Reserve 1 $2,000,000 144,398 15,246'

Reserve 2 2,000,000 75,583 23,673'

Reserve 3 200,000 7,915 50,769^

2,129,152

2,051,909

157,146 4,338,207

CSF Fiduciary Funds:

Hakim

Button

Korel

Sci Tech

1,613,649 301,7433 1,655,799' 259,593

200,000 14.330 2,339' 211,991

1,434,121 218,192 105,278' 1,547,035

458,424 34,535 302,822^ 190,137 2.208,756

Total' 7,774,136

' CSF management fees.

^ CSF management fees and a transfer to Sharp. Green, and Lankford.

^ Generally, all funds transferred to CSF came from Enterprise accounts. One notable exception was $258,300 transferred by Hakim from his California
bank account on May 29. 1986, to his CSF fiduciary account to repay a CSF loan. These funds are included in Hakim's income amount.
* Traced, for the most part, to Hakim's U.S. bank accounts and Hakim projects.
^ Traced to Secord's bank account and payments made for Secord's bills.
^ Traced, for the most part, to Secord/Hakim business ventures,
'CSF records mdicate that, as of 12-31-86, all of the money was held for CSF by Merrill, Lynch. Pierce. Fenner, and Smith. Inc. (Geneva office).

Source: CSF Ledgers, H6363A.

351

Chapter 22

The participants have different ideas of what should
happen to the money. Secord testified that the money
belongs to the Enterprise and that is up to Hakim, as
the owner of the Enterprise, to decide what to do
with it. He would recommend to Hakim that the
money, after expenses, be donated to the William
Casey Fund for the support of the Contras.^^"

Likewise, North testified that he would send "that
money, every nickel of it, to the Nicaraguan Resist-
ance, which was indeed the original purpose of set-
ting up all those non-U.S. government entities."^^'

Hakim said that he was entitled to, and promised a
substantial interest in, the Enterprise funds.^^^ Hakim
recognized that North's view of who owned the funds
differed from his but realized he would benefit either
way — either he would profit from opening the trade
door to Iran, or he would fight North for a share of
the money. Hakim declared that if the United States
had tried to end the Iran initiative, "I guarantee you
that I would have put up a big fight to get as much as
I could from that money before letting it go."^^^
Hakim also testified that "obligations" were still out-
standing to the Iranians who helped open the Second
Channel.234

Section 7: Brunei Contribution

If not for a typographical error, the Enterprise would
have received an additional $10 million generated by
U.S. Government efforts: the misdirected contribution
from the Sultan of Brunei.

In December 1985, Congress amended Boland to
provide explicitly that solicitation by the State De-
partment of humanitarian aid for the Contras from
third countries was not precluded. Solicitation of
lethal assistance was not addressed.^^^ The National
Security Planning Group decided to pursue such
third-country funding at a meeting with the President
on May 16, 1986. These funds would bridge the gap

until the anticipated resumption of U.S. aid in the
fall.236

The Administration estimated that the earliest that
aid could be made available to the Contras through
the normal appropriations channels was August or
September 1986. In the face of continued House op-
position and the likelihood of a filibuster in the
Senate, Secretary Shultz advocated seeking aid from
third countries as the course of least resistance. He
believed that it was highly improbable that Congress
would support a reprogramming of some money from
the Department of Defense for non-military aid to the
Contras and he argued that it would be desirable to
approach other countries. ^^^ Secretary Shultz was
asked to draw up a list of possible donors.^'*

In discussions at the State Department following
the National Security Planning Group meeting. Secre-
tary Shultz ruled out any countries receiving U.S. aid

or whose political relationship with the United States
was otherwise delicate. The Secretary's criteria elimi-
nated all the obvious candidates, including nations in
the Middle East.^^* In early June, Assistant Secretary
Elliott Abrams recommended the Sultanate of
Brunei — a tiny, oil-rich nation on the northwest coast
of Borneo — and the Department agreed.^*" Abrams
described how the selection was made:

Take a list of countries in the world and exclude
those with insufficient resources to make a hu-
manitarian contribution. Exclude further those
which are right-wing dictatorships, or which are,
if you will, on the other side, allied with the
Soviet Union. Then exclude those . . . over
which we can be said to have some leverage.
You are left essentially with oil producers. Then
look for non-Arab — since I had been to Ambassa-
dor Murphy already, non-Middle East non-Arab
oil producers. Venezuela, I thought, would not
do this. You are down to Brunei.^*'

Since Secretary Shultz planned to travel to Asia in
June 1986, Abrams was tasked with getting an appro-
priate account number in the event of a successful
solicitation of Brunei for a contribution to the Con-
tras. Abrams approached North, who, with Poin-
dexter's concurrence, gave Abrams the number of the
Enterprise's Lake Resources account in Switzerland.
Abrams was not told that this was an account con-
trolled by North, Hakim, and Secord for disbursing
lethal (not humanitarian) aid to the Contras.^*^

But either North or his secretary made a mistake.
In writing down the account number or in typing it.
North or his secretary apparently inverted the first
two digits, so that the correct account number at
Credit Suisse, 55(5-430-22-1, became i(55-430-22-l."3
North gave Abrams a typed card containing the erro-
neous number and Abrams gave it to the Secretary of
State.^*"* The Secretary of State was informed by
Abrams that the account belonged to the Contras;
Abrams said he had received that information from
North.^^s

The State Department then decided that Brunei
would not be approached during the Secretary's June
trip, although the Secretary carried with him to Asia
the card containing the wrong number.^*®

On August 5, Secretary Shultz directed Abrams to
make contact with Brunei.^*'' Around this time,
Abrams obtained a second account number from the
Chief of the CIA Central American Task Force. ^''*
Abrams could not explain why he asked for this
second account number.^"*^ But once he obtained it,
he had the problem of deciding which account to use,
the one provided by the CIA or North. Charles Hill,
Secretary Shultz's Executive Assistant, recommended
that Abrams use the number from North because it

352

Chapter 22

probably was cleaner.^^° Ironically, the account
Abrams received from the CIA was a Contra account
established specifically to receive the expected contri-
bution. Had that account been used, the Contras
would have received an additional $10 million.

Abrams, carrying North's account number and
using the cover name "Mr. Kenilworth," met with an
official of Brunei in London on August 9, 1986, and
successfully solicited a $10 million contribution for
humanitarian aid. Abrams gave the Bruneian official
the Swiss account number from North. ^**

On September 15, Brunei confirmed to the State
Department that "arrangements have been consum-
mated."^*^ But North advised Abrams three days
later that no funds had been received.^ *^ The State
Department went back to Brunei and was told that
transferring the funds would require the U.S. to "wait
for a short while before the transaction is complet-
ed." ^s*

By November, the funds still had not arrived in the
Lake Resources account. This remained true as of
November 25, when the Attorney General announced
discovery of the diversion. On December 1, Secretary
Shultz instructed Charles Hill to brief the State De-
partment's Legal Adviser, Abraham Sofaer, on the
circumstances surrounding the solicitation. According
to Sofaer, this was the first time he learned about the
Brunei contribution.^**

When he was informed of the Brunei contribution,
Sofaer directed the U.S. Ambassador to advise the
Brunei Government that if the funds were still under
its control, they should be frozen.^*^ But on Decem-
ber 4, 1986, Brunei informed the State Department
that it had sent the funds to the designated account in
August and could not withdraw the transfer. Sofaer
testified that on December 4, he received the approv-
al of officials at the Justice Department and the White

House to approach the Swiss Ambassador in Wash-
ington with a request that all accounts related to Lake
Resources and Oliver North be frozen. Simultaneous-
ly, he ordered a cable sent to the U.S. Ambassador in
Switzerland instructing that the same request be
made. The request became effective the following
morning.^*' The problem, however, was that nobody
in Washington — not even Oliver North — knew where
the Brunei funds had gone. A diplomatic coup had
become a diplomatic fiasco. The fiasco continued into
1987.

With the assistance of Swiss authorities aided by
the State Department, the Committees determined
that the Brunei funds had ended up in the Credit
Suisse account of a person described by the Swiss as a
wealthy Swiss businessman involved in the shipping
business who alleged that the $10 million flowed into
his account in connection with a shipping transaction.
The account-holder had withdrawn the $10 million
transfer shortly after it arrived at Credit Suisse and
placed it in a certificate of deposit at another Swiss
bank in Geneva, where it had been collecting inter-
est.^**

In May 1987, the matter was placed in the hands of
a Swiss Magistrate, who, with the Committees' en-
couragement, froze the certificate of deposit. The
Government of Brunei was notified by the State De-
partment and asserted its claim. The Committees un-
derstand that, as of this writing, the $10 million has
been returned to Brunei, but the interest remains
frozen.

Swiss authorities have declined to reveal the identi-
ty of the individual who received the funds. The
Committees were assured by the Swiss Magistrate,
however, that the individual is neither a principal in
the investigation, nor related to any of the principals.

353

Chapter 22

Chapter 22

1. Hakim Dep., 5/22/87, at 66; Secord Test., Hearings,
100-1, 5/7/87, at 166-67. CSF was established in September
1971. According to a report by Credit Suisse dated October
14, 1985, the wife of Willard Zucker holds all of the capital
shares. The Credit Suisse report also states: "The company's
goal is to give all advice on fiscal, fmancial, judicial and
economic matters and handle all fmancial goods of the
customer . . . The company would also take part or partici-
pate in any fmancial and real estate actions or enterprises."
Among the officers of CSF are: Jean De Senarclens, Alfred
Stohler, Willard Zucker and Roland Farina. CSF Invest-
ments, Ltd, a Bermuda Co. is an affiliate. EN 36-38.

2. Zucker, living in Switzerland under the protections and
obligations of Swiss secrecy law, refused to talk to the
Committees.

3. The Lake account provides an example. CSF estab-
lished the "Lake" bank account with a Swiss bank on July
19, 1985. The account was opened in the name of Lake
Resources Inc. Lake Resources Inc. was incorporated in
Panama on May 14, 1985. The initial officers were three
Swiss citizens associated with CSF. Thus, Lake Resources
could perform all the functions of a corporation without
giving any indication of its true owners. Summary of CSF
Incorporation Records, 10/12/87, H6942-56. Even the
names of the shareholders were protected. Apparently, CSF
typically held the shares of the companies it manages pursu-
ant to a written agreement with the true owner. Summary
of CSF Incorporation Records, H6954.

4. Hakim Dep., 5/22/87, at 65; Wood Int., 8/12/87; Cas-
tells Int., 8/28/87; Memorandum from Zucker stating
"[CSF"s] association with STTGI, its associated and prede-
cessor companies, dates back to 1971." STG914I.

5. Clark and Zink Dep., 7/6/87, at 29-34, 83. Through a
brochure, STTGI claimed that it had a European office and
that it could provide the type of services that CSF offered.
In fact, the office address, telephone number, and telex
number for the European office were CSF's and the serv-
ices offered appear to have been CSF's too, STGI34452-53.

6. Hakim Dep., 5/23/87, at 97-99, 239; Secord memoran-
dum to Zucker, Subj: movement of funds, HI 670; Secord
Dep., 6/10/87, at 76. The STTGI phone records show calls
to CSF which correspond with the movements of Enter-
prise funds through the CSF-managed Swiss accounts. Staff
Memorandum Summarizing STTGI Phone Records, 10/6/
87, EN73-96.

7. The Enterprise did not use conventional checks. If
checks were required, wire transfers were made from the
Enterprise network of accounts to a CSF account which in
turn issued a check in CSF's name to the payee. See, e.g.,
Robinette Test., Hearings, 100-6, 6/23/87, at 12. The
records supplied by Hakim indicate that CSF had bank
accounts in the United States, Bermuda, Paris, and Brussels,
and that CSF also held accounts in brokerage firms in
several countries. CSF's account in the U.S. was maintained
at Republic Bank of New York.

8. Hakim indicated that on three occasions he was in-
volved in arrangements to pick up sums of $50,000 in cash
in New York which he brought to Secord. Hakim was
under the impression that Secord routed the money onward
to the Contras. Hakim Dep., 5/23/87, at 166-67. Two
Zucker business associates have indicated, through their
lawyers, that Zucker arranged for them to drop off Contra-

bound cash in amounts of $50,000 to Hakim, and a Hakim
courier. Staff Memorandum on Zucker Cash Operations, 8/
13/87, EN56-68. Hakim also utilized his own sources. For
example, Owen testified that he picked up cash from a store
owner in New York which apparently was for the Contras.
Owen, Test., Hearings, 100-2, 5/19/87, at 353. The store
owner, who Hakim said was a friend of his, was reimbursed
through a CSF check. Hakim Dep., 5/23/87, at 149. CRF
5123. Staff Memorandum, Subj: Owen Cash Pick Up, 10/19/
87, EN54.

9. Summary of CSF Ledger entries, wire records, bank
statements and credit advices, H6338-62. Hakim failed to
provide a complete set of invoices from arms dealers,
making it difficult to determine whether expenditures shown
on the bank account statements - and accounted for in the
ledgers as weapons purchases - were actually for weapons.
Secord said he shredded some telexes related to Defex
transactions sometime in November of 1986 as a security
procedure. Secord Test., Hearings, 100-1, 5/7/87, at 197.

10. General Ledger, H972-1145; Capital Ledger, H958-71;
Fiduciary Ledger, H02756-3132.

11. Hakim Dep., 5/23/87, at 88-89; Secord Test., Hear-
ings, 100-1, 5/7/87, at 157. Zucker memorandums, H1779,
HI 780.

12. North Test., Hearings, 100-7, 7/10/87, at 3.

13. Energy Resources International SA (administered by
CSF) was incorporated on July 24, 1978 in Panama and
apparently inactive until it was used by the Enterprise. The
company's first bank account was opened on December 21,
1985 at Credit Suisse; the second account was opened on
March 13, 1985, at Banco Portuguese in London; and the
third account on April 19, 1985, at Banque Suisse. The
Committees did not receive bank records for the accounts
at Banco Portuguese and Banque Suisse. Summary of Incor-
poration Records, H6942-56.

14. Summary of Incorporation Records prepared by
Committee staff, H6942-5.

15. North Test., Hearings, 100-7, 7/10/87, at 314-15.

16. Hakim Dep., 5/22/87, at 114-15.

17. Id. at 86, 93-94.

18. Id. at 92.

19. Id at 110.

20. Id at 98-99.

21. Hakim Dep., 5/22/87, at 116.

22. As of December 31, 1984, CSF Investment managed
assets of more than $31 million, CRF2215-18.

23. With respect to expenditures and financial data, the
summary provided below is based on an analysis of portions
of the CSF General Ledger, H983-H1044.

24. Lake became active in the summer and fall of 1986.
The active Energy bank account was closed in October,
1985.

25. Hakim Dep., 5/22/87, at 93-94. Gulf Marketing Con-
sultants, Ltd. was incorporated in Liberia on May 15, 1985.
It opened two bank accounts at Swiss banks on August 28,
1985 and February 17, 1986. The Committees only received
records for the account maintained at Credit Suisse. Sum-
mary of Incorporation Records prepared by Committee
staff, H6942-56.

26. Hakim Dep., 5/22/87, at 94.

354

Chapter 22

11. Albon Values Corporation SA was incorporated on
September 9, 1985, and opened a Swiss bank account on
December 15, 1985. Records show Secord as a representa-
tive of the company, but do not contain his signature. Sum-
mary of CSF Incorporation Records, H6942-56.

28. Toyco SA was incorporated on April 17, 1986, in
Panama. It opened a Swiss account on May 14, 1986. Sum-
mary of CSF Incorporation Records. H6942-56. Money was
also withdrawn from Toyco for profit distributions.

29. Secord Test., Hearings, 100-1, 5/5/87, at 75. Udall
Research Corporation was incorporated on May 23, 1985, in
Panama and its Swiss bank account was opened on March
19, 1986. A fiduciary agreement between CSF and Hakim
provides that CSF holds the shares of Udall on behalf of
Hakim. Bank records show that Richard Secord is a repre-
sentative of Udall. Apparently, Olmsted was given power of
attorney for Udall. Summary of CSF Incorporation
Records, H6942-56.

30. North, PROF Note, 9/25/86, to Poindexter, N 12611.
In fact, the Udall account remained open, with a balance of
less than $3,000, until November 18, 1986.

31. Hyde Park was incorporated on December 15, 1983,
in Liberia. It opened an account in London on June 29,
1984, at Barclays Bank; the authorized signatories were
Daniel Jones and Burt Barnett. Apparently, Jones and Bar-
nett are two California lawyers, CRF2445. Hyde Park
opened a second account on March 19, 1986, with only
CSF-associated individuals on the signature card. The Com-
mittees received records only for the account maintained at
Credit Suisse. Summary of CSF Incorporation Records,
H6942-56.

32. Ex. AH-17-21.

33. Secord Test., Hearings, 100-1, 5/7/87, at 200-01.

34. North Test., Hearings, 100-7, 7/10/87, at 2-3.

35. Hakim Test., Hearings, 100-5, 6/5/87, at 328-29.

36. Poindexter Dep., 5/2/87, at 382-83.

37. North Test., Hearings, 100-7, 7/10/87, at 294-95; Earl
Dep., 5/2/87, at 31-33.

38. Secord Test., Hearings, 100-1, 5/7/87, at 190-91.

39. North Test., Hearings, 100-7, 1/\A/%1, at 140; Tambs
Test., Hearings, 100-3, 5/28/87, at 382-83.

40. Hakim Dep., 5/24/87, at 44.

41. Hakim Test., Hearings, 100-5, 6/5/87, at 348.

42. Id, at 340-41. See Chapter 23 on the Erria and the
DEA operation.

43. See Table 22-2, Estimated Ending Monthly Cash Bal-
ances. In addition, $2.2 million of profits distributed to
members of Enterprise remained in the personal fiduciary
accounts of the members of the Enterprise.

44. See Hakim Dep., 5/24/87, at 44-47.

45. Secord Test., Hearings, 100-1, 5/7/87, at 176.

46. Nightline, Iran Contra Hearings: Secord Int., 7/9/87,
at 5.

47. North Test., Hearings, 100-7, 7/8/87, at 122.

48. Id.

49. Id at 73-80.

50. Calculations related to arms transactions assume that
certain expenditures designated in the ledgers for arms actu-
ally were spent for that purpose and that arms purchased
were sent to Calero and not resold for a profit. The evi-
dence appears to support those assumptions. Calero did not
keep an itemized record of the arms he received, but re-
members receiving most of the weapons described by
Secord. Calero Int., 8/12/87.

51. North Test., Hearings, 100-7, 7/8/87, at 122, ("there
was always an intention to make this a self-sustaining oper-
ation.") See also, North Test., Hearings, 100-7, 7/10/87, at 3
(Casey's criteria for the off-the-shelf organization applied to
the arms sales from the beginning).

52. See Table 22-1, Enterprise Income.

53. Secord letter to the Committees, SC04081-105.

54. See Table 22-4, Mark-up On Arms Purchased for
Contras According to CSF Ledgers.

55. Id

56. Secord Letter to the Committees, SCO4081-105.

57. See the "stranded shipment" discussion later in this
chapter.

58. See Table 22-3, Enterprise Expenditures. One of the
Maules was used by the Secord/Dutton resupply operation.
The others were used for other Contra operations run by
the Contras. Dutton Test., Hearings, 100-3, 5/27/87, at 213.

59. Summary of ACE transactions, H6347; Gadd Dep., 5/
1/87, at 27. ACE received a total of $1.54 million and
disbursed $1,096,966 to Prop Air for the purchase of the
two Caribous; $230,433 to Southern Air for fuel, spare
parts, and partial payment on an airplane; $144,300 to Cor-
porate Air Services for crew; and $20,462 to others. The
ACE account had a cash balance of $48,165 as of October
22, 1986. H6347.

60. See Table 22-3, Enterprise Expenditures.

61. Id

62. Wire Record, H893; Ledger Record, H1073.

63. Secord Test., Hearings, 100-1, 5/5/87, at 60.

64. North Test., Hearings, 100-7, Part II, 7/13/87, at 84.

65. North Test., Closed Session, 7/9/87, at 58; North,
PROF Note, 8/23/86 at 15:52:52, to Poindexter, N12151.

66. Secord Test., Hearings, 100-1, 5/5/87, at 68; Hakim
Dep., 5/23/87, at 185-86. Dutton recalled being told that
some of his pilots had been supplied by Walker. Dutton
Test., Hearings, 100-3, 5/27/87, at 214.

67. Wire Record, HI 553; Ledger Entry, H1056. Analysis
of Payments to a Contractor in a Central American Country
H6345.

68. Summary of payments to Contra leaders, H6350-51.

69. North apparently discussed a plan for bounty pay-
ments of $5,000 to be paid to an FDN military commander
for each captured Sandinista officer, $5,000 to be paid to
each soldier who captured the officer, and $200,000 to be
paid to the FDN for every five officers captured. North's
notebook for October 10, 1986, states: "Calero-Bounty for
Sandinista or Cuban officers-5K ea[ch] for [FDN military
commander]-5K ea[ch] for soldier capturing 200K for FDN
for each 5." North Notebook, 10/10/86, Q2522.

70. The description here is based upon the CSF Ledgers
and supporting bank documents and is confirmed, with re-
spect to the transfers to and from the Israeli accounts, by
the Israeli Financial Chronology. See Table 22-3, Enterprise
Expenditures, and supporting documentation referred to
therein. See also Secord Test., Hearings, 100-1, at 95 (first
transaction) 105-06, 178 (second transaction), 119, 180 (third
transaction), 123 (fourth transaction).

71. Secord Test., Hearings, 100-1, 5/6/87, at 95.

72. Id

73. On May 16, 1986, $225,000 was paid from the Enter-
prise accounts to an unknown party. The CSF Ledgers
indicate that the $225,000 came from the $1,685,000 deposit.

74. According to North's notebook. North met with
Secord on May 19, 1986, and informed Secord of the need

355

Chapter 22

to bring $260,000 in cash to Israel. North Notebooks, 5/19/
86, Q2155. Two days later, $260,000 was withdrawn from
the Lake Resources account. Bank Record, H518.

75. Summary of expenditures shown in the CSF Ledgers
which relate to the Erria. H86357-59. The cost of the ship
was about $321,000. Funds distributed to the captain to-
talled $80,000; monthly payments for "chartering services"
totalled $126,000. Ship expenses labeled crew wages were
approximately $32,500. A payment for "insurance" was
made on May 20, 1986, in the amount of $52,900 and other
expenses totalled $131,009. Id. See Chapter 23 for a descrip-
tion of the Erria'% mission.

76. Bank Record, H882; Ledger entry, H1019. See Chap-
ter 23 for a description of the DEA project.

77. Wire Record, H889; Ledger Record, H1074; Memo-
randum to file Subj: Motorola Interviews, 10/12/87. See
also, Napier Dep., 4/10/87, at 52-53; Hakim Dep., 5/24/87,
at 44; STTGI notes referring to the radios, STG5206.

78. For a description of these projects, see Chapter 23.

79. Ex. RCM-41A.

80. Poindexter Test., Hearings, 100-8, 7/16/87, at 106.

81. Letter from Counsel for the Commandant of the
Marine Corps, 7/9/87, NF378-79; letter from Office of the
Secretary of the Navy, 7/9/87, NF380.

82. North Test., Hearings, 100-7, Part I, 7/8/87, at 120.
See generally New York Times, Late City Edition, 7/10/87,
at A9.

83. Robinette Test., Hearings, 100-6, 6/23/87, at 1-8.

84. Robinette 6/23/87, at 17-26; Ex. GR-3 to GR-7D.

85. HF1365-66. At the meeting. North also said that
during the installation period, he moved his family to a
government base, as suggested by the FBI and Secret Serv-
ice. HF 1365-66.

86. North Test., Hearings, 100-7, Part I, 7/8/87, at 129.

87. Nightline, Iran Contra Hearings: Secord Int., l/9/%l,
at 10.

88. Robinette Test., Hearings, 100-6, 6/23/87, at 12.

89. North Test., Hearings, 100-7, Part I, 7/8/87, at 129.

90. Id.

91. Id., Robinette Test., Hearings, 6/23/87, at 13-15.

92. North Test., Hearings, 100-7, Part I, 7/8/87, at 129;
Robinette Test., Hearings, 100-6, 6/23/87, at 16-19.

93. North Test., Hearings, 100-7, Part I, 7/8/87, at 131.

94. Washington Post, 3/17/87, at All; Chicago Tribune,
3/18/87, at 1-2.

95. Robinette Test., Hearings, 100-6, 6/23/87, at 19.

96. Id. at 46-50.

97. North Test., Hearings, 100-7, Part I, 7/8/87, at 129.

98. Id. at 126, 130.

99. Id at 129.

100. Cash withdrawal, H518; North Notebook, 5/19/86,
Q2155. For the purpose of calculating Enterprise Expendi-
tures this $260,000 was treated as an expense related to the
Iranian transactions.

101. Cash withdrawal, H107; Ledger Record, H1048.

102. Ledger entries H1075, H1093; wire records, H883,
H796. Hakim testified that he thought the Codelis money
was for a Secord/Hakim American Express account. Hakim
Dep., 5/23/87, at 44-48. However, the Secord/Hakim
American Express account was covered by Stanford Tech-
nology Services SA. See H1456.

103. Analysis of miscellaneous entries in CSF ledgers by
Committee staff accountants, H6350-57. There were also a
number of other miscellaneous expenditures, totalling

$325,843, which occurred during 1985 and 1986, including
directors fees, $65,000; bank charges, $74,715; miscellaneous
legal expenses, $67,500; and various other expenditures.

104. The numerical data here are based upon analysis of
the CSF Ledgers and supporting bank documents. Id. (In
this Report, the term "diversion" refers to that portion of
the surplus from the Iran arms sale that was used to pay
Contra-related expenses.)

105. This $7.2 million does not include $1.2 million in
commissions paid to members of the Enterprise for their
work on the Contra arms shipments.

106. If the $1.2 million in commissions taken by the part-
ners in the Enterprise are treated as a Contra expenditure,
the amount of the Diversion is $5 million.

107. North Test., Hearings, 100-7, Part I, 7/10/87, at 294-
95.

108. Secord Test., Hearings, 100-1, 5/6/87, at 110-11.

109. North Test., Hearings, 100-7, Part I, 7/10/87, at 311.
In fact, the actual cash balance at that time was approxi-
mately $11.6 million. Summary of Bank Records, H8925.

110. Poindexter Test., Hearings, 100-8, 7/16/87, at 105.

111. Hakim Test., Hearings, 100-5, 6/3/87, at 194.

112. Secord Test., Hearings, 101-1, 5/7/87, at 181.

113. See Table 22-5, Commissions on Arms Sales.

1 14. Id

115. Id

116. Ex. AH-4-15. A number of distributions for Clines
were also wired to CSF accounts. Ledger entries, H968.
This suggests that Clines may have also had a CSF fiduci-
ary fund.

117. Hakim Dep., 5/22/87, at 136.

118. Hakim Test., Hearings, 100-5, 6/3/87, at 215.

119. Hakim Dep., 5/23/87, at 41.

120. A number of C. Tea distributions have been traced
directly to Clines' U.S. bank accounts. Wire transfers, H382,
H332, H291.

121. Hakim Test., Hearings, 100-5, 6/3/87, at 215. As for
the relevant records that support Hakim's claim, see the
"Commissions" section. Hakim testified that Scitech's full
name was Scitech Trading Group, Inc. (abbreviated
"STTGI"). Id. at 213. Scitech Trading Group, Inc. was
incorporated in Liberia on July 22, 1985. Summary of CSF
Incorporation Records, H6952. The records show that Sci-
tech received Secord/Hakim commissions in equal propor-
tions and that expenditures made by Scitech were for
Secord/Hakim business ventures. See the Commissions Sec-
tion and the Other Profit Distributions Section below.

122. Hakim Test., Hearings, 100-5, 6/3/87, at 216.

123. Id, at 213.

124. Summary of Korel Ledgers, H6368, H6341.

125. $35,000 was transferred to another individual and
$28,111 went through Secord to an individual (Zucker's
notes state "It $28,111 is to be a check drawn to someone
designated to Nancy by RVS"). About $1,671 was trans-
ferred to Sharp, Green, and Lankford— Tom Green's law
firm. $45,000 was paid to Secord's attorney, Tom Green,
and $16,710 was distributed in other cash withdrawals.
Summary of Korel Ledgers, H6341.

126. Secord Test., Hearings, 100-1, at 154-55, 165.

127. New York Times, 6/7/87, at 1, 16; Nightline, 7/9/
87, at 4.

128. Hakim Test., Hearings, 100-5, 6/5/87, at 355. Secord
stated that the money from Hakim was part of a general
arrangement under which Hakim provided capital to

356

Chapter 22

STTGI and Secord provided management skills. As part of
the arrangement Hakim was to give Secord personal loans
until STTGI showed a profit. New York Times, 6/7/87, at
16.

129. Secord Test., Hearings, 100-1, 5/7/87, at 155.

130. Id. at 156.

131. W. at 155-59.

132. Hakim Dep., 5/31/87, at 50. In his public testimony.
Hakim placed the date in "the first half of 1986." Hakim
Test., Hearings, 100-5, 6/3/87, at 215-16.

133. Hakim Test., Hearings, 100-5, 6/3/87, at 215.

134. Hakim Dep., 5/23/87, at 121.

135. Hakim Test., Hearings, 100-5, 6/5/87 at 322-23;
Hakim Dep., 5/23/87, at 11-12.

136. Hakim testified that he and Secord inspected the
"bottom line" at CSF from time to time. Hakim last saw the
records in mid-1986. Hakim Dep., 5/23/87, at 84, 87. Hakim
stated, in particular, that Secord inspected the Korel and
Sciiech accounts. Hakim Test., Hearings, 100-5, 6/5/87, at
312.

137. Hakim Test., Hearings, 100-5, 6/3/87, at 215.

138. Case 1; Secord testified that his initial profits on arms
sales totaled "several hundred thousand dollars" and were
held by CSF in his name. Secord Test., Hearings, 100-1, 5/
7/87, at 154, 164-65. The ledgers show that on 4/4/85,
approximately $220,000 was transferred for "RVS" to CSF,
and that in May 1986, CSF moved approximately the same
sum into Korel Assets. Thus, it appears that the "RVS"
marked money - Secord's initial profits - were moved into
Korel Assets. General Ledger, H967; Fiduciary Ledger,
H03076; Wire Records, H373, H372. Case 2: The bank
account ledgers show a transfer marked "transfer RVS."
The transfer can be traced directly to Korel Assets. Fiduci-
ary Ledgers H3074, H03131; General Ledger, H967. Case 3;
The fiduciary agreement with respect to the management of
one of the $2,000,000 reserves by CSF originally read

■RVS/AH." The title of the agreement was changed to
"AH-1." H2723.

139. Secord did volunteer that he signed a fiduciary
agreement for the management of his money with CSF.
Secord Test., Hearings, 100-1, 5/7/87, at 154. The agree-
ment was not produced by Hakim. Hakim Dep., 5/23/87, at
203. Secord Test., Hearings, 100-1, at 154. Through July
1987, Secord opposed in the Swiss courts the Independent
Counsel's application for the Enterprise's financial records.

140. Capital Ledger, H970; wire transfer, HI 77; Fiduciary
Ledger, H2933. The copy of the fiduciary agreement deliv-
ered to the Committee was never signed by the client,
"B.Button". Ex. AH-26, Hearings, 100-1.

141. Hakim Dep., 5/22/87, at 124.

142. Q: "What does that [bellybutton] have to do with
death benefits?" A: "No, you know, probably wiggle and
touch somebody's bellybutton. I don't remember now. It
has been such a long time." Hakim, 5/22/87, at 124. "I
think it had to do with the family of the possible victims
that somebody had to wiggle their bellybuttons ... It is not
referring to anyone's name ... I said [to Zucker] somebody
needs to go and wiggle the bellybutton of the families, the
wife, the kids, and I said 'Button'." Hakim, 5/22/87, at 129-
30.

143. Hakim Dep., 5/24/87, at 182-83. 211-15, 5/25/87, at
7.

144. Hakim Test., Hearings, 100-5, 6/3/87, at 217.

145. Secord Dep., 6/10/87, at 24-25. Secord's handwrit-
ten notes of the Enterprise's finances show that he began
reserving, or "fencing in" $200,000 for the death benefit
fund in November 1985. It appears that this fund may have
been formally established as Reserve Account 3 in May. Id.
at 24; Secord Ex. 5.

146. Secord Dep., 6/10/87, at 25, 27.

147. North Test., Hearings, 100-7, Part I, 7/7/87 at 45.

148. Hakim Test, Hearings, 100-5, 6/4/87, at 270-78,
Hakim Dep., 5/24/87, at 200-03.

149. Secord Dep., 6/10/87, at 32-34.

150. Id at 27.

151. Id at 25-26.

152. Id at 32.

153. Id at 32.

154. North Test., Hearings, 100-7, Part I, 7/8/87, at 136.

155. Letter from Mrs. North to the Committees, 6/3/87,
SC4233.

156. Hakim Dep., 5/24/87, at 195-96, 198.

157. Secord Dep., 6/10/87, at 34.

158. North Test., Hearings, 100-7, Part I, 7/8/87, at 136-
37.

159. Hakim Dep., 5/24/87, at 193. Hakim placed Mrs.
North's trip to Philadelphia in August or September. Id. at
193-95. A lawyer in the Philadelphia suburbs, Harold
Cohen, recalled that on September 26, 1986, Zucker inter-
rupted a meeting with him to meet a lady from Washington.
But he did not know her name, and the Committees have
not been able to determine whether it was Mrs. North.
Cohen Dep., 6/1/87, at 11-12.

160. Hakim Dep., 5/24/87, at 201.

161. Lewis Dep., 6/14/87, at 8-14. Lewis added "the
reference to the White House and to someone's wife is a
certainty. The reference to the name is less certain." Id. at
19.

162. M. at 13.

163. Secord Dep.. 6/10/87 at 35-36.

164. Ex. AH-27. The $15,000 wired into the STTGI ac-
count was commingled with STTGI funds, and thus it is
impossible to be sure how it was used. The STTGI files
produced for the Committees, however, contain no written
record of any transfer from STTGI to the Norths. Summa-
ry of STTGI bank records, STGl 34511. Secord did pay
$7,000 in cash for the North security system on May 19 or
20. Robinette Dep., 6/17/87, at 30; Robinette Test., Hear-
ings, 100-6, 6/23/87, at 9-10.

165. Hakim Test., Hearings, 100-5, 6/3/87, at 218-19.

166. North Test., Hearings, 100-7, Part II, 7/10/87, at 10.
See also discussion of arms expenditures for the Contras in
Section 3.

167. Calero Test., Hearings, 100-3, 5/20/87, at 13.

168. Hakim Test., Hearings, 100-5, 6/5/87, at 28-29.

169. Secord Letter, SC04081-105. Although it is difficult
to verify arms purchases, there is no doubt that payments
described as commissions on the arms transactions were
actually paid directly and indirectly (through CSF) to mem-
bers of the Enterprise. Through a series of ledgers, fiduciary
agreements, and wire records, CSF documented the distri-
bution of funds to members of the Enterprise.

170. Secord told the Committees that the "profit" on the
phase I-IV arms sales was $2.49 million. Secord Letter,
SC0408 1-105.

171. Calero Test., Hearings, 100-3, 5/20/87. at 13.

172. North Test., Hearings, 100-7, Part II, 7/10/87, at 3.

357

Chapter 22

173. Although Secord did not provide an estimate as to
the commissions distributed for the stranded shipment,
Hakim did do so. Secord Letter, SC04081-105; Hakim Dep.,
5/23/87, at 19. The profit estimated by the Committees for
these shipments is $300,000 higher than that estimated by
Secord/Hakim.

174. Secord Test., Hearings. 100-1, 5/5/87, at 53.

175. See Table 22-4, Markup on Arms Purchased for
Contras According to CSF Ledgers.

176. Hakim Dep., 5/22/87, at 88. See Table 22-5, Com-
missions on Arms Sales to the Contras.

177. Secord Test., Hearings. 100-1, 5/7/87, at 171.

178. See Table 22-5, Commissions on Arms Sales to the
Contras; Hakim Dep., 5/22/87, at 88-89. Exactly whom
Hakim was trying to confuse and what he was trying to
accomplish is not clear. On the CSF books, payments to
Defex SA (the fake arms account) would appear to depress
profits that the Enterprise actually made on the arms sales
and thus mislead an uninformed reader.

179. Hakim Test., Hearings. 100-5, 6/5/87, at 20-21.
Secord claimed that the cost of the weapons was about $2.4
million. Secord letter, SC04184. Committee accountants
could only identify $2.2 million in weapons costs for the
stranded shipment in the CSF ledgers.

180. Secord Test., Hearings. 100-1, 5/7/87, at 191; Hakim
Dep., 5/22/87, at 156-62; Id. at 161.

181. Hakim Dep., 5/23/87, at 19-20; Hakim, 6/5/87, at
52-56.

182. See Table 22-4, Mark-Up on Arms Purchased For
the Contras According to CSF Ledgers. Secord testified
that commissions were distributed in a 40/40/20 ratio
(Secord, Hakim, Clines) and Hakim indicated that on the
later arms shipments the ratio was 30/30/30/10 (Secord,
Hakim, Clines, and Scitech); Secord Test., Hearings, 100-1,
at 53; Hakim Dep., ^/lim. at 147-48.

The ledgers show that the total sum of money distributed
to Korel, Hakim, and C. Tea during February 1985 to mid-
December 1985 equaled a 32/33/21/14 ratio among Korel,
Hakim, C. Tea and Scitech/STTGL which is equivalent to
a 39/40/21 ratio when one splits the STTGI/Scitech distri-
bution among Korel and Hakim. While most of the relevant
ledger entries describing the distributions simply stated
"transfer," the last distribution in the period contained a
notation "Bal. of Act. for Phases I-II-IIl."

On December 17, 1985, there was a simultaneous distribu-
tion, marked in the ledgers as "Profit Distribution Phase
IV," to Korel, Hakim, and Clines, in a 40/40/20 ratio; in
addition, there were four other simultaneous 1986 distribu-
tions: May 20, June 3, June 20, and August 27, all of which
fell in the 30/30/30/10 pattern described by Hakim. A Feb-
ruary 7, 1986, distribution was made in basically a 50/50
ratio between Korel and Hakim. Hakim indicated that this
was a commission payment.

The balance of the distributions shown in the ledgers
from December 17, 1985, to the end of the active days of
the Enterprise - $2.1 million - did not fall into any pattern,
and, except for some very minor amounts, did not include
Clines.

Secord told the Committees the total amount of profit the
Enterprise made on each arms shipment and roughly the
date of each arms transaction. Using this information, the
Committees correlated the commission distribution to each
arms shipment

183. The financial data in this Section are based upon the
CSF ledgers and supporting bank documents.

184. Summary of distributions to Secord. Hakim, and
Clines, excluding commissions, H6372A-77. The Commit-
tees traced $328,885 of this money to Hakim and $42,275 to
Clines. Secord received $50,000 which he, in turn, loaned to
his attorney, Tom Green. Id.

185. See Secord Test., Hearings. 100-1, 5/8/87, at 307,
Secord Ex. 76.

186. See Staff Memorandum, The Tri- American Arms
Venture, 10/5/87.

187. Secord Test., Hearings. 100-1, 5/8/87, at 193-94, 331;
Ex. RVS-75, Hearings. 100-1, at 594; Hakim Test., Hearings,
100-5, 6/5/87, at 14-16.

188. Marostica Dep., 5/20/87, at 24-26. 29-30; Royer
Dep., 5/21/87, at 79-83.

189. Ex. RVS-76, Hearings. 100-1, at 598; Hakim Dep., 5/
23/87, at 80; Secord Test., Hearings. 100-1, 5/8/87, at 331-
36.

190. Hakim Dep., 5/31/87, at 178-80.

191. Marostica Dep., 5/20/87, at 13-20; Royer Dep., 5/
21/87, at 28-32.

192. Secord Test., Hearings. 100-1, 5/7/87, at 193.

193. Royer Dep., 5/21/87, at 45-53.

194. Hakim Test., Hearings, 100-5, 6/5/87, at 16; Royer
Dep., 5/21/87, at 58.

195. Summary of CSF ledger entries showing transfers to
STTGL H637-1.

196. Summary of STTGl Bank Records, STG 134507-09;
Secord Test., Hearings, 5/7/87, 100-1, at 168.

197. Scitech ledger entries, H02959-60.

198. Secord Test., Hearings. 100-1. 5/7/87, at 166-67.

199. Hakim Dep., 5/23/87, at 143.

200. Hakim Test., Hearings. 100-5, 6/3/87, at 217.

201. Scitech ledgers, H02959-60; Summary of CSF Ledg-
ers and Bank Records, prepared by Committee staff ac-
countants. H6372B.

202. Hakim 6/3/87. at 38; Royer Dep., 5/25/87, at 49-50.
The payment was wired to the bank which held the proper-
ty on October 24, 1986. At the same time, an additional
$30,000, also drawn from the Scitech fund, was wired to the
trust account of a law firm involved in the transaction; wire
transfers, H1520-A, B and C.

203. Farber Dep., 6/1/87, at 4 (Zucker bought his 25%
interest personally). Clarke and Zink Dep., 7/6/87, at 14
(CSF held Zucker's 25% interest); at 29-31 (Secord's June
visit to Forways); at 26-28 (laser sight); at 37-40 ($50,000
wire through Forways).

204. Clarke-Zink Dep., 7/6/87. at 26, 36, 54.

205. Hakim Dep.. 5/31/87. at 254.

206. Id. at 255.

207. Forways Records. EN 0199-358.

208. Clarke and Zink Dep.. 7/6/87. at 9-10. 62; Ex. 2.

209. Ledger entry re $500,000. H02862; ledger entry re
$260,000. H1084; Hakim Dep., 5/24/87, at 144-58 ($500,000
earmarked for joint Secord/Hakim investment). Hakim
stated that the $260,000 was for a line of credit extended to
Forways and that the money should have been returned to
the Enterprise. Hakim Dep., 5/23/87, at 171-74.

210. Hakim Dep., 5/31/87, at 255-56; Clarke and Zink
Dep., 7/6/87, at 73-76; Ex. 3.

211. Hakim Dep., 5/23/87, at 256, 263-64.

212. Hakim could not identify the purpose of the third
fund which totaled $200,000. Since Hakim created it in a

358

Chapter 22

manner nearly identical to the other two. the Committees
refer to it here as a Reserve.

213. Secord Test., Hearings, 100-1, 5/7/87, at 162; Hakim
Dep., 5/23/87, at 108, 257-60.

214. Based upon CSF ledgers.

215. Hakim Dep., 5/31/87, at 34-35.

216. Hakim Dep., 5/24/87, at 163; Hakim Test., Hearings.
100-5. 6/4/87, at 286-87; Hakim Test., 6/3/87, at 280.

217. Ex. AH- 17, 18, Hearings, 100-5.

218. Hakim Test., Hearings, 100-5, 6/3/87, at 222.

219. Exs. AH- 19 and 20.

220. Secord Test., Hearings, 100-1, 5/7/87, at 179.

221. North Notebooks, 8/3/86, Q2316.

222. Nightline, 7/9/87, at 5.

223. North Test., Hearings, 100-7, Part I, 7/10/87, at 314-
15; Ex. OLN-328, Hearings, 100-7.

224. See Chapter 23, "Other Privately Funded Operations
of the Enterprise."

225. Secord Test., Hearings, 100-1, 5/7/87, at 166.

226. North Test., Hearings, 100-7, Part I, 7/8/87, at 124-
25.

227. Hakim Dep., 5/31/87, at 40-41.

228. Hakim Dep., 5/31/87, at 9-11; Secord Dep., 6/10/87,
at 37-38.

229. The numerical data here are based upon the CSF
ledgers and supporting bank documents. See Table 22-7,
Individuals and Entities that Control Unspent Enterprise
Funds.

230. Secord Test., Hearings, 100-1, 5/8/87, at 4.

231. North Test., Hearings, 100-7, Part II, 7/13/87, at 45-
46.

232. Hakim Dep., 5/24/87, at 35; Hakim Test., Hearings,
100-5, 6/3/87, at 200-01.

233. Hakim Dep., 5/23/87, at 259-60.

234. Hakim Dep., 5/31/87, at 34-35, 53.

235. U.S. Congress. Intelligence Authorization Act FY86,
Sec. 105, P.L. 99-169, 99 Stat. 1003.

236. Raymond F. Burghardt to Rodney B. McDaniel,
Memorandum, Secret, "Minutes of the May 16, 1986, Na-
tional Security Planning Group Meeting," National Security
Council (June 4, 1986), N10288.

237. At a White House interagency meeting the week of
May 12, the group (comprised of officials of the CIA,
Defense, and State), recommended that the Administration
consider an immediate reprogramming of $15M from De-
fense to CIA for non-military assistance to the Contras
($5M per month through August, 1986). Contrary to the
conclusion reached by Secretary Shultz on May 16, the
group concluded there was "a reasonable likelihood of suc-
cess" of securing the support of the Senate and House
Intelligence Committees for the reprogramming option.
Poindexter to the President, Memorandum, prepared by:
North and Burghardt, N6263.

238. Shultz Test., Hearings. 100-9, 7/23/87, at 17-18; Ex.
GPS-A, Hearings, 100-9, at 4.

239. At the time, the Secretary and the State Department
itself had not been informed of the contributions to the
Contras by Country 2 and Country 3. Abrams Test., Hear-
ings, 100-5, 6/2/87, at 42. Shultz was advised by McFarlane
only on June 16, 1986, of the $32 million contribution from
Country 2. He was never told of the $2 million contribution
from Country 3. Shultz Test., Hearings, 100-9, im/%1, at 4.

240. Abrams Test., Hearings, 100-5, 6/2/87, at 43.

241. Id. at 43.

242. Id. at 44; North Test., Hearings, 100-7, Part I, 7/8/
87, at 156-57; Shultz Test., Hearings, 100-9, l/li/%1, at 19-
20.

243. North's secretary, Fawn Hall, testified that she is
certain she typed the account number precisely as North
gave it to her. Hall Test., Hearings, 100-5, 6/8/87, at 487;
North Test., Hearings, 100-7, Part I, 7/10/87, at 326;
Abrams Test., Hearings, 100-5, 6/2/87, at 45; Ex. GPS-56-U,
Hearings, 100-9.

244. Abrams Test., Hearings, 100-5, 6/2/87, at 45-46; Ex.
EA-10, Hearings, 100-5.

245. Shultz Test., Hearings, 100-9, 7/23/87, at 20, 51;
Abrams Test., Hearings, 100-5, 6/2/87, at 45.

246. Shultz Test., Hearings, 100-9, 7/23/87, at 20.

247. Ex. GPS-A, at 5.

248. Id., Abrams Test., 6/2/87, at 45.

249. Id.

250. Abrams Test., Hearings, 100-5, at 46-7.

251. Abrams Test., Hearings, 100-5, 6/2/87, at 48-50; Ex.
GPS-A, Hearings, 100-5, at 5.

252. Ex. GPS-56-0. Subsequently, Brunei informed State
that the $10 million had been transferred on August 19,
1986. Ex. GPS-56-T, Hearings, 100-9.

253. Ex. GPS-A, at 5.

254. Ex. GPS-A, at 5; GPS-56-R.

255. Sofaer Dep., 6/18/87, at 75-76.

256. Ex. GPS-A, Hearings, 100-9, at 6.

257. Sofaer Dep., 6/18/87, at 83. According to Secretary
Shultz's chronology, on the day Sofaer was informed of the
Brunei solicitation, Monday, December 1, the U.S. Ambas-
sador to Brunei was instructed to advise Brunei that if funds
were still under its control, they should be frozen. Ex. GPS-
A, Hearings, 100-9, at 6. Sofaer testified he received the
number of the Lake Resources account in Switzerland from
Nick Piatt on Tuesday and "immediately communicated
that to the Department of Justice and to the FBI." Sofaer
Dep., 6/18/87, at 82. On Wednesday, he said, "I started
pressing for action and was not getting it." Id. at 82.

258. Statement of Chairman Inouye, McFarlane Test.,
Hearings, 100-2, 5/12/87, at 83-84.

359

I

Chapter 23
Other Privately Funded Covert Operations

Under the plan that Lt. Col. Oliver L. North attrib-
uted to Director of Central Intelligence William
Casey, profits from the Iran arms sales were to fund
not just the Contras, but other covert operations of
the Enterprise as well. Before the Iran arms sales
became public, Lt. Col. Oliver L. North had begun
implementing certain projects he and Casey believed
the Enterprise could perform.

"We always assumed," North said later "that there
would come a time again, as indeed it did, where the
Congress would make available the moneys necessary
to support the Nicaraguan freedom fighters."' When
that happened, the Enterprise, functioning free of
government scrutiny and with ample funds, could
carry out other covert projects; many were intended
"to be conducted jointly [with] . . . other friendly
intelligence services" while others would be limited
to activities conducted by North, Secord and Hakim. ^

Even before the Enterprise was formed, however,
North was operating with non-appropriated funds on
another project that the Government could not do
because it was contrary to United States policy — the
ransom of the hostages.

The DEA Ransom Operation

Before the Iran initiative was conceived, the NSC
staff was working on a plan to ransom the hostages.
Confronted with the policy of the U.S. Government
of not paying for the hostages release. North found a
loophole by using private funds.

Edward V. Hickey, Jr., an Assistant to the Presi-
dent, attended a meeting of the Terrorist Incident
Working Group (TIWG) in January 1985. Hickey
noted that the area in Lebanon, where the hostages
were held, was a known area of narcotics trafficking.
Hickey had a personal interest in the hostages. He
had known William Buckley, the CIA Chief of Sta-
tion in Beirut who had been kidnapped on March 16,
1984.

Hickey asked his long-time friend, a DEA Special
Agent (Agent 1), if DEA could help to locate Buck-
ley and the other hostages. Agent 1 reported that
another DEA Special Agent (Agent 2) had contacts
in the Middle East who might be able to help. Shortly

thereafter. Agents 1 and 2 met with Hickey and Hick-
ey's military aid General Matthew Caulfield. Agent 2
told Hickey that he had an excellent source with
impressive contacts in Lebanon.^

Following this meeting, Hickey met with Deputy
National Security Adviser John Poindexter and en-
couraged him to include the DEA in the Hostage
Locating Task Force (HLTF).'' On February 13,
1985, National Security Adviser McFarlane notified
the Departments of State, Defense, and Justice and
the CIA that the Task Force would report to the
TIWG and it would include the DEA.^ The DEA
was to be represented on the Task Force by Abraham
Azzam, an Arabic speaking agent of Lebanese herit-
age.® Funding for the Task Force would come from
the CIA.''

With the approval of DEA Administrator Mullen,
the DEA provided Agents 1 and 2 with $20,000 for
travel, expenses and for payments to their sources for
information on the hostages.^ If the DEA's sources
were productive, they were to be turned over to the
CIA for further operational handling. Agents 1 and 2
were instructed to report to Azzam, who in turn was
to report to DEA Deputy John Lawn.^

Agents 1 and 2 were not to be involved operation-
ally in securing the release of the hostages; their func-
tion was to assist in obtaining intelligence information
regarding the location of the hostages.'" According
to Lawn, he gave these instructions because Federal
law provides that DEA's responsibility is for oper-
ations that concern drug-related law enforcement."
(See Figure 23-1.)

In February 1985, Azzam, Agent 1, and Agent 2
met with Agent 2's source in Geneva and in New
York. The source claimed that he had contacts who
could arrange to pay off individuals in Lebanon who
had enough influence over the captors to arrange for
the release or escape of the hostages. He added that
$50,000 was needed to begin operations, ' ^ and that
the hostages could be released if the United States
sold weapons, tanks, airplanes, and other military
equipment to those controlling the holders of the hos-
tages. Oliver North, the NSC staff member responsi-
ble for terrorism issues, later told the agents the
United States could not sell weapons. ' ^

361

Chapter 23

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362

Chapter 23

Under the Task Force authorization, the CIA was
to pay for hostage information. But the CIA was
reluctant to do so without proof that Agent 2's source
was legitimate and would produce valuable informa-
tion. Agent 1, Agent 2, Hickey, and Caulfield then
met with Poindexter to explain their need for funds.
Poindexter told them he would look into the
matter.'''

In early March 1985, Hickey arranged a meeting
among North, Agent 1, Agent 2, Azzam, and Caul-
field. At the meeting, the agents explained their ef-
forts to North and informed him that the CIA was
reluctant to provide the money.'* In a follow-up
phone call to North on March 12, 1985, Caulfield said
the DEA's efforts were "not very sophisticated."'®
He explained that the plan now called for four hos-
tages to be released in exchange for $1 million per
hostage, once the $50,000 was paid to the source."
North's notes of the conversation reflected his own
reaction: "fundamental decision: Do we pay
ransom?"'* North answered his own question with
his actions: he became the operational leader of the
project.'^

Soon thereafter, the DEA agents arranged for two
CIA officers to meet Agent 2's source in New York.
The two officers were sufficiently convinced of the
value of the source to authorize the $50,000 expendi-
ture from the CIA. 2° Agent 1 received the money on
March 18 from a CIA officer and signed a form
acknowledging that he was responsible to account for
it.^' Agent 1 paid the money to the source in two
installments: $20,000 on March 19, and $30,000 on
April 20, after the source had returned from a trip to
Lebanon. 2 2

On May 2, 1985, upon the source's return from
another trip to Lebanon, he told the agents that he
now needed to give $200,000 to his contact, who
would locate Buckley and obtain proof that he was
still alive. After that payment, the source said, it
would take an additional $1 million per hostage to
secure their release.

Azzam became concerned when he learned that the
source's contact was known to the DEA as a narcot-
ics trafficker and a thief. ^^

Azzam voiced his concerns to CIA officials who
agreed that the $200,000 should not be paid until the
source produced proof that his contacts had access to
Buckley. The proof was to consist of photographs of
the hostage with current newspapers, or similar items,
showing the date of the proof. ^'^

North told Azzam he could get the ransom money
of $1 million per hostage. When Azzam asked North
where he would get it. North asked him not to in-
quire.^* Azzam surmised correctly that North was
planning to get the money from H. Ross Perot, a
Texas industrialist. ^^ Azzam told this to the CIA offi-
cers. The next day. North called Azzam to express his
anger that Azzam had told the CIA. Azzam could not
understand North's anger. He believed that the CIA

was to be a full partner given that DEA could not
legally have any operational capabilities.^' Reported-
ly, Perot was upset that his role had been compro-
mised and complained to Poindexter and McFarlane.

In early May 1985, the source went to Lebanon to
obtain the required proof while Agents 1 and 2
waited in Cyprus. The source produced a document
that allegedly was proof of access to Buckley. ^^
Azzam directed Agent 1 to bring the document to
him for verification by expert analysts from the CIA
and FBI laboratories. Despite these instructions,
Agent 1 presented the "proof first to North, a signal
in Azzam's eyes that Agents 1 and 2 regarded North
as their principal supervisor. ^^

On May 14, 1985, Azzam and Agent 1 took the
document to the CIA. The Agency found the evi-
dence unacceptable. ^° The CIA and FBI technical
reports which were produced two weeks later were
inconclusive.^'

Because the first evidence the source produced was
at best inconclusive and at worst fabricated, the CIA
developed a series of questions to the hostages only
they could answer. ^^ When the source refused to
return to Lebanon and submit the questions, the CIA
and Azzam declined to authorize the $200,000.^3 Ac-
cording to the CIA's Deputy Director for Operations,
Clair George, the plan was a "scam, a fake" nothing
more than "hocus pocus." 3''

North Continues the Initiative

Notwithstanding this account of their source,
Agents 1 and 2 urged North to continue working
with them. 3 5 On May 22, 1985, according to North's
notes, the two Agents assured North that their source
could produce the hostages if given $200,000 for pay-
ments to officials in Lebanon and $2 million for two
hostages. 3 6 The agents explained that they needed to
change their operating procedures: they wanted to
report directly to the NSC staff to get the DEA "off
their backs." ^'^ They advised North to contact DEA
Administrator Lawn or Attorney General Meese di-
rectly to ensure that they could proceed without in-
terference. ^^

On June 7, 1985, in a memo to McFarlane, North
detailed the DEA operation. He wrote that, "at the
request of the two DEA officers who originated the
contact in Lebanon, I met with their asset [source] in
Washington . . ." ^9 North informed McFarlane that
the $2,200,000 would be provided by a "donor," but
that "travel arrangements and operational costs are
currently being financed from funds normally avail-
able to the Nicaraguan resistance." He added that
"our normal point-of-contact of these matters is not
yet aware." *° North's disclosure that private money
raised for the benefit of the Contras was available to
support the DEA operation is consistent with a state-
ment he made at the time to Clair George, who
recalled:

363

Chapter 23

Ollie North always sort of implied when we
were talking about the hostages that if I ever
thought that I needed money and that policy
dictated it, but I didn't want to take it from CIA
funds because they are Congressionally con-
trolled, he could get money.*'

Finally, North recommended in the memorandum
that McFarlane approve the plan and ask the Attor-
ney General to detail Agents 1 and 2 to the NSC for
30 days. McFarlane initialed the "approve" line at the
bottom of the memo. McFarlane handwrote just
under the approve line, "North to follow up 6/10
with AG."'»2

McFarlane testified that he did not realize the full
meaning of North's memorandum regarding his use of
funds "normally available" to the Contras. "To tell
you the truth," McFarlane testified, "it is my own
oversight. ... If I had been careful about reading
[North's memorandum] I would have [understood its
true significance]." *^ McFarlane testified that he
never asked North whether he was getting money
from Calero to assist in the release of the hostages. "I
didn't, but I should have, and I just missed this.
That's all," he explained. "I thought it was all coming
from a private U.S. citizen." ** Poindexter, however,
knew the source of the funds. He stated that North
told him the money was coming from Calero con-
trolled funds that had been contributed to the Con-
tras.*^

Around June 10, North prepared a memorandum
for Attorney General Meese describing how the DEA
agents would deposit the $200,000 and open an ac-
count for the remaining $2 million, which was to be
provided by the "donor to bribe those in control of
the hostages." North asked the Attorney General to
assign the DEA agents to "this organization [NSC
staff) for a period not to exceed 30 days." *® Attorney
General Meese complied with North's request.*'' That
assignment would last for over one year.

Once the DEA agents were assigned to North, they
reported directly to him, except for occasional, curso-
ry briefings to Lawn.** They wrote no reports of
their activities and made no entries in the DEA in-
formant files regarding contacts with their sources.
Further, they immediately destroyed their notes after
orally reporting to North. *^

The agents embarked on the operation as planned.
In late May, Jay Coburn, an employee of H. Ross
Perot, had delivered $200,000 in cash to North and
Agent 1 without obtaining a receipt. ^° North placed
the money in his office safe and told Agent 1 that a
nongovernmental employee would have to handle the
money. ^' Agent 1 suggested his brother, who had
experience in security matters. ^^ The plan called for
Agent 1 and his brother to meet with their source on
Cyprus and for the brother to give him the money. If
everything went well, they would arrange for the $2
million to be deposited and available for "contacts,"

who would arrange the release and transportation of
two hostages.

True to the plan. North gave the brother the
$200,000 in cash and $11,000 in Calero traveler's
checks for expenses. ^^ Agent 1 and his brother trav-
elled to Cyprus in late June of 1985, where the broth-
er gave the source the $200,000 to take to Lebanon.

Two unrelated events then intervened: the hijack-
ing on June 14, 1985, of TWA flight 847 by Lebanese
terrorists, and in early June the death of one of the
source's contacts in Lebanon.^* As a result, the DEA
source claimed to be leery about approaching anyone
associated with the hostage holders. The source, after
a trip to Lebanon, reported that the hostages possibly
could be freed in exchange for arms.^^ The agents
concluded that this was not feasible.^® Ironically, this
same course was about to be pursued by the United
States in the Iran initiative.

Late 1985 and Early 1986: North
Presses On

In December 1985, Charles Allen of the CIA
became Chairman of the Hostage Location Task
Force. ^' Allen already was involved in the Iranian
initiative. North also recruited an Army Major of the
Defense Intelligence Agency, who had an intelligence
background in the Middle East. North or Allen then
picked the Major to serve as "team leader or chief of
staff, organizer, et cetera." ^*

The first meeting of the Task Force took place on
December 23, 1985, and included were Allen, North,
the Major, and others representing various federal
agencies and departments.*^ Agents 1 and 2 were not
made an official part of the Task Force, but North
advised the Task Force that Agents 1 and 2
would be useful sources for "intelligence and special
projects." ^°

The Major described Agents 1 and 2 as "street
toughs in camel hair coats," ^ ' who were "street-
smart but not very knowledgeable of other federal
agencies . . . outside their own, nor knowledgeable
certainly in any way, shape or form, about Middle
East or international relations or politics or the mili-
tary." ^^ At their first meeting, the DEA agents told
the Major and Allen that they did not want to deal
with the Operations Directorate at the CIA; Allen
told them that the Major would be their CIA con-
tact.^^

On January 14, 1986, Agent 1 and the Major went
to New York to meet with and evaluate a new DEA
"source," who, if acceptable, would be paid from
CIA funds.** On January 28, 1986, the Major report-
ed to North his reservations about the source and the
whole operation. North said that he liked the DEA
agents because they were "action oriented." From
that point on, the Major sensed that North was delib-
erately keeping him uninformed.** Allen testified that
he believed the DEA agents were working only to

364

Chapter 23

obtain intelligence information and were not involved
operationally in hostage-release activities. •**

In January 1986, the Major expressed to Allen his
concern regarding the propriety of using money to
gain the hostages' release. Allen replied that North
had told him that the President had said he would
"go to Leavenworth if necessary" to free the hos-
tages.^'' The Major also recalled that in March 1986,
while Allen and the Major were generally discussing
how to finance efforts to free the hostages, Allen
commented that, "OUie was already into his Contra
money for the hostages. . . ." ®* The Major did not
pursue this remark.^^

In late April 1986, the Major submitted a paper to
North analyzing a range of options to gain the release
of the hostages.'" When the Major met with North to
present his paper, he urged North to abandon any
effort to gain the release of the hostages by providing
arms to Iran." Indeed, his paper warned that a fac-
tion in Iran might leak such a sale "simply to embar-
rass the present Administration." ''^ North was non-
committal and "made no comment on [the Major's]
noting that it was against official U.S. policy . . .
[and] encouraged terrorism." '^ In late May 1986, the
Major left the Task Force.''''

The DEA Agents Become Operational
Again

In May 1986, at the very time that North was
preparing to accompany McFarlane to Tehran, he
continued to work with the DEA agents to ransom
the hostages for $1 million each. When the plan final-
ly was executed, it occurred simultaneously with the
McFarlane mission to Tehran.''^

In May, Agent 1 was in Cyprus working on a
hostage rescue plan with the new DEA source. He
called Agent 2 in the United States and requested
more money: $20,000 for the source and $10,000 for
Agent I's expenses.''® Agent 2 asked North, who then
turned to the Enterprise. North gave Agent 2 the
telephone number of Albert Hakim, Secord's associ-
ate, in Geneva.

A DEA Agent ("Agent 3") called upon Hakim in
Switzerland. He gave Agent 3 $30,000 cash in bills
wrapped in Credit Suisse bands, without a receipt.''''
Agent 3 gave the money to Agent 1, who took it to
Cyprus.''* The DEA agents were to rent speed boats
as a diversion and North was to obtain assistance
from the U.S. Sixth Fleet. '^

According to the new plan, certain Lebanese ele-
ments would be paid $1 million to rescue each hos-
tage. Once the hostages were freed, it was decided
they would be taken by the Enterprise ship Erria to
Cyprus. While the Enterprise provided the expense
money. North turned once again to H. Ross Perot for
funding of the ransom. In June 1986, Jay Coburn,
Perot's aide, fiew to Cyprus in a private plane.
Coburn was to provide $2 million upon the release of

the hostages.®" After Coburn arrived, Clines appeared
in Cyprus with the Erria, but the plan collapsed: the
contacts demanded the money before releasing the
hostages, but the DEA agents refused to pay until the
hostages were freed.*'

Soon after the June 1986, DEA mission failed,
North told McFarlane that Perot had complained that
he lost his money on the operation, and that North
had failed to keep him informed. North asked McFar-
lane to mollify Perot. McFarlane eventually saw
Perot and asked him "not to be too hard on Ollie." *^
In addition, a letter was addressed to Perot from the
President, dated June 11, 1986, stating:

I have been briefed on your effort over the past
several weeks on behalf of our Americans ab-
ducted in Beirut. On behalf of the American
people, I want to thank you for your discreet
assistance in this regard. My hope is that we may
yet succeed in reuniting these men with their
families and loved ones. Thanks again and God
bless you.*^"

In August and September 1986, Agent 1 called
North about two possible sources on the hostages.
North told Agent 1 he could not "touch them" and
referred him to Dewey Clarridge at the CIA. On
October 14, 1986, North met with Lawn. North ex-
pressed his appreciation for the DEA agents' efforts,
but acknowledged that their efforts had failed.*^ With
that, U.S. efforts to ransom the hostages ended.**

The Attorney General's Role

Throughout the DEA operation, private funds
were used to pay the expenses of the agents and to
provide the ransom money. Yet, as discussed in Chap-
ter 27, the use of nonappropriated funds to finance
Government operations is inconsistent with the provi-
sions of the Constitution requiring that all monies
spent by the Government be appropriated by Con-
gress. Numerous statutes and governmental account-
ing rules implement this principle. A government offi-
cial receiving money for the government from any
source must deposit it in the Treasury;*^ government
agencies may not accept gifts of money absent specif-
ic statutory authorization;*® and government employ-
ees may not receive private funds for the performance
of their governmental duties.*' To violate these laws
creates an obvious conflict of interest for the agents as
well as privatizing governmental functions. The use of
private money to finance the DEA operation broke
each of these rules.

The evidence points toward the conclusion that the
Attorney General approved the use of private funds
for the ransom/resource operations. According to
McFarlane, North was informed by the Attorney
General that it was acceptable for Perot to contribute
money to be used to bribe public officials and other

365

Chapter 23

individuals in Lebanon. McFarlane stated that Attor-
ney General Meese explicitly had approved this
action and told him he was "keeping an eye on it." **
North's testimony confirms McFarlane's account.
North stated that he understood from the Attorney
General that "we couldn't use U.S. Government
monies for those purposes [but] we could use outside
monies." North also recalled informing the Attorney
General of the source of the money. *^ Attorney Gen-
eral Meese, however, maintained that he was not
aware of a "plan to use private funds to ransom
people in foreign countries," ^° nor did he recall ad-
dressing the issue of using appropriated or unappro-
priated funds to conduct the activity.^'

McFarlane testified that Attorney General Meese
had advised that while Government funds could not
be used, private monies could be used to bribe foreign
officials to free the hostages.®^ Agent 2 testified that
Lawn told him that the Attorney General had person-
ally approved Agent 2's participation in the NSC
hostage effort. ^^ Agent 2 told the Committees that
Lawn had given him instructions that the DEA
agents not handle the private money personally.^''
Agent 1 stated that North gave him the money-han-
dling instructions and attributed them to the Attorney
General. ^^

The Attorney General denied knowing of the spe-
cifics of Perot's involvement in the plan,^' although
his telephone logs reflect some contact with Perot
during 1985. Then, on November 26, 1986, after the
diversion became public, the Attorney General tele-
phoned Perot. A note taken by Meese's aide on De-
cember 3, 1986, reflects an instruction by the Attor-
ney General to call Perot to check on whether he
would respond that the Attorney General knew of or
authorized the payments.®*

Administrator Lawn's testimony regarding his
knowledge of using private money to ransom the hos-
tages also contradicted documentary evidence. Lawn
at first testified that he was never told that the money
would be paid by a private donor.®® Lawn was then
shown a copy of his handwritten notes of a briefing
of the plan by Agent 2 which reads, in part: "donor
money, not CIA;" "facilitators will not handle funds;"
and "contact with donor." ^°° Lawn then admitted
that "obviously I was told that there was donor
money and I was obviously told that it was not CIA
money. I don't recall hearing that. I don't recall re-
cording that. But this obviously is my handwrit-
ing." "" As to the notations that the agents would
not themselves handle the private funds but only fa-
cilitate the delivery of the funds, Lawn admitted: "I
assume that I was told. I am sorry, I just don't recol-
lect having been told." '°^

Policy Considerations Were Ignored

President Reagan repeatedly has stated since 1981
that the United States would not pay ransom to ter-

rorists who kidnapped Americans, ^"^ a policy ad-
hered to by Administrations of both parties over the
years. There are practical reasons for such a policy.
Clair George, the Deputy Director for Operations,
stated: "You don't trade for hostages . . . because now
everybody is going to sell them for something." '"''
Former Deputy Director of the CIA, John McMahon
stated that ransom payments could become a source
of funds for terrorists. When they "run out of funds,
they would kidnap the nearest U.S. businessman, get a
ransom and then they'd fill their coffers for a year.
When they needed more, they would ransom another
one." '"^

The DEA operation had all these shortcomings
plus an additional one: it was inconsistent with the
simultaneous effort to gain the release of the hostages
through the Iran initiative. It is reasonable to believe
that the Lebanese hostage holders would be less likely
to release the hostages at the request of Iran, at the
same time as they were being offered $1 million per
hostage in the DEA initiative.

There was little consideration of these factors. The
DEA initiative was not discussed at a meeting of the
NSC; there were no policy papers; and no consulta-
tion with the Secretaries of Defense and State.'"®
Secord summed up the process when he testified that
"it did not occur to me at the time that these two
[efforts] clashed," but he acknowledged that "they
could have collided." '"'' Some on the NSC staff
characterized the payments to the hostages holders as
"bribes" not ransom, and the operation as a rescue,
not a payoff

The Other Operations
Israel

During the 1985-1986 winter. North set into motion a
series of projects involving Israel. These took advan-
tage of the close working relationship North had de-
veloped with his counterpart in the Israeli Govern-
ment, Amiram Nir, Adviser to Prime Minister Peres
on combatting terrorism.

North and Nir had similar backgrounds in working
for their respective governments: both believed in un-
orthodox tactics when dealing with terrorism. Ac-
cording to North, Nir broached the idea for joint
operations during a trip to the United States in Janu-
ary 1986. Nir carried a proposal, according to North,
that the profits Israel would generate from the Iranian
arms sales would be used, in part, for a series of
covert operations.'"* These would include gathering
intelligence on terrorist groups, seeking the release of
hostages, initiating and financing propaganda efforts
that would be operated covertly.'"® North recorded
in his notebooks that Nir had suggested on January 9
that, from the sale of the first 1,000 TOWs to Iran for
$10 million, $2.5 million would be dedicated for

366

Chapter 23

"Ops." "° Each project received a code name in the
sequence TH-1, TH-2, and so on. North told the
Committees that the projects had not progressed
beyond the planning stage and, therefore, he did not
seek a Presidential Finding authorizing any of these
operations. ' ' '

North testified that he discussed the Enterprise's
role in these projects with Poindexter, but Poindexter
said he did not recall such a conversation. "^ The
only evidence that the President knew of these sensi-
tive projects appears in a September 15, 1986, memo-
randum from North to Poindexter. North asked Poin-
dexter to brief the President on certain initiatives,
including one of the proposed joint U.S. -Israeli covert
operations. An attachment to the memorandum which
North suggested should be briefed to Casey stated
that "covert funds could be made available" for this
operation, but the source of the funds was not dis-
closed."^ Poindexter noted on the memorandum that
he approved North's recommendation to brief the
President on these operations and that it was "done."
Poindexter testified that he did not know or tell the
President that the covert funds referred to by North
were coming from the Enterprise."*

The Lebanese Operation

Another initiative undertaken by North involved
the use of DEA and Israeli contacts to fund and equip
a force in Lebanon. North described the proposed
force as part of a "long term operation" to give the
United States some future military leverage on the
ground in Lebanon."^

North sent Poindexter a PROF note in June 1986
about Secord's progress in working with a Lebanese
group on a hostage rescue operation: "After the CIA
took so long to organize and then botched the Kil-
burn effort, Copp [Secord] undertook to see what
could be done through one of the earlier DEA devel-
oped [Lebanese] contacts. Dick [Secord] has been
working with Nir on this, and now has three people
in Beirut and a 40-man . . . force working for us.
Dick rates the possibility of success on this operation
as 30% but that's better than nothing." "* In closed
testimony before the Committees, North indicated
that the project was never carried out even though
"we spent a fairly significant amount of money
on . . . [this additional] DEA operation." '"

Peter Kilburn, a 60-year-old librarian at the Ameri-
can University in Beirut, was kidnapped on Novem-
ber 30, 1984. U.S. sources believed that, unlike the
other hostages, Kilburn was being held by a criminal
faction in Lebanon. At one point in the fall of 1985,
North had contemplated allocating Enterprise funds
to support an operation intended to free him."* The
plan was terminated when Kilburn was murdered al-
legedly by agents of Mu'ammar Qaddafi shortly after
the American air raid on Libya in April 1986.

Other Countries

Other projects contemplated by North involved
aiding anticommunist resistance groups around the
world. North told the Committees that he and Direc-
tor Casey "had several discussions about making what
he called off-the-shelf, self-generating activities that
would be able to do a number of these things. He had
mentioned specifically an ongoing operation." In addi-
tion. North testified, "I concluded within my own
mind the fact that it might require [other ongoing]
operations [as well].""* In testimony before the
Committees, North explained his motivation for assist-
ing resistance groups. "We cannot be seen ... in the
world today as walking away and leaving failure in
our wake. We must be able to demonstrate, not only
in Nicaragua, but . . . elsewhere where freedom
fighters have been told, we will support you, we must
be able to continue to do so." '^^

In April 1986, North asked Secord and his partner
Albert Hakim to use $100,000 from the Lake Re-
sources Swiss accounts to purchase conventional
radio phone equipment for donation to a political
party in a foreign country. On April 29, two repre-
sentatives of a U.S. manufacturer met in Miami with
Secord and one of Secord's associates, and the pur-
chasing agent for the political party. At the meeting,
the purchasing agent agreed to buy $100,000 of the
radio equipment, and Secord — upon North's request —
arranged for the Enterprise to wire this amount to the
manufacturer.

The Erria

Another of North's projects involved the purchase
by the Enterprise of the M/V Erria, a small coastal
freighter of Danish registry used to transport goods
between Europe and the Middle East. The Erria, built
in 1973, was small, only 163 feet long, and weighed
710 tons.i^^ Before its purchase, the Erria was owned
by its captain, Arne Herup.'^^

In 1984 and 1985, the Erria was used to run weap-
ons to the Persian Gulf and then to Nigeria and
Central America. Because of its Danish registry, the
Erria, was able to escape the scrutiny of customs
officials. '^^ " "When we ended up needing a ship to
perform a certain task," recalled North, "there was
nowhere to get one on short notice, and so this orga-
nization [the Enterprise] produced it practically over-
night." Poindexter testified that Secord offered the
ship because the Department of Defense could not
provide a ship suitable for the covert operation. '^^
According to North, Casey said "we can't find one
anywhere else, get a ship. It didn't cost the taxpayers
of the United States a cent." '^* The money came
from the Iran arms sales and other Enterprise funds.

The Erria first came to the attention of the Enter-
prise in April 1985, when it carried arms purchased
through Secord to the Contras. En route to Central

367

Chapter 23

America, the Erria came under surveillance by an
unidentified "fishing boat" which Captain Herup as-
sumed was Cuban. '^* Herup took evasive action and
brought the cargo successfully to a Central American
country.'^* Herup's actions impressed Secord's asso-
ciate, Thomas Clines, and when North needed a ship
in April 1986, for covert operations, Clines suggested
to Hakim that the Enterprise purchase the Erria from
Herup, and keep him as Captain.

Hakim bought the ship for $312,000 through
Dolmy Business, Inc., one of the Panamanian compa-
nies owned by the Enterprise, on April 28, 1986.'^'
Herup was asked to remain as captain for at least six
months, with Danish agent Tom Parlow of SA Char-
tering continuing as the ship's agent. Hakim and
Clines told Herup that they were working for the
CIA and that at some future date they might ask him
to transport technical equipment for covert oper-
ations. They promised that when the project was fin-
ished, the ship would be returned to Herup at no cost.

The Proposed Charter to the CIA for a
Covert Operation

Tlie first mission North contemplated for the Erria
was for an extended covert operation. On April 28,
1986, Secord sent a KL-43 message to North propos-
ing that the CIA charter the vessel for that purpose:
". . . Abe [Hakim] still in Copenhagen with our
lawyer finalizing purchase of ship. Deal has been
made after three days of negotiation. The Danish cap-
tain is up and eager for the mission — he now works
for us. We are asking ... [of the CIA] for firm fixed
price contract of $1.2 million for six months. He will
probably balk at this price . . ."'2'"

As Secord predicted, the Agency felt the rate was
excessive (several times the prevailing rate for similar
assets) and it balked at chartering the ship. In addi-
tion, the CIA informed North that it was not interest-
ed on technical grounds and that it did not feel that
security could be maintained because of the ship's
previous use by North's associates to ferry arms to
Central America. The Agency indicated that Tom
Clines' involvement was a negative factor of major
proportions. '2*

North persisted in his efforts to have the CIA lease
the ship. He then enlisted Poindexter's help. In a May
14 memorandum, Vincent M. Cannistraro of the SC
staff urged Poindexter to take the matter up with
Casey:

Status of Ollie's Ship. OUie has offered the use of
a Danish vessel for [a covert operation]. He first
offered CIA a six month lease. CIA told me that
they thought it was too expensive, and the cost
and time involved in refitting the vessel for [the]
mission made the alternative option . . . more
attractive. Ollie then offered to [perform the mis-
sion] using his own resources. [C/NE] has told

me that because of the alleged involvement of
one Tom Clines (who was involved with Wilson
and Terpil), CIA will have nothing to do with
the ship. '^®

In the end, Casey supported Clair George's deci-
sion that the ship was not suitable for Agency use.

The Odyssey of the Erria

On May 9, 1986, the Erria commenced its oper-
ations under its new owners, the Enterprise. The ship
was to travel to pick up technical equipment for a
covert operation.

On May 16 Herup was ordered to abort the mission
and return to Lamaca, Cyprus. The new plan for the
ship was to pick up any American hostages released
as a result of the DEA initiative. En route to Lar-
naca, Herup received instructions to take up a posi-
tion off the coast of Lebanon and to await further
directions.'^"

As described earlier in this Chapter, the DEA hos-
tage ransom plan failed. Accordingly, after a 48-hour
wait, Hakim ordered the ship to sail on to Lamaca.
On June 5, Herup received instructions to head for
Gibraltar, but at the last moment the ship was divert-
ed to Cagliari, Sardinia. From there, he was told to
take the ship to Setubal, Portugal, to await an arms
cargo from Defex. The cargo at Setubal was not
ready for loading, and Herup was instructed to return
to Copenhagen, where he arrived on July 4. ' ^ '

The Erria then was ordered to Szczecin, Poland,
where it arrived on July 10. The cargo it picked up
was marked "machine parts," but actually consisted of
158 tons of Communist-bloc weapons, including AK-
47 assault rifles, hand grenades, mortars, and a variety
of ammunition. '32 The shipment was consigned to
Energy Resources International, an Enterprise compa-
ny.

The Erria's next stop was Setubal, Portugal, where
on July 19, it loaded an additional 222 tons of arms
from Defex Portugal in the presence of Parlow and
Clines. '33 Herup was told to set his course for a
Central American port. According to Hakim, the total
cargo, which he called the "stranded shipment," cost
$1.7 million; '34 Secord placed the cost at about $2.4
million. '35 En route to Central America, Parlow
called Herup and told him to stop the ship: Congress
was in the process of repealing the Boland Amend-
ment. The vessel sat in the water for 4 days. Captain
Herup then was ordered to return to Portugal, where
he was met by Clines. '3^

The Enterprise decided to find a buyer for the 380-
ton cargo of arms now on board the Erria. Defex sold
the arms to an intermediary for $1.2 million. The
intermediary, in turn, sold the cargo for $2,156,000
(including transportation), '3' to the CIA, which did
not want to deal with the Enterprise because of
Clines' involvement. The arms were transferred from

368

Chapter 23

the Erria to another ship on September 20 for deliv-
ery to the CIA. '38

Hakim and Secord continued their efforts. Herup
was ordered to take the now-empty Erria to Haifa,
Israel, where it was to receive a new shipment of
arms. So as not to run afoul of the Arab boycott, the
name of the ship was altered to read, "Ria," and false
entries were placed in the Captain's log. On October
13, at Haifa, Herup loaded a crate containing eight
tons of Eastern Bloc arms that Nir had promised for
the Contras. The captain also had been told he was to
pick up pharmaceuticals for Iran. No pharmaceuticals
were loaded.

Herup was then ordered to go to Fujairah in the
Gulf of Oman. The Iranians had promised North two
Soviet T-72 tanks, but after the Erria waited 6 weeks
in the Gulf, the plan failed to materialize. On Decem-
ber 9, Herup was ordered to open the Israeli crate.
He found only 600 well-used AK-47 assault rifles and
15 cases of ammunition — valued at approximately
$100,000 — a cargo not worth transporting to Central
America. '3^

After the revelations of the Iran-Contra covert op-
erations in November 1986, Clines or Hakim ordered
the Erria on December 14 to return to Eilat, Israel,
where the crate of weapons that had been received in
Haifa were unloaded.

The Erria returned to Denmark later in December.
Its missions on behalf of the Enterprise were at an
end.

Conclusion

The Erria was in a sense a metaphor for the other
operations of the Enterprise — ventures that began
with ambitious expectations but accomplished noth-
ing. But the fate of these ventures cannot obscure the
danger of privatization of covert operations or the
fact that the participants in the Enterprise had auda-
cious plans for covert operations. Had the architects
of the other operations been emboldened by success,
and not frustrated by failure, the Committees can only
conjecture, with apprehension, what other uncon-
trolled covert activities on behalf of the United States
lay in store.

369

77-026 0

67-13

Chapter 23

Chapter 23

1. North Test., Hearings. 100-7, Vol. 1, at 140.

2. North Test., Hearings. 100-7, Vol. 1, at 314-15; Ex.
OLN 328.

3 Hickey Int., 6/8/87.

4. Id.

5. McFarlane to Shultz, Weinberger, Smith, Casey,
Vessey, Subj. "Hostage Locating Task Force," 2/13/85.
See also: Poindexter to Shultz, Weinberger, Meese, Casey,
Crowe, Subj. "Revised Terms of Reference (TOR) for Hos-
tage Locating Task Force (HLTF)," 12/20/85.

6. Lawn Dep., 8/20/87, at 8-9, 11.

7. Id. at 41-42.

8. Special Enforcement Operation Account (SEO 471);
Azzam Int., 5/26/87.

9. Lawn Dep., 8/20/87, at 7-8.

10. Id at 49.

1 1. Lawn Dep., 9/20/87, at 49.

12. Azzam Int., 5/26/87.

13. Agent 1 Dep., 8/28/87, at 56-57.

14. Hickey Int., 6/9/87.

15. Azzam Int., 5/26/87.

16. North Notebooks. 3/12/85, Q1168.

17. Id

18. Id Ql 168-69 .

19. Agent 2 denied that the DEA operations involved
ransom. Agent 2 Dep., 8/12/87, at 188. He stated that the
large payments were "bribes" and could not be ransom
because "[a] ransom has to be solicited." {Id. at 193). In
discussing the $1 million per hostage figure that was con-
templated for the May 1986, rescue effort (see below).
Agent 2 maintained that this money was intended only for
those who were "corruptible." {Id. at 196). Agent 2 also
testified, however, that he could not be sure that some of
these monies would not be given to the individuals were
responsible for the kidnappings. {Id. at 194). Agent 2 testi-
fied that the possibility that the payment of monies would
create an incentive for more kidnappings was discussed and
it was concluded that "[w]e'd just have to take our shot."
(Id at 199).

20. Agent 1 Dep., 8/12/87. at 14.

21. C930O, CIA document: Agent 1 Dep., 8/12/87, at 32.

22. C9296-C9300, C9299, C9297-98. C9296.

23. Azzam Int., 5/26/87.

24. Id.

25. Id

26. Earlier Perot had tried to donate a plane to DEA
which Azzam had refused. Azzam was therefore aware of
Perot's efforts to aid law enforcement. Id.

27. Id

28. C9259.

29. Azzam Int., 5/26/87.

30. C9282-84, CIA Report on Buckley Proof dated May
15, 1985.

31. Azzam Int., 5/26/87.

32. C9282-84, CIA Report on Buckley Proof, dated May
15, 1985.

33. Azzam Int. 5/26/87.

34. Clair George Test., Hearings, 100-11. at 235-236; See
also Clair George Dep., 4/24/87, at 60.

35. Agent 1 Dep.. 8/12/87. at 62-64.

36. North Notebooks, 5/22/85, Q 1854-56.

37. Id.. Q1855.

38. Id

39. North Memo. 6/7/85. to McFarlane, at 2; Ex. 38A
(RCM).

40. Id

41. Clair George Dep., 4/24/87 at 57-58.

42. Ex. 38A. (RCM). McFarlane testified that he never
discussed this matter with the President.

43. McFarlane Test., Hearings, 100-2, at 45.

44. McFarlane Test., Hearings, 100-2, at 45.

45. Poindexter Test., 7/15/87 at 187; 7/17/87, at 148.

46. Ex. EM-2, Hearings.

47. Yet, when asked by the House Judiciary Committee
on March 5, 1987, if he knew of the plan, the Attorney
General testified he knew only that the DEA agents were
collecting information. (Meese Test., House Committee on
the Judiciary, March 5, 1987, Ex. EM-5, at 54-55.) Howev-
er, in testimony at the Joint Hearings, Meese claimed he
was unaware only of any "ransom" plan as opposed to
plans to bribe foreigners. (Meese Test., 7/29/87, at 222-23.)
Meese repeated his prior testimony that he was not aware
of the operational role of the DEA agents, although the
memo he received from North stated that the agents would
rent a safehouse and open a bank account. (Id.) The Attor-
ney General did not consider such activities to be oper-
ational, although the head of the DEA, John Lawn, does.
(Lawn Dep.. 8/20/87, at 49.)

48. Lawn Dep., 8/20/87 at 10-11.

49. Agent 1 Dep.. 8/12/87 at 85-86.

50. Agent 1 Dep., 8/28/87 at 47-50.

51. Agent 1 Dep., 8/12/87 at 79.

52. Agent 1 Dep., 8/28/87 at 95-97.

53. Brother Int., 6/3/87.

54. Agent 2 Dep., 8/12/87 at 94; North Notebooks,
6/6/85, Q1895.

55. Agent 1 Dep., 8/28/87 at 99-102.

56. Agent 1 Dep., 8/28/87 at 106.

57. The Hostage Location Task Force is to be distin-
guished from the Hostage Locating Task Force referred to
earlier. The former was a short-term entity headed by
Charles Allen and included staff members on loan from
other agencies. Some of these staff members worked full-
time and were physically located at CIA. Its purpose was to
define the options available to deal with the hostages held
in Lebanon. (DIA Major Dep.. 7/2/87, at 48). The Hostage
Locating Task Force, by contrast, was an interagency
group that met only periodically. Its purpose was to share
information relating to hostages. (Id. at 8).

58. DIA Major Dep.. 7/2/87. at 35.

59. DIA Major Int.. 6/10/87.

60. Id at 43.

61. W. at 74.

62. Id at 73.

63. DIA Major Int.. 6/10/87.

64. Agent 1 Dep.. 8/28/87. at 131-32.

65. DIA Major Int.. 6/10/87.

66. Allen Dep.. 4/21/87. at 93-94. In fact. Allen told FBI
Executive Assistant Director Oliver "Buck" Revel! in April
1987. that he did not even know the DEA agents. (Memo
from Revell to Webster dated May 7, 1987. FB002889-90;
Revell Dep. 6/11/87 at 29.)

370

Chapter 23

67. The Major assumed that North meant that the Presi-
dent was willing to commit illegal acts to gain the release of
the hostages. The Major did not believe the statement. DIA
Major Dep., 7/2/87, at 101-02.

68. DIA Major Dep., 7/2/87, at 128.

69. Id. at 128.

70. N7437, DIA Major Hostage Memo.

71. DIA Major Dep., 7/2/87, at 115-17.

72. N7437, DIA Major Hostage Memo.

73. DIA Major Dep., 7/2/87, at 117.

74. Id. at 142.

75. Agent 2 Dep., 8/12/87, at 188. Agent 2 testified that
the operation was planned to occur in the May-June time
frame and that he kept North apprised of developments. Id.
at 204. Secord testified that North enlisted him to assist in
the DEA effort "just before" the Tehran mission began.
Secord Test., Hearings, 100-1, 5/6/87, at 111.

76. Agent 1 Dep., 8/28/87, at 136-37.

77. The bank records of Hyde Park Square Corp., one of
the corporations within the Enterprise, disclose a withdraw-
al on May 19. 1986 of $30,150.

78. Agent 1 Dep., 8/28/87 at 138.

79. Agent 1 Dep.. 8/28/87, at 147. In an apparent refer-
ence to the Sixth Fleet, Agent 1 speaks erroneously of
North obtaining assistance from "The Seventh Fleet or
something like that."

80. North had pursued a similar course in an attempt to
obtain the release of Peter Kilburn, an American citizen
who was the librarian at the American University in Beirut.
Kilburn was kidnapped on November 30, 1984, by a differ-
ent group. A source indicated in the summer of 1985, that
he could gain access to Kilburn in exchange for cash. North
turned to Perot to provide $100,000 in cash and eventually
$1 million to obtain Kilburn's release. This time, Coburn
provided $100,000 in cash, all of which was eventually
given to the intermediary. Kilburn was killed by his captors
after the U.S. bombing raid on Libya on April 15, 1986,
before the rescue attempt could be carried out.

81. See also Erria Section.

82. McFarlane Dep., 7/2/87 at 82.

82a. President to Perot Letter, 6/11/86, N4247.

83. Lawn Dep., 8/20/87, at 53.

84. The DEA agents had other experiences with people
involved with North's network. Sometime in 1986, Fawn
Hall asked Agents 1 and 2 to meet with Michael Ledeen.
They met at Ledeen's office. Ledeen told them he was a
very good friend of North's. Ledeen said he had a $30,000
contract with Continental Airlines and he wanted to know
how he could stop DEA from seizing their airplanes if
cocaine was discovered on board. (Id. at 170.) The agents
arranged for Ledeen to meet the DEA regional director in
Miami regarding the problem. Robinette told them, on an-
other occasion, that he was retained by Clines to investigate
a civil suit filed against Clines and others alleging assassina-
tion plots and drug dealing in Central America. (Id. at 158.)
Agent 1 told him he knew very little about the drug situa-
tion down there. Later, Robinette called him to ask him to
check out Ted Shackley. Agent 1 referred him to his broth-
er for investigative work. In December 1986, Albert Hakim
called Agent 3 in Switzerland. Hakim told Agent 3 that he
had an Iranian business associate who was in the hospital
construction business who had to accompany him to the
United States on business. (Agent 3 Dep., 5/13/87, at 60.)
Hakim asked if Agent 3 could assist this Iranian in getting a

visa to the United States. Agent 3 said he could not. Agent
3 asked Hakim if he was working for any government
agencies, and Hakim said he was still working with the
CIA. (Id.) Agent 3 suggested that in that case he should
seek CIA assistance in getting his associate travel papers.

85. 31 U.S.C. Sec. 3302.

86. 16Comp. Gen. 911 (1937).

87. 31 U.S.C. Sec. 3302.

88. McFarlane Dep., 7/2/87, at 78-79.

89. North Test., Hearings, 100-7, Vol. 2, at 185-86;
McFarlane Test., Hearings, 100-7, Vol. 2, at 212-13.

90. Meese Test., Hearings, 100-9, at 388.

91. Id., at 10.

92. McFarlane Dep., 7/2/87, at 80.

93. Agent 2 Dep., 8/12/87, at 76-77.

94. Id at 77.

95. Footnote omitted.

96. Agent 1 Dep., 8/12/87, at 79.

97. Meese Dep., 7/8/87, p. 169.

98. Meese phone Logs; 12/3/86 Richardson's notes, 9089.

99. Lawn Dep., 8/20/87, at 45.

100. W., at 112-14.

101. Id., at 127.

102. Id, at 115.

103. Footnote omitted.

104. George Dep., 4/24/87, at 63.

105. McMahon Dep., 6/1/87, at 69.

106. The DEA operation lacked authorization pursuant to
a Finding as required under Executive Order 12333.

107. Secord Test., Hearings, 5/7/87 at 188.

108. North Test., 7/8/87, at 32; North Test., Closed Ses-
sion, 7/9/87 at 9.

109. North Test., Closed Session, 7/9/87 at 5-11.

110. North Notebooks, 1/9/86, Q1429.

111. North Test., Closed Session; July 9, 1987 at 5-8, 11.
North testified about the projects in Executive Session of
the Committees.

112. Poindexter Test., 7/15/87 at 144-145.

113. North to Poindexter, memorandum, "Follow-on
Meeting with Amiram Nir," September 15, 1986, N2927.

114. See generally Poindexter Test., 7/15/87, at 160-64;
Ex. JMP 58; Ex. OLN 303.

115. North Notebooks, 11/19/85, QI319.

116. North, PROF note, 6/3/86 at 1142-43, to Poin-
dexter, NI2543.

117. North Closed Test., 7/9/87, at 64.

118. DIA Major Dep. 7/2/87, at 9-14; U.S. Congress,
House Select Committee to Investigate Covert Arms Trans-
actions With Iran, internal memorandum, Robert A. Ber-
mingham to John W. Nields, Jr., Subj: Joint Effort to
Rescue Peter Kilburn (September 7, 1987); New York
Times 3/2/87.

119. North Test., Closed Session, 7/9/87, at 18.

120. North Test., 7/9/87, at 18-19.

121. ER33.

122. Herup Int., 4/29/87, at 1,

122a. Danish law prohibits the sale of arms to states at
war.

123. Poindexter Test., 7/15/87 at 149-51.

124. North Test., Hearings, 7/10/87, at 93-95.

125. There was no contact between the two vessels. The
unidentified ship followed the Erria for two days and then
departed.

371

Chapter 23

126. The commercial Bill of Lading shows the destination
as a Central American port; however, the true destination
of the cargo was a different Central American port. The
ship arrived at that port on June 2, 1985. EROOOl-02.

127. Dolmy Business, Inc., was organized as a corpora-
tion under the laws of Panama, on September 11, 1985.
ER0.U09; ERlO-12. See also: the Memorandum of Agree-
ment and Bill of Sale covering the Erria. ER13-17; ER18-
19.

127a. OLN Ex.-286.

128. C9605. Items for discussion at DCI meeting with
Poindexler on 5/15/86.

129. N4M72 (Memo from Cannistraro to Poindexter
"Agenda for weekly meeting with DCI," 5/14/86.)

130. See summary log of the Erria, at ER0021; Erria log
book, at ER0O23-30; and ship's position May 23-29, as re-
flected on page 14 of the Erria log book, at ER0031.

131. At this point, Albert Hakim and Dolmy Corporation
owed SA Chartering $32,000 for fuel and wages, and it was
for the purpose of collecting this debt that Tom Parlow
directed Captain Herup to return to Copenhagen. Parlow
sent a telex to CSF, stating falsely that SA Chartering had
the vessel impounded for non-payment of account. CSF

then promptly wired money to SA Chartering which was
drawn against Dolmy's Credit Suisse account.

132. Herup, Int., 4/29/87 at 68; Staff memo on Coastal
Freighter Erria, 3/4/87, at 5; "National Syrian tied to
North." B. Sun, 4/20/87, at lA, 9A.

133. Staff memo on Coastal Freighter Erria, 3/4/87, at 5.

134. See Chapter 22.

135. SC4104, Secord letter to Liman and Nields, "Arms
Sales Profit Analysis." at 2.

136. Herup Int., 4/29/87, at 6-7.

137. Staff memo on Hakim/Secord ownership of Erria
arms cargo, 4/30/87, at 2; C4803-C4807, H87. The CIA did
not get the whole cargo for that price. Some of the muni-
tions were diverted by the intermediary, for use by North
for other covert activities.

138. The transfer of the Erria's cargo took place in Cher-
bourg, France. Five of the ship's containers were destined
for one U.S. port, and 22 containers were destined for
another U.S. port. See loading diagram at ER34. The rele-
vant shipping documents, including cargo declaration, mani-
fest, identification of crew, etc., at ER35-42, ER43-4.

139. ER32. See also Herup Int., 4/29/87, at 10.

372

Part VI
Conclusions and Recommendations

Chapter 24
Covert Action in a Democratic Society

The Iran-Contra Affair raises fundamental and trou-
blesome questions about the secret intelligence oper-
ations of the U.S. Government. Can such operations,
and particularly covert action, be authorized and con-
ducted in a manner compatible with the American
system of democratic government and the rule of
law? Is it possible for an open society such as the
United States to conduct such secret activities effec-
tively? And if so, by what means can these operations
be controlled so as to meet the requirements of ac-
countability in a democratic society?'

These questions became the center of public debate
in the mid-1970s, after revelations of controversial
Central Intelligence Agency (CIA) activities and ex-
tensive investigations by a Presidential Commission
and Select Committees of the House and the Senate.^

The result of those inquiries was a concerted effort
by the executive and legislative branches to adopt
laws and procedures to control secret intelligence ac-
tivities, including covert actions, and to ensure that
they would be conducted only with the prior authori-
zation of the President and timely notice to Congres-
sional committees specially constituted to protect the
secrecy necessary for effective operations.

Experience has shown that these laws and proce-
dures, if respected, are adequate to the task. In the
Iran-Contra Affair, however, they often were disre-
garded. The flexibility built into the legislation and
rules to allow the executive branch to deal with ex-
traordinary situations was distorted beyond reasonable
bounds. Laws intended to reflect a spirit of comity
between the branches were abused when that commit-
ment to cooperation was abandoned.

The Director of the Central Intelligence Agency,
William J. Casey, and other Government officials
showed contempt for the democratic process by with-
holding information that Congress was seeking and by
misrepresenting intelligence to support policies advo-
cated by Casey.

What is Covert Action?

The term "covert action" refers to a specific type of
clandestine activity that goes beyond the collection of
secret intelligence.' It is an attempt by a government

to influence political behavior and events in other
countries in ways that are concealed.

Covert action is not defined in statute. Executive
Order 12333, however, issued by President Reagan in
1981, refers to covert action as special activities
which are defined as:

Special activities mean activities conducted in
support of national foreign policy objectives
abroad which are planned and executed so that
the role of the United States government is not
apparent or acknowledged publicly, and func-
tions in support of such activities . . . .*

This definition excludes diplomatic activities, the
collection and production of intelligence, or related
support functions. The Executive order also provides
that the authorized special activities may not include
activities that are "intended to influence United States
political processes, public opinion, policies, or
media."*

Peacetime covert action became an instrument of
U.S. foreign policy in response to the expansion of
Soviet pohtical and military influence following
World War II. The overt U.S. policies at that time
included the commitment of military assistance under
the Truman Doctrine, the surge of economic aid
through the Marshall Plan, the efforts to establish a
democratic regime in West Germany, and the dramat-
ic airlift to break the Soviets' Berlin blockade. Ac-
companying the overt policies were covert actions
designed to counter Soviet political influence and to
prepare for behind-the-lines resistance in case of a
Soviet invasion of Europe. When a Communist-orga-
nized coup overthrew the Government of Czechoslo-
vakia in February 1948, and a series of general strikes
orchestrated by Communist-controlled labor unions
swept Western Europe, U.S. officials decided that this
covert political action and support should be intensi-
fied to reinforce the still-fragile free institutions of the
postwar world.®

In this atmosphere. President Truman directed the
development of a covert action capability. A 1948
National Security Council Directive, NSC 10/2, de-
fined covert actions to be:

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propaganda; economic warfare; preventive direct
action, including sabotage, anti-sabotage, demoli-
tion and evacuation measures; subversion against
hostile states, including assistance to underground
resistance movements, guerrillas and refugee lib-
eration groups, and support of in digenous anti-
communist elements.'

Since 1948, U.S. covert actions have included most of
these activities.

What makes such activities "covert" is not their
effect, but their implementation in a manner permit-
ting "plausible denial," a concept that NSC 10/2 also
codified. U.S. action in support of indigenous groups
were to be;

so planned and executed that any U.S. govern-
ment responsibility for them is not evident to
unauthorized persons and that if uncovered the
U.S. Government can plausibly disclaim any re-
sponsibility for them.*

This concept was an important element in the meas-
ures which the Truman and Eisenhower Administra-
tions implemented to strengthen democratic trade
unions, the fledgling postwar political parties, and the
free press in the war-ravaged parts of the world. For
American support had its own danger: it might have
tainted the recipients and exposed them to charges of
being in the service of "Yankee imperialism." Means
had to be found to camouflage the American connec-
tion. Financing and other support, in case of unwel-
come publicity, was to be nonattributable to the U.S.
Government, and allegations about such support were
to be deniable in a plausible manner.

As originally defined in NSC 10/2, "plausible
denial" meant concealing the U.S. Government's role
from unauthorized inquiry — not avoiding responsibil-
ity and accountability to other agencies of the Gov-
ernment, including Congress. One of the main issues
identified by Congressional investigations in the mid-
1970s, however, was the misuse of "plausible denial."^

Covert Action and the Law

Covert action operations pose challenges for the polit-
ical processes of the United States. As with other
secret intelligence programs and more sensitive de-
fense projects, appropriations and expenditures of
these operations must necessarily be kept from the
public domain. Thus, covert assistance to foreign gov-
ernments and groups does not receive the open debate
other assistance programs do.

Paramilitary covert actions are in the "twilight
area"'" between war, which only Congress can de-
clare, and diplomacy, which the President must
manage. This type of activity is especially trouble-
some as a constitutional separation of powers issue.

While covert actions can be legitimate instruments
of foreign policy, they can, if inconsistent with the

national policy, undermine U.S. interests abroad.
Even if the covert action is consistent with U.S.
policy, disclosure sometimes can be harmful to U.S.
interests.' '

The executive and legislative branches have agreed
that covert actions must be subject to specific legal
controls. Statutes, executive orders, and national secu-
rity directives establish a framework for the authori-
zation and conduct of these activities. The system was
intended to insure careful review and accountability
and to meet the practical need of securing political
support.

The National Security Act of 1947'2 created both
the National Security Council (NSC) and the Central
Intelligence Agency. The law authorized the CIA to
advise the NSC on intelligence matters, to correlate
and evaluate intelligence, and "to perform such other
functions and duties related to intelligence affecting
national security as the National Security Council
may from time to time direct." While Congress has
never provided specific authority for the CIA or any
other elements of the Government to conduct covert
actions, it has continued to appropriate funds for these
activities.

When Secretary of Defense James Forrestal asked
the Director of Central Intelligence (DCI) in 1947
whether the CIA was empowered to conduct covert
activities, the Director replied that the CIA could do
so if the NSC approved the activities and Congress
appropriated funds to carry them out.'^

A CIA's legal counsel put it in similar terms:

If the President gave us a proper directive and
Congress gave us the money, we had the admin-
istrative authority to carry out [covert actions].**

In 1948, NSC 10/2 established the first administra-
tive mechanism for the approval of covert actions at a
senior interagency level, with the participation of offi-
cials from the White House, the State Department,
the Defense Department, and the CIA.

The Eisenhower Administration tightened and for-
malized procedures for control of covert action by
creating the "5412" Committee for the review and
supervision of covert activities. The Department of
Justice was to review covert action proposals before
they were submitted to the NSC.

The "5412" Committee of the Eisenhower era
became the "303" Committee of the Johnson Admin-
istration and the "40" Committee under President
Nixon '^ but the essential procedures remained the
same: a proposal for covert action was reviewed and
analyzed by an interagency committee, resulting, if
approved, in an NSC directive from the President and
the review of the expenditure by a Congressional
committee.

Congressional oversight was by consensus. A series
of personal relationships developed between the direc-
tors of the CIA and the chairmen of the Congression-

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Chapter 24

al Committees dealing with Appropriations and Armed
Services.'^ There was trust and mutual respect along
with a bipartisan agreement across a broad spectrum
of foreign policy, although since the mid-1950s there
were pressures from within and outside Congress to
establish more clearly defined forms of Congressional
oversight for intelligence activities.

After public allegations of CIA efforts to "destabi-
lize" the Allende regime in Chile," Congress sought
to insure Presidential accountability for covert actions
and notification of all appropriate Congressional com-
mittees, including those on foreign affairs. The
Hughes-Ryan Amendment of 1974 provided:

No funds appropriated under the authority of this
chapter or any other Act may be expended by or
on behalf of the Central Intelligence Agency for
operations in foreign countries, other than activi-
ties intended solely for obtaining necessary intelli-
gence, unless and until the President finds that
each such operation is important to the national
security of the United States.'*

The Hughes-Ryan Amendment also required the
President "to report, in a timely fashion, a description
and scope of such operations to the appropriate com-
mittees of Congress." There were six such committees
at that time.

Further allegations of CIA involvement in unlawful
domestic activities prompted President Ford to estab-
lish a commission, chaired by Vice President Rocke-
feller, to evaluate certain past CIA practices.'^ In
January 1975, President Ford indicated "off the
record" that he had discovered CIA involvement in
assassination conspiracies that "would blacken the
reputation of every President after Harry Truman."^"
The story did not stay off the record for long and
there was a public outcry. Shortly thereafter, the
Senate established a temporary Select Committee to
Study Governmental Operations with Respect to In-
telligence Activities (the Church Committee), 2' and
the House of Representatives created its own tempo-
rary Select Committee on Intelligence (the Pike Com-
mittee).^^

The investigations by the Church Committee in
1975 and 1976 failed to turn up proof that Presidents
had ordered assassinations of foreign officials, but
some senior officials indicated it was their belief that
some Presidents had secretly approved such activi-
ties.^^ Many in Congress felt that the problem was
not so much that the CIA was undertaking covert
action without the proper authority, but that Execu-
tive approval had been given in a deliberately ambig-
uous manner.

Congress responded with the Hughes-Ryan Amend-
ment^* which altered the approval process of CIA
covert action operations. By requiring that the Presi-
dent personally approve all covert actions as impor-
tant to the national security. Congress sought to make

the President responsible for all covert operations.
The U.S. Government might still be able to deny
publicly the responsibility for specific actions, but
within the Government there would be an accounta-
ble source of authority — the President.^*

By 1977, both Houses of Congress established per-
manent select committees for intelligence oversight.
This increased from six to eight the number of "ap-
propriate committees" to be notified under the terms
of the Hughes-Ryan Amendment.^* The resolution
establishing the Senate Select Committee on Intelli-
gence expressed the sense of the Senate that the Com-
mittee should be notified of "significant anticipated
intelligence activities." The term was intended to
ensure that notice of Presidential Findings under the
Hughes-Ryan Amendment would occur prior to the
implementation of the operation.

The Executive branch also established new proce-
dural controls over covert action operations. Presi-
dent Ford's Executive Order 11905^'' set up an NSC
Committee to review covert action proposals prior to
their submission to the President and to conduct
"periodic reviews of programs previously considered"
by the Committee.^* The Committee was composed
of the NSC principals, the National Security Adviser,
the Attorney General, and the Director of the
Budget, or their representatives.

An Intelligence Oversight Board was created to
assess reports of illegality and impropriety in the ac-
tivities of the intelligence community and to report its
evaluations directly to the President. The CIA was
authorized to carry out covert actions as directed by
the President only when these were "within the limits
of applicable law."

President Carter carried forward similar procedures
in his Executive Order 12036, issued in 1978.^® The
Carter Order added the provision that designated the
CIA as the sole agency to carry out covert action
unless the President directed otherwise. It also re-
quired that the Congressional oversight committees be
kept informed of "significant anticipated intelligence
activities" in a manner consistent with constitutional
authorities and duties of the executive and legislative
branches.

In 1980, Congress replaced the notification provi-
sions of the Hughes-Ryan Amendment by amending
the National Security Act of 1947 to add a new sec-
tion 501 on Congressional oversight of intelligence
activities.^" For the first time, the language on notice
of "significant anticipated intelligence activities" was
written into law.

Under the new law, notification had to be given
only to the Intelligence Committee of each house,
rather than to eight committees. Moreover, in extraor-
dinary circumstances affecting the national interests of
the United States, the President may choose to limit
prior notice to the chairmen and ranking minority
members of the Intelligence Committees and the ma-

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jority and minority leaders of the two Houses, a total
of eight Members.

The law provided that the Committees were to be
notified in a "timely fashion" of any covert action for
which prior notice was not given. ^' The 1980 report
on this provision by the Senate Intelligence Commit-
tee states:

The Senate Select Committee and the Executive
Branch and the intelligence agencies have come
to an understanding that in rare, extraordinary
circumstances if the President withholds prior
notice of covert operations, he is obliged to
inform the two Oversight Committees in a timely
fashion of the action and the reasons for with-
holding such prior notice. ^^

According to the Committee report, the law was a
compromise intended to codify the "practical relation-
ship" that "the Executive Branch and the intelligence
oversight committees had developed based on comity
and mutual understanding, without confrontation"
and thus to "carry this working relationship forward
into statute. "^^

Although the law gave the President some flexibil-
ity on notification, there was no exception from the
requirement for a Presidential Finding as a precondi-
tion to all covert action operations. Presidential ac-
countability remained the cornerstone of the system
of control over covert actions.

When President Reagan took office, he pledged to
revitalize U.S. intelligence and to dispel the "suspi-
cion and mistrust . . . [that] can undermine this na-
tion's ability to confront the increasing challenge of
espionage and terrorism. "3''

As part of the effort to restore confidence, the
President issued Executive Order 12333^* in which
he eased some of the restrictions on CIA activities.
The new order pledged continued obedience to the
law and retained the provision that only the CIA
could conduct covert actions in peacetime unless the
President designated another agency to do so. The
Executive Order also applied the Hughes-Ryan
Amendment's Finding requirement to all covert ac-
tions, not just to those of the CIA.^®

In keeping with standard American political proc-
esses, a basic structure of covert action procedures
evolved within the law. A system of interlocking stat-
utes, executive orders, and national security directives
had been established by three successive Administra-
tions.

Despite occasional problems, this system has
proved workable. The Administration has notified the
oversight Committees of its proposals including those
of great sensitivity in which lives might be in danger
in event of disclosure. In fact, "the Committees have
received advance notification of every presidential
finding but for the two involving the attempted
rescue of our hostages in Iran in 1979-80 and the NSC

initiative in 1985 and 1986."^^ The President and
senior intelligence officials have indicated to Congress
their satisfaction with the Oversight Committees' role
and with the prevailing procedures, which also pro-
tect the CIA from charges that its actions are unau-
thorized. Indeed, the procedures implemented by the
Executive and by Congress preclude the possibility
that the intelligence agencies would be blamed for
activities for which elected officials might wish to
deny responsibility.

These mechanisms were a significant achievement
of bipartisan, interbranch cooperation. But they re-
quired continuing adjustment in light of experience
with existing procedures. One such adjustment oc-
curred in 1984 following public disclosure of the
mining of the Nicaraguan harbors. The Intelligence
Committees had not been adequately briefed by the
CIA on the anticipated escalation of U.S. involvement
in Nicaragua.^* This subsequently led to an agree-
ment between the Senate Intelligence Committee and
the Director of Central Intelligence, known as the
Casey Accords, formalizing the requirement that the
Director report any significant anticipated intelligence
activity, including instances in which the activity
would be part of an ongoing program. ^^ The agree-
ment also institutionalized various reporting require-
ments to ensure more substantive briefings, improve
oversight of broad Findings and bring potential treaty
and legal repercussions to the attention of the Mem-
bers.

For the goals of this system of accountability and
oversight to be fulfilled, several steps had to be taken.
First, the President had to approve specifically, and
accept responsibility for, each covert action by sign-
ing a Finding before the operation proceeded.
Second, the Congressional Intelligence Committees
had to be notified either before the operation began
or in a "timely fashion" thereafter. Third, for over-
sight of intelligence activities to be meaningful, intelli-
gence officials had to respond candidly to Congres-
sional inquiries and provide Congress and officials in
the executive branch with objective intelligence anal-
yses so that proposed actions could be evaluated ob-
jectively.*"

In the Iran-Contra Affair, the principles of this
process of accountability and oversight would get
their severest test.

Misuse of Findings

The Findings process was circumvented. Covert ac-
tions were undertaken outside the specific authoriza-
tions of Presidential Findings. At other times, covert
actions were undertaken without a Presidential Find-
ing altogether. Actions were undertaken through enti-
ties other than the CIA, including foreign govern-
ments and private parties. There were claims that the
Findings could be used to override provisions of the

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law. The statutory option for prior notice to eight key
congressional leaders was disregarded throughout,
along with the legal requirement to notify the Intelli-
gence Committees in a "timely fashion."

"Stretching" Findings

On December 1, 1981, President Reagan signed a
Finding that authorized certain covert action pro-
grams in Central America, particularly in Nicara-
gua.*' The Finding is directed toward the Cuban
presence in Nicaragua and Central America generally.
This conflicts with the Administration's explanation of
the Finding which emphasized its purpose as the
interdiction of arms from Nicaragua to the leftist in-
surgents in El Salvador, Yet, under the aegis of this
Finding, the CIA provided assistance to Eden Pas-
tora's rebel forces in the south of Nicaragua, far from
El Salvador. The stated goal of these forces was the
overthrow of the Sandinista Government.*^

Destabilizing the Sandinistas in Nicaragua was a
different goal from arms interdiction to El Salva-
dor.*^ Director Casey, however, declined to seek a
new Finding that properly distinguished between
these two objectives.

If a Finding signed by the President and presented
to the Intelligence Committees for one purpose can be
used for another, the Finding and notification process-
es become meaningless. In fact, while Casey was Di-
rector of Central Intelligence, CIA personnel attempt-
ed to craft Findings in terms so broad that they
would not limit the CIA's freedom to act.** Judge
Sporkin, the General Counsel of the CIA, analogized
the formulation of Findings to the preparation of a
securities prospectus where the corporate purposes
are broadly stated to give management discretion to
carry out a wide range of activities.*^ Viewed in this
way, a Finding becomes a blank check for the intelli-
gence agency and defeats the notion of Presidential
accountability under the Hughes-Ryan law. At this
point, it ceases to be a self-limiting document confined
to a specific program.

Dispensing with Presidential Findings

In reaction to the adoption of the second Boland
Amendment in October 1984, the NSC staff took an
increasingly active role in support of the Contras. The
NSC staff raised money for the Contras and, with
Richard Secord's assistance, created an organization
outside the Government to procure arms and resupply
the Contras.*^ While the President has said that sup-
porting the Contras was his own idea,*^ he told the
Tower Board that he was unaware that the NSC staff
was directly assisting the Contras.** In any event,
there was no Presidential Finding authorizing these
activities. National Security Adviser Robert C.
McFarlane testified that he was unaware of the mag-
nitude of Oliver North's operation** although both

North and Admiral John M. Poindexter disputed
McFarlane's denials.^"

Efforts coordinated by North to ransom hostages
constituted another instance in which the legal re-
quirements for a Finding were dispensed with. This
was in contravention of the President's own directive.
Executive Order 12333, which provided specifically
that all covert actions be contained in Presidential
Findings. Not only was a Finding dispensed with, but
funds to support the operation were raised from pri-
vate sources. The operation was pursued despite the
objection of CIA and some DEA officials, and Con-
gress was not notified.

There was also no written Finding when the CIA
became involved in the covert shipment of arms to
Iran in 1985. As McFarlane subsequently expressed,
"[t]he President was all for letting the Israelis do
whatever they wanted to do."^' In November 1986,
McFarlane asserted that the Attorney General had
opined that U.S. participation in the initial Israeli
shipments could be justified on the grounds that the
President had made a "mental Finding. "^^ The Attor-
ney General testified to his view that the President's
concurrence was tantamount to an oral Finding and
thus sufficient legal authorization for the program. ^^

The December 1985 Finding sought to authorize
retroactively the CIA-assisted shipment of arms in
November 1985. It was drafted after the shipment was
made; presented to the President at the request of
Casey and urging of CIA Deputy Director John
McMahon; and then signed by the President without
the normal full staffing of relevant senior Administra-
tion officials.^* This process ignored a central pur-
pose of the Finding requirement which is to ensure
that the President fully authorizes a covert action
before it begins and is accountable for its implementa-
tion.^^ Further, the "unless and until" language of the
Hughes-Ryan Amendment clearly required a Finding
before the CIA could proceed.

The use of Findings to ensure Presidential responsi-
bility for covert action operations also was disregard-
ed in the diversion of money from the Iran program
to the Contras, which itself was never authorized by a
Finding. Neither the January 17, 1986, Finding relat-
ing to the Iran arms sales, nor any Finding relating to
assistance to the Contras authorized the diversion of
funds. Poindexter testified that he believed the diver-
sion would become politically controversial if ex-
posed, so he decided not to tell the President in order
to give him "deniability."^*

Poindexter testified that he destroyed the only
signed copy of the December 1985 Iran Finding in
November 1986 to spare the President political em-
barrassment.^'' However, when the President signed
that Finding — which was written as a straight arms-
for-hostages operation — he accepted responsibility for
his decision. Along with that responsibility came the
risk that the public might disapprove of the decision if

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Chapter 24

it were ever revealed. In destroying the record of the
President's post hoc approval of the November 1985
shipment, Poindexter also sought to destroy the proof
of Presidential accountability that the law seeks to
achieve.

Using Findings To Avoid Laws

At times, certain members of the Administration
used Findings to avoid legal requirements. A project
to stockpile weapons for the Contras is a case in
point.

In the summer of 1983, the CIA feared that Con-
gress might refuse to appropriate funds for the Con-
tras in the next fiscal year 1984. The Agency thus
devised a way of bypassing the appropriations proc-
ess: the Department of Defense (DOD) would secret-
ly transfer military equipment to the CIA without
charge. The Agency would then dispense the equip-
ment to the Contras in the following fiscal year even
if Congress cut off aid. To justify its request, the CIA
pointed to the broad Presidential Finding authorizing
assistance to the Contras even though nothing was
said in that Finding about a donation of DOD materi-
el to the Contras through the CIA.

The Finding that was supposed to enhance control
over covert action operations was invoked to justify
an evasion of one of the Constitution's most funda-
mental safeguards, the dependence of the executive
branch upon Congress for specific appropriations. In
the end, the proposal was not implemented because
DOD would not transfer the equipment to the CIA
free of charge.

In the Iran initiative, the Administration also used
the Finding to avoid compliance with the laws regu-
lating the export of arms. When the January 17, 1986,
Iran Finding was under consideration, CIA, DOD,
and Justice Department lawyers addressed the ques-
tion of whether the Finding could authorize CIA
arms transfers without regard to the restrictions on
arms transfers under the Foreign Assistance Act and
the Arms Export Control Act. In 1981, Attorney
General William French Smith had taken the posi-
tion— based on an analysis by the State Department
Legal Adviser — that the restrictions of those statutes
applied only to transfers undertaken pursuant to them;
the President, however, could approve a transfer
"outside the context of those statutes" by utilizing the
Economy Act and the National Security Act.^^
Nonetheless, the Smith opinion recognized the Con-
gressional reporting requirements applicable in any
event, and specifically concluded that "the House and
Senate Intelligence Committees should be informed of
this proposal and the President's determinations."^^

When the Smith opinion was considered in the con-
text of the Iran Finding in January 1986, its require-
ment of at least some form of prior Congressional
notification was ignored. Instead, a memorandum
from Poindexter to the President describing the Find-

ing characterized that opinion as concluding "that
under an appropriate finding you could authorize the
CIA to sell arms to countries outside of the provisions
of laws and reporting requirements for foreign mili-
tary sales."®" Poindexter's memorandum recommend-
ed to the President "that you exercise your statutory
prerogative to withhold notification ... to the Con-
gressional oversight committees until such time as you
deem it to be appropriate."^'

Later in 1986, after the Iran Finding was executed,
the Arms Export Control Act was amended to ban all
arms exports under the Act to countries that support-
ed terrorism, unless there was a Presidential waiver
and a report to Congress.®^ Administration officials,
however, continued to rely on the Finding as the
controlling authority, despite the fact that Iran was a
designated terrorist country.

The former General Counsel of the CIA testified
that under the Administration's interpretation, a Find-
ing would justify arms transfers that occurred even
after the 1986 amendment.

Q. "The impression was left somehow that if we
decided to go 'black' or covert, we don't have to
comply with other provisions of the law. Would
that be your interpretation as well?"

A. "Well . . . they give the President an oppor-
tunity to, through a different regime, to do it that
way, so that you can avoid the other problems.
Yes. I think that is an accuracy."

Q. "I have some difficulty with that interpreta-
tion because there is nothing in the Hughes-Ryan
Act which suggests that somehow [a Finding]
would preempt the other provisions of the law.
... If we had the Arms Export Control Act,
had a flat prohibition on the sale of arms to
countries who sponsor terrorism and we listed
Iran as one of those countries that sponsor terror-
ism, could the President legally sign a covert
action [finding] permitting the CIA to ship arms
to Iran?"

A. "I think that is what we said in this case.
... I mean that was the interpretation that you
could have that, that [it] could be done. That is
what covert action is. Senator. It is an ability of
the Government. You see you are not defeating
anything because the system requires there be no-
tification to Congress."®^

It is unreasonable, however, to interpret the Smith
opinion as providing a justification for avoiding all of
the various requirements of the Arms Export Control
Act and the National Security Act. Moreover, Execu-
tive Order 12333 does not, and legally could not,
authorize U.S. intelligence agencies to conduct activi-
ties in violation of the laws of the United States.®*
The argument that covert action pursuant to a Find-

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ing may proceed without regard to certain statutory
restrictions applicable to other Government programs
is not the same as an argument for exemption from all
Federal statutes.

Moreover, the Administration also used the January
17 Iran Finding to override statutory Congressional
notification provisions. As explained above, the Presi-
dent was informed that this new Finding could justify
arms transfers without any prior notification to Con-
gress, including the limited notification to the chair-
men and ranking minority members of the Intelligence
Committees and the majority and minority leaders of
the two Houses. At best, the President was given
misleading advice. Findings were intended to subject
covert action to the accountability of the constitution-
al system, not to supplant law.

Not Playing It Straight With
Congress

The concept of Presidential responsibility was not the
only principle undercut during the Iran-Contra initia-
tive. Accountability to Congress for intelligence oper-
ations also was ignored. For Congress to exercise its
constitutional and statutory responsibility for over-
sight, it must first be notified of significant intelli-
gence activities and then be given truthful and com-
prehensive information about them.

Misleading Testimony

Congress was not notified of either the Iran initia-
tive or the NSC staffs covert operation in support of
the Contras. Senior intelligence officials, including the
Director of Central Intelligence, misled Congress,
withheld information, or failed to speak up when they
knew others were giving incorrect testimony.

For example, Clair George (CIA Director for Op-
erations), the CIA's Chief of Central America Task
Force (C/CATF), and Elliott Abrams (Assistant Sec-
retary of State), testified in October 1986, before the
House Permanent Select Committee on Intelligence
(HPSCI) on the shooting down of the Hasenfus flight.
Abrams testified that the U.S. Government was not
involved in the Hasenfus operation. ^^ George and the
C/CATF knew that the testimony was incorrect, but
neither corrected Abrams. George later apologized to
the Select Committees:

I was surprised that Abrams made that statement.
It was so categorical. The question is, should I
step up and say "hold it, Elliott, what about —
excuse me, all you members of the HPSCI, but
Elliott and I are now going to discuss what we
know about" and I didn't have the guts to do it
or I didn't do it.*^

George's own testimony to the Senate Foreign Re-
lations Committee also was inaccurate. Unaware of
the activities of one of his field officers, he stated that

the CIA was not involved "directly or indirectly in
arranging, directing, or facilitating resupply missions
conducted by private individuals in support of the
Nicaraguan democratic resistance.""^ Similarly, the
C/CATF told the Select Committees that his testimo-
ny at the same was "narrowly defined,"®* thus rein-
forcing the impression that U.S. officials had no role
in the private resupply operation. He explained that
he:

could have been more forthcoming to the [Senate
Foreign Relations] Committee, but I frankly was
not going to be the first person to step up and do
that ... so long as others who knew the details,
as much as I, who knew more than I, were keep-
ing their silence on this, I was going to keep my
silence.®^

He elaborated: "I was a member of the team, I was
a member of the Administration team . . . my frame
of mind was to protect, was to be a member of the
team . . . and to do it without lying, try to go
through as best we could. "'"' While the C/CATF
maintained that he was able to give technically cor-
rect answers, he conceded that he knew that the
testimony of George and Abrams was mistaken. He
testified that his loyalty to the Administration pre-
vented him from correcting the record when the
Committees suggested that he place his allegiance
above his responsibilities as a professional intelligence
officer. The C/CATF explained that Congress' re-
quest for information put him in a "giant nutcracker"
between the Administration, to which he felt a pri-
mary duty, and Congress, which counted on the CIA
to provide objective information.'"

A pattern developed in the CIA of not seeking
information that could cause problems for Administra-
ton policy if it had to be revealed to Congress. When
CIA stations abroad reported on General Singlaub's
efforts to purchase arms and ammunition for the Con-
tras, North reported to McFarlane on February 6,
1985, that "[two countries] have indicated . . . that
they want to help in a 'big way'. Clair George (CIA)
has withheld the dissemination of these offers and
contacted me privately to assure that they will not
become common knowledge."''^

Deputy Director Gates told the Senate Intelligence
Committee: "Agency people . . . from the Director on
down, actively shunned information. We didn't want
to know how the Contras were being funded ... we
actively discouraged people from telling us things.
We did not pursue lines of questioning."'^ When
Gates first heard Charles Allen's suspicions that a
diversion of funds had taken place, his "first reaction
was to tell Mr. Allen that I didn't want to hear any
more about it."''*

Thus, when witnesses appeared before the Intelli-
gence Committees, they could deflect inquiries be-
cause they had consciously chosen to avoid knowl-

381

Chapter 24

edge. This turned upside down the CIA's mission to
collect all intelligence relevant to national security.
Such behavior is both self-destructive and corrosive
of the democratic process. It is self-destructive be-
cause the intelligence agencies are dependent on Con-
gressional support, which is undermined by a lack of
candor. It is corrosive of the democratic process be-
cause Congress is prevented by such activity from
obtaining the information necessary to fulfill its con-
stitutional oversight functions. As Clair George point-
ed out, once members of the intelligence agencies
begin to deceive others in the Government, "the de-
struction of a secret service in a democracy" must
follow. He added, "I deeply believe with the com-
plexities of the oversight process in the relationship
between a free legislative body and a secret spy serv-
ice, that frankness is the best and only way to make it
work."^^

Misuse of Intelligence

The democratic processes also are subverted when
intelligence is manipulated to affect decisions by elect-
ed officials and the public. This danger is magnified
when a Director of Central Intelligence, like Casey,
becomes a single-minded advocate of policy. Al-
though Deputy Director of Central Intelligence, John
McMahon testified that no such intelligence manipula-
tion took place, there is evidence that Director Casey
misrepresented or selectively used available intelli-
gence to support the policy he was promoting, par-
ticularly in Central America.

For example, in the first week in January 1986, an
all-source CIA analysis stated that while problems
with supplies were hampering the Contras' strategy of
forcing the Sandinistas to fight on more than one
front, "[t]he insurgents have adequate weapons and
ammunition and . . . problems with food supplies
appear to have eased since U.S. funding [is] available
to buy and transport food locally."""^ But that posi-
tive evaluation of the Contras' position was not raised
during a January 9, 1986, "NSC Pre-Brief '"" In addi-
tion, notes taken during that meeting reflect that Di-
rector Casey chose to ignore the CIA assessment and
said, he "wants to make the insurgency choice stark —
either we go all out to support them or they'll go
down the drain."'*

Intelligence misrepresentations for policy purposes
occurred in the spring of 1986, when the Sandinistas
pursued Contra fighters into Honduras. Such raids
had periodically occurred since mid-1985. Neither
Honduras nor the United States made an issue of
these incursions because they were limited in scope
and aimed at the Contras. At that time, the Sandinista
raid was considered routine by the CIA Intelligence
Directorate which noted, "[t]he Sandinistas probably
believed that there would, as usual, be no Honduran
reaction to the incursions and that their forces could
quickly move out and return to Nicaragua."''^

The White House response ignored this assessment,
blamed Congress for encouraging the raid, and used
the incident to authorize emergency military aid to
Honduras. Press spokesman Larry Speakes stated at
the daily White House briefing on March 25, 1986:

Within 48 hours of the House rejection of aid to
the Nicaraguan resistance, Sandinista military
units crossed into Honduras in a large scale effort
to attack UNO and FDN camps.*°

Actually, the first Sandinistas crossed the border on
March 20, the same day as the House action, and
began to retreat across the border by March 24,
before Speakes gave his briefing.*' They were back
in Nicaragua before President Reagan signed the au-
thorization for emergency military assistance to Hon-
duras.

Casey, however, wanted CIA analysts to highlight,
rather than minimize, the raid's significance in
Agency reports. In an April 3 memorandum, Casey
instructed the Deputy Director of Intelligence to use
the available material on the Sandinista incursion:

to alert the world that the Sandinistas were pre-
paring and trying to knock the Contras out while
we debated in the U.S. and can have another
bigger try if we debate another two weeks. *^

The Acting Deputy Director of Intelligence replied
on the same date:

Pursuant to your note this a.m., DI and DO
redrafted the blind memo on the Sandinista
Military Actions and Intentions. . . . DIA [Defense
Intelligence Agency] wanted to prepare a dissent.
DIA has not yet formally submitted its position, but
we have been led to understand that its approach will
be that the incident represented more a target of
opportunity for the Sandinistas rather than being
representative of any clear strategy. Also, you should
know that in the past we have had some difficulty in
coordinating pieces on the fighting with INR (of
State Department) which has estimated lower num-
bers of troops involved in recent operations.*^

Casey subsequently expressed his dissatisfaction
with the revised CIA assessment in a memorandum to
the C/CATF on April 3:

[the DDI material] still does not make the point
that this is what is trying to be represented as a
target of opportunity and the incursion appears to
us to be a long-planned effort designed to knock
out the Contra forces quickly. ...*''

Casey then suggested that alternatively his point be
incorporated into a memorandum which should be
used for the following purposes:

382

Chapter 24

a. In Latin American countries "[i]t should be taken
to the highest level of government available in the
hope that it would either influence those governments
to be supportive of the Contra program and upcom-
ing debate or at least refrain from undercutting its
cause up here."*^

b. "A fully sanitized version should be made avail-
able to OIlie North, Pat Buchanan and Elliott Abrams
for their purposes here. I'll leave it up to you to get
the materials on to Elliott, Pat and Ollie."*®

Subsequent developments in Honduras confirmed
that the Honduras "emergency" was mainly in Wash-
ington. On Tuesday, March 25, when President
Reagan ordered the emergency military aid, the U.S.
Commander in Chief, South, General John Galvin,
arrived in Tegucigalpa to assess the situation and pro-
vide intelligence and advice to the Honduran govern-
ment, President Azcona of Honduras left the capital
for a seaside vacation.*'

Another example of the selective misuse of intelli-
gence occurred in November 1986, after Casey had
meetings in several Central American capitals. The
local CIA station chiefs attended those meetings and
cabled reports of the meetings to the C/CATF, who
was to use these cables as the basis for a draft report
on the Director's trip.

One of the Central American Presidents was criti-
cal of U.S. policies, particularly those supporting the
Nicaraguan armed Resistance. The U.S. Ambassador
in that country told Casey that most Latin American
countries opposed U.S. policy in Central America.
Yet, the remarks critical of U.S. policy were omitted
from the draft trip report prepared for Casey by the
C/CATF. 8 8

On November 23, Director Casey discussed his trip
to Central America in a letter to President Reagan:
"On Thursday, I returned . . . from . . . Central
America. I found the commandantes and the fighting
men of the FDN in high spirit and ready to go. In
stark contrast, the leaders [of Central American coun-
tries] were scared to death that we would not stay the
course . . . ."** In fact, one of the leaders refused to
meet with Casey, and another was critical of U.S.
policies. Casey chose to give the President a distorted
picture of the attitudes of the Central American presi-
dents effectively reinforcing his own view of what
U.S. policy should be.

Misrepresentation of intelligence also occurred in
the Iran initiative. In memorandums recommending
the January Findings, Poindexter told the President
that Iran was in danger of losing the war with Iraq.
According to Poindexter, Casey, agreed with this as-
sessment. Yet, the Secretary of State, the Secretary of
Defense, and Clair George all testified that the intelli-
gence community was of the opposite view — that Iran
had the upper hand in the war.

Secretary Shultz asserted that in connection with
the Iran initiative, the intelligence "he [the President]
was getting . . . was faulty about terrorism."*" The

reason, according to Shultz, was that there was a
problem of keeping "intelligence separated from
policy and control over policy was very much in play
and the Director of Central Intelligence wanted to
keep himself very heavily involved in this policy
which he had been involved in apparently all
along. "^'

The misuse of intelligence was a subject ancillary to
the mandate given the Committees by Congress. The
Committees included these examples because the seri-
ous implications they pose for decisionmaking. This
misuse of intelligence by a Director of Central Intelli-
gence, the National Security Advisor, or any Senior
Intelligence official, frustrates the ability of those
within the executive branch and Congress to arrive at
decisions based upon sound national policy judge-
ments.

Conclusions

Out of necessity, covert activities are conducted, and
nearly all are approved and monitored, in secret. Be-
cause they are not subject to public debate and scruti-
ny, they must be examined carefully within the practi-
cal constraints imposed by the need for operational
security. It has been the United States' historic
achievement to develop a system of law, using stat-
utes, executive orders, regulations, notification proce-
dures, that provides this scrutiny and protection. The
Committees conclude:

(a) Covert operations are a necessary component of
our Nation's foreign policy. They can supplement, not
replace, diplomacy and normal instruments of foreign
policy. As National Security Adviser Robert McFar-
lane testified, "it is clearly unwise to rely on covert
action as the core of our policy."®^ The government
must be able to gain and sustain popular support for
its foreign policy through open, public debate.

(b) Covert operations are compatible with demo-
cratic government if they are conducted in an ac-
countable manner and in accordance with law. Laws
mandate reporting and prior notice to Congress.
Covert action Findings are not a license to violate the
statutes of the United States.

(c) As the Church Committee wrote more than a
dozen years ago. "covert actions should be consistent
with publicly defined United States foreign policy
goals."*^ But the policies themselves cannot be secret.

(d) All Government operations, including covert
action operations, must be funded from appropriated
monies or from funds known to the appropriate com-
mittees of the Congress and subject to Congressional
control. This principle is at the heart of our constitu-
tional system of checks and balances.

(e) The intelligence agencies must deal in a spirit of
good faith with the Congress. Both new and ongoing
covert action operations must be fully reported, not

383

Chapter 24

cloaked by broad Findings. Answers that are techni-
cally true, but misleading, are unacceptable.

(0 Congress must have the will to exercise over-
sight over covert operations. The intelligence commit-
tees are the surrogates for the public on covert action
operations. They must monitor the intelligence agen-
cies with that responsibility in mind.

(g) The Congress also has a responsibility to ensure
that sensitive information from the executive branch
remains secure when it is shared with the Congress. A
need exists for greater consensus between the Legisla-
tive and executive branches on the sharing and pro-
tection of information.

(h) The gathering, analysis, and reporting of
intelligence should be done in such a way that there
can be no question that the conclusions are driven by
the actual facts, rather than by what a policy advo-
cate hopes these facts will be.

It has been observed that a country without en-
emies has no need of an army or an intelligence
agency.^*

The United States of America, as a great power
with worldwide interests, will continue to have to
deal with nations that have different hopes, values,
and ambitions. These differences will inevitably lead
to conflicts. History reflects that the prospects for
peaceful settlement are greater if this country has
adequate means for its own defense, including effec-

tive intelligence and the means to influence develop-
ments abroad.

Organized and structured secret intelligence activi-
ties are one of the realities of the world we live in,
and this is not likely to change. Like the military,
intelligence services are fully compatible with demo-
cratic government when their actions are conducted
in an accountable manner and in accordance with
law.

This country has been fortunate to have a military
that is sensitive to the constraints built into the Con-
stitution and to the necessity of respecting the Con-
gress' responsibilities. This attitude of the military has
won the trust of the American people, as George C.
Marshall, the Chief of Staff of the Army during
World War IL explained to one of his officers:

But we have a great asset and that is that our
people, our countrymen, do not distrust us and
do not fear us. Our countrymen, our fellow citi-
zens, are not afraid of us. They don't harbor any
ideas that we intend to alter the government of
the country or the nature of this government in
any way. This is a sacred trust. . . .

Like the military, the intelligence services can func-
tion only with the trust and support of their country-
men. If they are to earn that trust, they must heed
Marshall's words. ®^

384

Chapter 24

Chapter 24

1. For a discussion of these issues, see G.F. Treverton,
Covert Action: The Limits of Intervention in the Post-war
World (Basic Books 1987).

2. See U.S. Congress, Senate Select Committee to Study
Governmental Operations with Respect to Intelligence Ac-
tivities, Final Report and Hearings, Book IV: Supplementa-
ry Detailed Staff Reports on Intelligence and Military Intel-
ligence (GPO 1975-76).

3. The distinction between clandestine intelligence collec-
tion and counterespionage, on the one hand, and covert
military, political, and economic actions, on the other, is
addressed in R.S. Cline, The CIA Under Reagan. Bush and
Casey (Acropolis Books, 1981); S. Kent, Strategic Intelli-
gence for American World Policy (Prmceton University Press,
1966); and L.B. Kirkpatrick, The United States Intelligence
Community: Foreign Policy and Domestic Activities (Hill &
Wan, 1973).

4. Section 3.4(h), Executive Order 12333, December 4,
1981. Sciaroni Ex. 14, at B116.

5. Id

6. See C. Meyer, Facing Reality: From World Federalism
to the CIA, (Harper and Row, 1980) for a discussion of U.S.
covert action in Europe to counter the Soviet political and
propaganda offensive during the postwar years.

7. Quoted in W. M. Leary, ed.. The Central Intelligence
Agency: History and Documents 131-33 (University of Ala-
bama Press, 1984).

8. Id

9. The Senate Select Committee to Study Governmental
Operations with Respect to Intelligence Activities (com-
monly known as the Church Committee) stated in its 1975
report to the Senate: "Non-attribution to the United States
for covert operations was the original and principal purpose
of so called doctrine of plausible denial." Evidence before
the Committee clearly demonstrates that this concept, de-
signed to protect the United States and its operatives from
the consequences of disclosures, has been expanded to mask
decisions of the President and his senior staff members. A
further consequence of the expansion of this doctrine is that
subordinates, in an effort to permit their superiors to 'plausi-
bly deny' operations, fail to fully inform them about those
operations. 'Plausible denial' has shaped the process for
approving and evaluating covert actions. For example, the
40 Committee and its predecessor, the Special Group, have
served as 'circuit breakers' for Presidents, thus avoiding
consideration of covert actions by the Oval Office. 'Plausi-
ble denial' can also lead to the use of euphemism and
circumlocution, which are designed to allow the President
and other senior officials to deny knowledge of an operation
should it be disclosed." U. S. Congress. Senate. Alleged
Assassination Plots Involving Foreign Leaders, an Interim
Report of the Select Committee to Study Governmental
Operations with Respect to Intelligence Activities, Report
No. 94-465, 94th Congress, 1st Session (1975), at 11.

10. See Youngstown Sheet & Tube v. Sawyer, 343 U.S.
579, 637 (1952), Jackson, J., concurring. "When the Presi-
dent acts in absence of either a Congressional grant or
denial of authority, he can only rely upon his own inde-
pendent powers, but there is a zone of twilight in which he
and Congress may have concurrent authority, in which its
distribution is uncertain."

11. E.g., Article 18 of the Organization of American
States (OAS) Charter, which provides in part that: "No

State or group of States has the right to intervene, directly
or indirectly, for any reason whatever, in the internal or
external affairs of any other State. The foregoing principle
prohibits not only armed forces but also any other form of
interference or attempted threat against the personality of
the State or against its political, economic and cultural
elements."

12. 50U.S.C. Sec. 401 et seq.

13. H. Moses, The Clandestine Service of the Central Intel-
ligence Agency, 3-4 (Association of Former Intelligence Offi-
cers, 1983).

14. Interview with Lawrence Houston, 7/8/83, quoted in
J. Ranelagh, The Agency: The Rise and Decline of the CIA,
n.7 at 767 (Simon & Schuster 1986).

15. Ranelagh, at 279-83.

16. W. E. Colby, Honorable Men: My Life in the CIA
(Simon & Schuster 1978).

17. Covert Action in Chile, 1963-1973, Committee Print,
Staff Report of the Select Committee to Study Governmen-
tal Operations with Respect to Intelligence Operations. U.S.
Senate. 94th Congress, 1st Session, 1975.

18. 22 U.S.C. Sec. 2422.

19. This resulted in the Report to the President by the
Commission on CIA Activities Within the United States
(commonly known as The Rockefeller Commission) (GPO
1975).

20. D. Wise, The American Police State (Random House
1976).

21. Hearings and Final Report of the Select Committee to
Study Government Operations With Respect to Intelligence
Activities, United States Senate, 94th Congress, Vol. 1-7,
and Final Report, Books 1-5 (Church Committee).

22. House Select Committee on Intelligence, Recommen-
dations of the Final Report of the House Committee on
Intelligence (GPO 1976) (Pike Committee Report).

23. U. S. Congress. Senate. Alleged Assassination Plots
Involving Foreign Leaders, an Interim Report of the Select
Committee to Study Governmental Operations with Re-
spect to Intelligence Activities, Report No. 94-465, 94th
Congress, 1st session (1985), at 16, 25-26, 65, 67, 117.

24. 22 U.S.C. Sec. 2422.

25. The Church Committee stated: "The concept of plau-
sible denial, at least as it applies to the President, within the
government 'is dead.' Main new covert operations cannot
be undertaken without the knowledge, and approval, of the
Chief Executive." Church Committee Final Report, Book I,
at 58.

26. Formerly Pub. L. 93-559, Sec. 32, 88 Stat. 1804
(1974).

27. 41 Fed. Reg. 7703 (1976).

28. 43 Fed. Reg. 3674 (1978).

29. 22 U.S.C. Sec. 2422.

30. Senate Report No. 96-730, May 15, 1980, to accompa-
ny S. 2284, at 4.

31. Id at 2.

32. Id at 12.

33. Id at 5.

34. Presidential Statement on U.S. Intelligence Activities,
12/4/81, Public Papers of Ronald Reagan, 1981, at 1126-27.

35. Executive Order 12333, 12/4/81, Sciaroni Ex. 14, at
B102 16.

36. Section 3.1, Executive Order 12333, December 4,
1981, at B114.

385

Chapter 24

37. U.S. Congress. House Permanent Select Committee
on Intelligence, Hearings before the Subcommittee on Leg-
islation, H.R. 1013, H.R. 1371, and Other Proposals Which
Address the Issue of Affording Prior Notice of Covert
Actions to the Congress, 100th Cong., 1st Sess., at 176
(June 10. 1987).

38. Chronology of House Permanent Select Committee
on Intelligence and Mining Activities, Internal Memoran-
dum. See Chapter 2.

39. C0616-C0621.

40. W.

41. The Finding states: "Support and conduct . . . para-
military operations against the Cuban presence and Cuban
Sandinista support infrastructure in Nicaragua and else-
where in Central America." N44649.

42. Gregg Memo, 7/12/82, to W. Clark; Subj: "Proposed
Covert Action Finding on Nicaragua." N44654.

43. Inman Int., 3/16/87, at 6.

44. Sporkin Int., 3/19/87, at 2.

45. Id.

46. See Chapter 22.

47. See New York Times, 5/16/87, at Al. The President
stated, "As a matter of fact, I was very definitely involved
in the decisions about support to the freedom fighters. It
was my idea to begin with."

48. Tower Report, at III-24.

49. McFarlane Test., 7/14/87, at 201, 221-22; 5/11/87, at
7 25.

50. North Test.. 7/7/87, at 24; id. 7/8/87, at 226; id 7/
13/87, at 128-30; Poindexter Test., 7/15/87, at 187-88.

51. McFarlane PROF Note, 11/22/86 at 16:56:33, to
Poindexter, Ex. EM-41.

52. Prof Note, McFarlane to Poindexter, 11/21/86,
N 12670.

53. Meese Test.. 7/29/87, at 231.

54. Ex. JMP-18; Poindexter Test., 7/15/87, at 43; McMa-
hon Dep., 6/1/87, at 94-97.

55. 22 U.S.C Sec. 2751 et seq.

56. Poindexter Test., 7/15/87, at 94.

57. Id at 44.

58. Letter from William French Smith, Attorney General
of the United States, to William J. Casey, Director of Cen-
tral Intelligence, 10/5/81, with attachments. N10019-40.

59. Id

60. Ex. JMP-28.

61. Id

62. Pub. L. 99-399, Sec. 509(a) (Aug. 27, 1986).

63. Sporkin Test., 6/24/87, at 183 (emphasis added).
Judge Sporkin had left the CIA before the 1986 amendment
was completed.

64. Section 2.8, Executive Order 12333, December 4,
1981.

65. Hearings before HPSCI, 10/14/86.

66. George Test., 8/6/87, at 34.

67. Hearings Before the Senate Foreign Relations Com-
mittee, 10/10/86, at 16.

68. C/CATF Test., 8/5/87, at 58.

69. Id, at 62.

70. Id. at 171-75.
Id., at 185; George Dep., 8/6/87, at 80.
N7015.

Gates, Tower Test.. 12/4/86, at 38.
Id. at 18-19.

George Test., 8/6/87, at 175.
CIA Special Analysis "Resupply Problems for Insur-

at 9 (Jan. 8. 1986). CIIN 1391. TCS 2706/86, C3327.

71.
72.
73.
74.
75.
76.
gents,"

77. C3315-17.

78. C3315.

79. C4929.

80. Transcript of 3/25/86 Press Briefing. N38896.

81. "U.S. Pushed Honduras to Admit Raid," Miami
Herald, 3/28/86, at lA. 16A.

82. C4921.

83. Id

84. C4920.

85. Id

86. Id

87. Associated Press wire article, by George Gedda, 3/
25/86, 10:14 AET.

88. C/CATF Test., 5/5/87, at 233-35.

89. C1698.

90. Shultz Test., 7/23/87, at 162.

91. Id, at 12.

92. McFariane Test., 5/1/87, at 8.

93. Church Committee, Findings and Conclusions at 448.

94. T. Powers, The Man Who Kept the Secrets: Richard
Helms and the CIA. at vi (Knopf 1979).

95. F.C. Pogue, 3 George Marshall 459 (Viking Press
1973).

386

Chapter 25

Powers of Congress and the President in the

Field of Foreign Policy

Under our Constitution, both the Congress and the
Executive are given specific foreign policy powers.
The Constitution does not name one or the other
branch as the exclusive actor in foreign policy. Each
plays a role in our system of checks and balances to
ensure that our foreign policy is effective, sustainable
and in accord with our national interests.

Key participants in the Iran-Contra Affair had seri-
ous misconceptions about the roles of Congress and
the President in the making of foreign policy. Poin-
dexter testified, referring to his efforts to keep infor-
mation about the covert action in support of the Con-
tras from the Congress, "I simply did not want any
outside interference." ' North testified, "I didn't want
to show Congress a single word on this" same covert
action.^ In Poindexter's and North's view. Congress
trespassed on the prerogatives and policies of the
President and was to be ignored or circumvented
when necessary. If Congress denied the President
funds to implement his foreign policy, they believed
that the President could and should seek funds from
private parties and foreign governments. If Congress
sought to investigate activities which were secretly
taking place, they believed executive branch officials
could withhold information to conceal operations.
These practices were required, in their judgment, to
promote the President's policies.

In Part IV, these Committees set forth the record
of the misrepresentations, half-truths, and concealment
employed by some within the executive branch to
prevent Congress from learning about the NSC staffs
covert activities. Here, we note that the attitude that
motivated this conduct was based on a view of Con-
gress' role in foreign policy that is without historical
or legal foundation.

The argument that Congress has but a minor role in
foreign policymaking is contradicted by the language
of the Constitution, and by over 200 years of history.
It is also shortsighted and ultimately self-defeating.
American foreign policy and our system of govern-
ment cannot succeed unless the President and Con-
gress work together.

The Witnesses' Position at the
Hearings

During the public hearings, both Poindexter and
North characterized Congress as meddlers in the
President's arena. Both asserted that their actions in
providing covert support to the Contras were lawful
despite the prohibitions contained in the Boland
Amendment.'' In light of that position, Poindexter
was specifically asked "why it was when the NSC
was carrying out military support for the Contras,
you felt it necessary to withold information from the
Congress." * In his responses, Poindexter said in part
that the covert action in Central America was an
implementation of the President's policy, and that
"we didn't want more restrictive legislation intro-
duced in some new form of the Boland Amend-
ment." ^ Characterizing such legislation as "outside
interference," Poindexter responded to questions:

Q. Now, the outside interference we are talking
about was Congress, and I take it the reason they
were inquiring about Colonel North's activities,
the Government's activities in support of the
Contras, was precisely so that they could fulfill
with information their constitutional function to
pass legislation, one way or the other. Isn't that
true?

A. Yes, I suppose that is true.

Q. And that you regarded as outside interfer-
ence?

A. The point was, and still is, that the President
has the constitutional right and, in fact, the con-
stitutional mandate to conduct foreign policy. His
policy was to support the Contras.®

North also repeatedly stated his view that "it was
within the purview of the President of the United
States to conduct secret activities ... to further the
policy goals of the United States." ' North claimed
that the President had the power under the Constitu-
tion to conduct "secret diplomacy" because "the
President can do what he wants with his own staff" *
He stated that the President had a "very wide man-

387

Chapter 25

date to carry out activities, secretly or publicly, as he
chooses." ^

The Constitutional Frameworl(

The Constitution itself gives no support to the argu-
ment that the President has a mandate so broad. The
words "foreign policy" do not appear in the Constitu-
tion, and the Constitution does not designate the
President as the sole or dominant actor in foreign
policy.

The only foreign policy powers expressly granted
to the Executive in the Constitution are the powers to
nominate Ambassadors, to negotiate treaties, and to
direct the Armed Forces as Commander-in-Chief.
Two of these powers are specifically conditioned on
Senate approval: the Senate, through its power of
advise and consent, can confirm or reject Ambassa-
dors and ratify or reject treaties.

On the other hand, the Constitution expressly
grants Congress the power to regulate foreign com-
merce, to raise and support armies, to provide and
maintain a navy, and to declare war. Congress is
given the exclusive power of the purse. The Execu-
tive may not spend funds on foreign policy projects
except pursuant to an appropriation by Congress.

Judicial Decisions Recognize a Shared
Power

Judicial decisions have not found in the Constitu-
tion any exclusive Presidential power to conduct for-
eign affairs. Questions involving foreign policy are
infrequently litigated. But on those occasions where
opinions are on point, the courts routinely have de-
scribed the conduct of foreign policy as a shared
power between Congress and the President.

Only last year, the Supreme Court, in discussing its
own role in a case involving "this Nation's foreign
relations," recognized "the premier role which both
Congress and the Executive play in this field." '"
Similarly, in 1948 the Supreme Court declined to take
jurisdiction of a case turning on a foreign policy issue,
noting that such issues "are wholly confided by our
Constitution to the political departments of the gov-
ernment. Executive and Legislative."'' In a 1979
case, the D.C. Circuit Court of Appeals noted that
Congress' role in foreign policy stems from its power
of the purse and its authority to investigate the Ex-
ecutive's faithful execution of the law: "The legisla-
ture's powers, including prominently its dominant
status in the provision of funds, and its authority to
investigate the Executive's functioning, establish au-
thority for appropriate legislative participation in for-
eign affairs." '^

In 1977, the D.C. Circuit rejected the argument
that the Executive had "absolute discretion in the area
of national security." '^ The Court noted that the
Constitution assigns each branch powers "equally in-

separable from the national security." '■* Finally, the
Court dismissed the executive branch's claim that it
could prevent Congress from obtaining information
that might impact on national security since the Ex-
ecutive's concern with secrecy "conflicts with an
equally legitimate assertion of authority by Congress
to conduct investigations relevant to its legislative
functions." '^

Congress's role in obtaining and protecting confi-
dential information relating to foreign policy has also
been recognized in judicial opinions. In United States
V. Nixon, the Supreme Court recognized that "mili-
tary, diplomatic, or sensitive national security se-
crets" '® may be entitled to specially privileged status
in certain contexts, but went on specifically to state
that the case had nothing to do with the balance
between the President's "generalized interest in confi-
dentiality . . . and congressional demands for informa-
tion." '■' And, as Justice Black noted in his concur-
rence in the 1971 Pentagon Papers case, "[t]he guard-
ing of military and diplomatic secrets at the expense
of informed representative government provides no
real security for our Republic." ■*

The D.C. Circuit has also underscored that the
duty of protecting national security secrets is shared
jointly by Congress and the President: "TTiere is Con-
stitutional power, under the Necessary and Proper
Clause, in the federal government to keep national
security information secret. This is typically a govern-
ment power, to be exercised by the legislative and
executive branches acting together." '*

Judicial opinions, thus, have consistently recognized
that Congress shares with the President powers in the
conduct of foreign policy and also shares with him
the right of access to, and the duty to protect, sensi-
tive national security information.

The Curtiss-W right Case

In urging a broad interpretation of presidential
power, various witnesses before these Committees in-
voked the Supreme Court's 1936 decision in United
States V. Curtiss-W right Export Corporation.'^'^ Their
reliance on this case is misplaced.

In Curtiss-Wright, Congress, by statute, had delegat-
ed to the President the power to prohibit the sale of
arms to countries in an area of South .\merica if the
President believed the prohibition would promote
peace. The Curtiss-Wright Corporation claimed that
the power to make this determination was a legisla-
tive power that Congress could not delegate to the
President.

Witnesses at the hearings misread this case to justi-
fy their claim that the President had broad inherent
foreign policy powers to the virtual exclusion of Con-
gress. Curtiss-Wright did not present any such issue.
The case involved the question of the powers of the
President in foreign policy where Congress expressly
authorizes him to act; it did not involve the question

388

Chapter 25

of the President's foreign policy powers when Con-
gress expressly forbids him to act.

In Curtiss-Wright, the Court upheld broad delega-
tions by Congress of power to the President in mat-
ters of foreign affairs. Writing for the Court, Justice
Sutherland said that legislation within "the interna-
tional field must often accord to the President a
degree of discretion and freedom from statutory re-
striction which would not be admissible were domes-
tic affairs alone involved." ^'

In language frequently seized on by those seeking
to claim that the President's role in foreign policy is
exclusive, Justice Sutherland noted that the President
was acting not only with a delegation of power by
the legislature, but also with certain powers the Con-
stitution gave directly to him:

It is important to bear in mind that we are here
dealing not alone with an authority vested in the
President by an exertion of legislative power, but
with such an authority plus the very delicate,
plenary and exclusive power of the President as
the sole organ of the federal government in the
field of international relations — a power which
does not require as a basis for its exercise an act
of Congress, but which, of course, like every
other governmental power, must be exercised in
subordination to applicable provisions of the
Constitution.^^

Some have tried to interpret this passage as stating
that the President may act in foreign affairs against
the will of Congress. But that is not what it says. As
Justice Jackson later observed, the most that can be
drawn from Justice Sutherland's language is the inti-
mation "that the President might act in external af-
fairs without congressional authority, but not that he
might act contrary to an Act of Congress." ^^ More
recently, in Dames & Moore v. Regan,^* the Supreme
Court cautioned that the broad language in Curtiss-
Wright must be viewed only in context of that case.
Writing for the majority. Justice (now Chief Justice)
Rehnquist expressed the Court's view of the appropri-
ate relationship between the executive and the legisla-
tive branches in the conduct of foreign policy:

When the President acts pursuant to an express
or implied authorization from Congress, he exer-
cises not only his powers but also those delegated
by Congress. In such a case the executive action
'would be supported by the strongest presump-
tions and widest latitude of judicial interpretation,
and the burden of persuasion would rest heavily
upon any who might attack it.' . . . When the
President acts in the absence of congressional
authorization he may enter a 'zone of twilight in
which he and Congress may have concurrent au-
thority, or in which its distribution is uncertain.'
... In such a case, the analysis becomes more
complicated, and the validity of the President's

action, at least so far as separation-of-powers
principles are concerned, hinges on a consider-
ation of all the circumstances which might shed
light on the views of the Legislative Branch
toward such action, including 'congressional iner-
tia, indifference or quiescence.' . . . Finally,
when the President acts in contravention of the
will of Congress, 'his power is at its lowest ebb'
and the Court can sustain his actions "only by
disabling the Congress from action on the sub-
ject." ^*

Similarly, in 1981, the D.C. Circuit cautioned
against undue reliance on the quoted passage from
Curtiss-Wright: "To the extent that denominating the
President as the 'sole organ' of the United States in
international affairs constitutes a blanket endorsement
of plenary Presidential power over any matter extend-
ing beyond the borders of this country, we reject that
characterization." ^®

In calling the President the "sole organ" of the
Nation in its relations with other countries. Justice
Sutherland quoted from a speech by John Marshall in
1800 when Marshall was a Member of the House of
Representatives: "As Marshall said in his great argu-
ment of March 7, 1800, in the House of Representa-
tives, 'The President is the sole organ of the nation in
its external relations, and its sole representative with
foreign nations.' Annals, 6th Cong., col. 613." ^''

The reader might assume from this passage that
Marshall advocated an exclusive, independent power
for the President in the area of foreign affairs, free
from legislative control. When his statement is placed
in the context of the "great argument of March 7,
1800," however, it is clear that Marshall regarded the
President as simply carrying out the law as estab-
lished by statute or treaty. The House had been debat-
ing a decision by President John Adams to turn over
to England a person charged with murder. Some
members thought the President should be impeached
for encroaching upon the judiciary, since the case was
already pending in court. Marshall replied that Presi-
dent Adams was executing a treaty approved by the
Senate that had the force of law. Here is the full
context of Marshall's "sole organ" statement:

The case was in its nature a national demand
made upon the nation. The parties were the two
nations. They cannot come into court to litigate
their claims, nor can a court decide on them. Of
consequence, the demand is not a case for judi-
cial cognizance.

The President is the sole organ of the nation in
its external relations, and its sole representative
with foreign nations. Of consequence, the
demand of a foreign nation can only be made on
him.

389

Chapter 25

He possesses the whole Executive power. He
holds and directs the force of the nation. Of
consequence, any act to be performed by the
force of the nation is to be performed through
him.

He is charged to execute the laws. A treaty is
declared to be law. He must then execute a
treaty, where he, and he alone, possesses the
means of executing it.

The treaty, which is a law, enjoins the per-
formance of a particular object. The person who
is to perform this object is marked out by the
Constitution, since the person is named who con-
ducts the foreign intercourse, and is to take care
that the laws be faithfully executed. The means
by which it is to be performed, the force of the
nation, are in the hands of this person. Ought not
this person to perform the object, although the
particular mode of using the means has not been
prescribed? Congress, unquestionably, may pre-
scribe the mode, and Congress may devolve on
others the whole execution of the contract; but,
till this be done, it seems the duty of the Execu-
tive department to execute the contract by any
means it possesses.^*

Moreover, as Professor Corwin — a respected schol-
ar on the American Presidency — has written, al-
though Marshall referred to the President as the "sole
organ of the nation in its external relations,"
"[c]learly, what Marshall had foremost in mind was
simply the President's role as instrument of communi-
cation with other governments." ^^

While the President is not confined to acting
merely as an "instrument of communication with
other governments," neither does the President enjoy
absolute or exclusive power in matters affecting for-
eign affairs. The Curtiss-Wright opinion itself notes
that the President's authority in foreign affairs "must
be exercised in subordination to the applicable provi-
sions of the Constitution." ^°

At the hearings. North cited to the circumstances
surrounding Senate consideration of the Jay Treaty
during the presidency of George Washington as sup-
port for his claim that the President had the power to
withhold information from Congress. There, President
Washington "refused to accede to a request to lay
before the House of Representatives the instructions,
correspondence and documents relating to the negoti-
ation of the Jay Treaty." ''

Reliance on President Washington's position with
respect to information about the Jay Treaty is errone-
ous. President Washington did not argue that he had
the power to withhold documents from Congress. As
the opinion in Curtiss-Wright makes clear, President
Washington only withheld these "correspondence and
documents" from one House of Congress, not from
the entire legislative branch. He gave the documents

to the Senate; he withheld them from the House be-
cause the documents related to a treaty negotiation,
and the power to ratify or reject treaties is reserved
under the Constitution to the Senate.

Circumvention of Congress'
Constitutional Power of the Purse

In testifying before these Committees, North and
Poindexter indicated their view that whatever power
Congress may have in foreign policy derived solely
from its power of the purse. They reasoned that so
long as public money was not expended. Congress
had no role and the President was free to pursue his
foreign policy goals using private and third-country
funds.

North said the President "was fully within his
rights to send us off to talk to foreign heads of state,
to seek the assistance of those foreign heads of state
to use other than U.S. Government monies, and to do
so without a Finding." ^^ Poindexter supported the
concept of circumventing Congressional opposition to
the President's foreign policy by using nonappropriat-
ed funds:

Congress has put some restrictions on the use of
proposed funds. Those restrictions didn't apply to
private funds. They didn't apply to third-country
funds.

And the restrictions in the Boland Amendment,
as I have said, did not apply to the NSC staff. ^^

These claims by North and Poindexter strike at the
very heart of the system of checks and balances. To
permit the President and his aides to carry out covert
actions by using funds obtained from outside Congress
undermines the Framer's belief that "the purse and
the sword must never be in the same hands."

These Committees have rejected these claims in
Chapter 27. Suffice it to say here that, under the view
of North and Poindexter, a President whose appro-
priation requests were rejected by Congress could
raise money from private sources or third countries
for armies, military actions, arms systems, and even
domestic programs. That is the path to dictatorship.

Besides usurping Congress' power of the purse, the
use of foreign funds has another, equally dangerous,
effect on our democratic processes. That effect was
explored by a Member of the panel during McFar-
lane's testimony about the solicitation of Country 3
for assistance to the Contras:

Q: In October 1985 when the State Department
was scheduling an appointment for Colonel
North to meet with one of these countries that
later contributed $2 million, I was involved in a
tough legislative battle in this House. On October
12, I believe, of 1985, this House passed a textile

390

Chapter 25

bill, very controversial. At that very time, Colo-
nel North apparently was soliciting, from a
nation that was impacted by this bill, funds se-
cretly and that country later delivered $2 million,
according to the testimony.

The President vetoed that bill in December
1985 and between December 1985 and August
1986, when the Congress decided to sustain the
President by an eight-vote margin, there were
entreaties apparently made to many other nations
that were impacted by this legislation. . . .

So this is the type of thing that is extremely
dangerous from a perception standpoint, is it not?

A: I agree with that, yes.

Q: I think I could go back into my District or
around this country and say while I was fighting
for this bill, unbeknownst to me one of the na-
tions that was severely impacted was secretly
giving millions of dollars to the executive branch
that later vetoed the bill, that ought to be disturb-
ing to me, don't you think?

A: I agree sir."*

It is a mistake for the United States to engage in
what Assistant Secretary of State Elliott Abrams
called "tin cup" diplomacy. It is unseemly for a
global superpower to ask other nations to finance its
foreign policy. Moreover, allowing foreign policy to
be conducted with funds supplied by private parties
and foreign governments is likely to create the expec-
tation by the donor nations that they can expect
something in return for their largesse. These concerns
were, of course, raised by Congressional actions when
in August 1985 it allowed the Administration to solic-
it humanitarian assistance for the the Contras from
third countries. But since this decision was made
openly and in accordance with the normal processes
of government, the reward for any donor nation
could also be openly considered and agreed upon by
the executive and legislative branches. There would
be no need to hide the help, and no reason to hide the
reward.

But by seeking private and third-country aid for the
Contras without Congressional notification — much
less approval — the Administration did more than
engage in an unfortunate fundraising effort that
opened the door to expectations of secret return
favors. This clandestine financing operation under-
mined the powers of Congress as a coequal branch
and subverted the Constitution.

Foreign Policy as a Shared Power

The sharing of power over foreign policy requires
consultation, trust, and coordination. As President
Reagan told a joint session of Congress on April 27,
1983: "The Congress shares both the power and the
responsibility for our foreign policy."

In the aftermath of the Vietnam war, Secretary of
State Henry Kissinger observed:

The decade-long struggle in this country over
executive dominance in foreign affairs is over.
The recognition that the Congress is a coequal
branch of government is the dominant fact of
national politics today. The executive accepts
that the Congress must have both the sense and
the reality of participation; foreign policy must be
a shared enterprise. ^ ^

The need for such a cooperative relationship was
stressed in the testimony received by these Commit-
tees from Secretary of State George Shultz and Sec-
retary of Defense Caspar Weinberger. Each recog-
nized that both Congress and the Executive had fun-
damental duties in the area of foreign policy.

Secretary Shultz rejected the notion that there is a
need "to lie and cheat in order to be a public servant
or to work in foreign policy." ^^ He emphasized that
Congress and the President must work cooperatively
on foreign affairs:

[W]e have to respect the fundamental duties of
our colleagues on the Hill, but we have to expect
them to respect ours and what that means is . . .
while we have a system of separation of powers
in the way it is constituted, it inevitably means
we also have a system of sharing powers ....

You have to have a sense of tolerance and re-
spect and a capacity to work together and a
desire to do it, for us to share information, for
you to put forward your ideas, not to keep teUing
us all the time how to run things. But keep tabs.
To have a way of interacting . . . .^^

Secretary Weinberger was asked at the hearings
whether frequent consultation with Congress on for-
eign policy issues was a valuable opportunity for the
President. He replied:

Indeed, yes, sir. Not only because it is very
useful to have the advice . . . but I also think that
it is important for the longer-range success of any
kind of activity, because I have frequently made
the point in private meetings that we can't fight a
war on two fronts.

We can't fight with the enemy, whoever it may
be, and we can't fight with the Congress at the
same time.

391

Chapter 25

We need to have the United States Government
unified if any kind of activity is going to succeed
over the long run and we have a very different
governmental system than most other countries.

We deliberately divided authority and power to
keep government ineffective and weak, that is
what the Founders had in mind. They considered
it to a considerable extent, but we can work
within that. But we do have to do it in a way
that gets as much general acceptance of a course
before we embark on it whenever we possibly
can as soon thereafter as we can.^®

Questioned further whether clandestine undertakings
needed the support of the Congress, he replied:

I think without any question, sir, because you
frequently with clandestine activities, which we
have to do in this kind of world, you are not able
to have public support.

So you certainly need to have Congressional un-
derstanding. Congressional approval wherever it
can be obtained, and that is done through consul-
tation . . . .^^

In remarks to Poindexter near the end of Poin-
dexter's testimony before these Committees, a Repub-
lican Member of the House Select Committee high-
lighted the need for honest consultation where the

Constitution divides power among branches of gov-
ernment: "The reason for not misleading the Congress
is a practical one. It is stupid. It is self-defeating
because while it may, in fact, allow you to prevail in
the problem of the moment, eventually you destroy
the President's credibility. "■'°

Conclusion

The questions before these Committees concerning
the foreign policy roles of Congress and the President
are not abstract issues for legal scholars. They are
practical considerations essential to the making of
good foreign policy and the effective functioning of
government. The theory of the Constitution is that
policies formed through consultation and the demo-
cratic process are better, and wiser, than those formed
without it.

The Constitution divided foreign policy powers be-
tween the legislative and executive branches of gov-
ernment. That division of power is fundamental to
this system, and acts as a check on the actions of each
branch of government. Those who would take short-
cuts in the constitutional process — mislead the Con-
gress or withhold information — show their contempt
for what the Framers created. Shortcuts that bypass
the checks and balances of the system, and excessive
secrecy by those who serve the President, do not
strengthen the President. They weaken the President
and the constitutional system of government.

392

Chapter 25

Chapter 25

1. Poindexter Test., Hearings, 100-8 at 158.

2. North Test., Hearings, 100-7, Part I at 87.

3. Poindexter Test., Hearings, 100-8 at 155, 158.

4. Poindexter Test., Hearings, 100-8 at 158.

5. M

6. Id. at 159.

7. North Test., Hearings, 100-7, Part II at 38.

8. Id. at 37.

9. Id at 34.

10. Japan Whaling Assn. v. American Cetacean Society,
106 S.Ct. 2860, 2866 (1986).

11. C. & S. Air Lines v. Waterman Corp., 333 U.S. 103,
111 (1948).

12. Goldwater v. Carter, 617 F.2d 697, 709 (D.C. Cir.
1979), vacated on other grounds, 444 U.S. 996 (1980).

13. United States v. AT&T, 567 F.2d 121, 128 (D.C. Cir.
1977).

14. Id at 128.

15. Id

16. United States v. Nixon, 418 U.S. 683, 706 (1974).

17. Id. at 712 n. 19. (Emphasis added.)

18. New York Times Co. v. United States, 403 U.S. 713,
719(1971).

19. United States v. AT&T, 551 F.2d 384, 393 (DC.
Cir. 1976) (footnote omitted).

20. United States v. Curtiss-Wright Corp., 299 U.S.
304(1936).

21. W. at 320.

22. Id at 319-320.

23. Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S.
579, 636 n.2 (1952) (Jackson, J., concurring).

24.453 U.S. 654(1981).

25. Id. at 668-69 (emphasis added; quoting in part Jack-
son, J., concurring, in Youngstown Sheet & Tube Co. v.
Sawyer, 343 U.S. at 637-38.

26. American Intern. Group v. Islamic Republic of Iran,
657 F.2d 430, 438 n.6 (D.C. Cir. 1981).

27. United States v. Curtiss-Wright, 299 U.S. at 319.

28. Annals of Cong., 6th Cong., at 613-614 (emphasis
supplied).

29. E. Corwin, The President: Office and Powers 1787-
1957 178 (1957) (emphasis in original).

30. 299 U.S. at 320.

31. W. at 320.

32. North Test., Hearings, 100-7, Part II at 37.

33. Poindexter Test., Hearings, 100-8 at 158.

34. McFarlane Test., Hearings, 100-2 at 279-80.

35. 72 Dept. State Bull. 562 (1975).

36. Shultz Test., Hearings, 100-9 at 232.

37. Shultz Test., Hearings, 100-9 at 236-237.

38. Weinberger Test., Hearings, 100-10 at 208-209.

39. Id at 209.

40. Poindexter Test, Hearings, 100-8, at 246.

393

Chapter 26
The Boland Amendments and The NSC Staff

Beginning in 1983, Congress responded to the Presi-
dent's policy toward the Contras principally through
its power over appropriations — one of the crucial
checks on Executive power in the Nation's system of
checks and balances. Because the President's program
depended upon providing financial assistance to the
Contras, appropriations bills became the forum for
debating what the Nation's policy should be.

Aid to the Contras was controversial from the be-
ginning. The Kissinger Commission,' unanimous on
virtually all other recommendations about Central
America, could not agree on the Contras. The Ad-
ministration's justifications for aid to the Contras were
sometimes contradictory. The President publicly
denied that his goal was to overthrow the Sandinista
Government. Yet the Contras pursued only one
goal — to topple the Sandinistas.

In Congress, the two Chambers found themselves
at odds, with the House generally denying or restrict-
ing and the Senate generally supporting aid for the
Contras. Votes in each Chamber were often decided
by razor-thin margins.

Ultimately, restrictions on assistance to the Contras
were embodied in the Boland Amendments, named
after their chief sponsor. Representative Edward P.
Boland. While Congress applied various requirements
to support for the Contras in each of the six fiscal
years from October 1, 1982, to September 30, 1987,
the legislation for fiscal years 1983, 1985, and 1986
embodied the most important restrictions and will be
designated Boland, I, II, and III, respectively.

The Boland Amendments were compromises be-
tween supporters of the Administration's programs
and opponents of Contra aid. As compromises, they
were written not with the precision of a tax code, but
in the language of trust and with the expectation that
they would be carried out in good faith. None expect-
ed the Administration to secretly seek loopholes, or to
lead Congress to believe that support was not being
given to the Contras when, in fact, it was.

This Chapter focuses on how the Boland Amend-
ments evolved^ and on how one element within the
White House — the National Security Council staff —
discharged its trust under the Boland Amendments.

Boland I: September 27, 1982, to
December 7, 1983

As has been noted in other chapters, the Administra-
tion's efforts on behalf of the Nicaraguan resistance
began not long after the Administration began. By the
end of 1981, as required by law, the Administration
was advising the Intelligence Committees in both
chambers of Congress about the Central Intelligence
Agency's involvement in Nicaragua, which was then
funded out of the CIA's contingency reserve.^ Ac-
cording to the Administration, its covert activities
were intended to interdict the flow of arms from
Nicaragua to rebel forces opposing the government of
El Salvador.* Ultimately, both Intelligence Commit-
tees sought to curtail, or at least channel, the CIA's
activities in the region by restricting the CIA's use of
its contingency reserve funding. The first such restric-
tion was embodied in a classified annex to the intelli-
gence authorization bill for fiscal year 1983, which
became effective September 27, 1982.^

In late 1982, the American press began to report
accounts of the Administration's "secret war" in
Nicaragua.*' On December 8, 1982, Representative
Tom Harkin offered an amendment to the pending
Defense Appropriations Bill for fiscal year 1983
stating:

None of the funds provided in this Act may be
used by the Central Intelligence Agency or the
Department of Defense to furnish military equip-
ment, military training or advice, or other sup-
port for military activities, to any group or indi-
vidual, not a part of a country's armed forces, for
the purpose of assisting that group or individual
in carrying out military activities in or against
Nicaragua.''

Soon thereafter. Representative Boland, Chairman
of the House Permanent Select Committee on Intelli-
gence, sponsored a substitute — referring explicitly to
the overthrow of the Government of Nicaragua — that
was to become Boland I:

None of the funds provided in this Act may be
used by the Central Intelligence Agency or the
Department of Defense to furnish military equip-

395

Chapter 26

ment, military training or advice, or other sup-
port for military activities, to any group or indi-
vidual, not a part of a country's armed forces, for
the purpose of overthrowing the government of
Nicaragua or provoking a military exchange be-
tween Nicaragua and Honduras.*

Representative Boland said that this substitute was
substantively identical to the restriction contained in
the classified annex to the earlier enacted Intelligence
Authorization Act and that it had been accepted by
the Administration. "They do not like it," he said,
"but it is agreeable to them." ^

Representative Harkin countered almost immediate-
ly with a substitute of his own, which differed primar-
ily from Representative Boland's by focusing on the
intent of the recipients of CIA assistance:

None of the funds provided in this Act may be
used by the Central Intelligence Agency or any
agency of the Department of Defense to furnish
military equipment, military training or advice, or
other support for military activities, to any indi-
vidual or group which is not part of a country's
armed forces and which is already known by that
agency to have the intent of overthrowing the gov-
ernment of Nicaragua or of provoking a military
conflict between Nicaragua and Honduras.'"

Representative Harkin's substitute was defeated;
Boland I prevailed by a vote of 411 to 0.

In the Senate, a similar debate took place, but with
a different outcome. On December 18, 1982, by a
vote of 58 to 38, that body tabled a proposal spon-
sored by Senator Christopher J. Dodd that would
have made a "policy declaration" that "no funds
should be obligated or expended, directly or indirect-
ly, after January 20, 1983, in support of . . . paramili-
tary groups operating in Central America." ' '

Ultimately, the conference committee incorporated
Boland I into the Defense Appropriations Act for
fiscal year 1983, which became effective on Decem-
ber 21, 1982.'^ Boland I was the law at least until
October 1, 1983. '^

Within a few months of the enactment of Boland I,
however, a dispute arose between the Administration
and some Members of Congress, including Represent-
ative Boland, over the scope of the prohibition. Rep-
resentative Boland and others in Congress contended
that the intent of the recipients of the aid governed
the permissibility of assistance. No group that intend-
ed to overthrow the Nicaraguan Government could
receive U.S. assistance, they said.'*

The Administration took a more constricted view:
as long as the United States itself was not seeking to
overthrow the Sandinista Government, the objectives
of the Contras to replace the Nicaraguan Government
were irrelevant."^ As support for its position, the
Administration pointed to the defeat of the second
Harkin amendment, which would have barred assist-

ance to the Contras because of their intent to over-
throw the Nicaraguan Government. While subsequent
changes in the Boland amendments ultimately would
render moot this particular dispute, the Administra-
tion's willingness, indeed eagerness, to exploit ambigu-
ities in Boland I presaged its attitude toward the later
Congressional efforts to limit Administration support
for the Contras. In addition, the aggressive approach
by the Administration to this ambiguity helps to ex-
plain why the Boland Amendments evolved toward
more restrictive formulations.

Limited Funding: December 8,
1983, to October 3, 1984

As fiscal year 1983 progressed with Boland I in place,
the Administration's support for the Contras contin-
ued. In addition, the Administration began to expand
its justifications for the program beyond the interdic-
tion of arms to include bringing the Sandinistas to the
bargaining table and forcing free elections.'^

As a result, on May 13, 1983, the House Permanent
Select Committee on Intelligence reported out H.R.
2760, a bill to amend the Intelligence Authorization
Act for the then-current fiscal year that would have
foreclosed funding for the Contras. In language that
foreshadowed Boland II, that bill provided:

None of the funds appropriated for the Central
Intelligence Agency or any other department,
agency, or entity of the United States involved in
intelligence activities may be obligated or ex-
pended for the purpose or which would have the
effect of supporting, directly or indirectly, mili-
tary or paramilitary operations in Nicaragua by
any nation, group, organization, movement, or
individual.'''

The Senate never voted on H.R. 2760.'* Thus,
Boland I continued to govern the Administration's
relationship with the Contras through the remainder
of fiscal year 1983. '»

While H.R. 2760 was under consideration, howev-
er, both the House and the Senate were working on
intelligence authorizations and defense appropriations
for fiscal year 1984. As reported out by the House
Intelligence Committee, the Intelligence Authoriza-
tion Bill, H.R. 2968, contained the same provisions
cutting off funding for the Contras as did H.R.
2760.2 0

Fiscal year 1984 was well under way before H.R.
2968 reached the floor of the House. '^' Again mem-
bers extensively debated the proper policy toward
Nicaragua, and again voted to cut off covert aid, 243

to 171.22

On the Senate side, the intelligence authorization
legislation was reported out of committee without any
unclassified restriction on support for the Contras. On

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Chapter 26

November 3, 1983, after debate over the Administra-
tion's policies toward Nicaragua, the Senate approved
an intelligence authorization bill that did not restrict
assistance for the Contras.^^

The conference on the conflicting versions of the
legislation was a pivotal point in the history of aid to
the Contras. After the conference, Representative
Boland explained the opening positions and the out-
come to his colleagues in the House:

As you know, I believe [the Central Intelligence
Agency's] paramilitary action in Nicaragua is ille-
gal, unwise, counterproductive, and against the
best interest of the United States.

I, and a majority of the House conferees, would
have preferred that the covert action be stopped.

This was the position of the House of Represent-
atives.

Just as clearly, it was the position of the Senate
conferees and of the Senate that the action
should be permitted to continue and that when
appropriated funds ran out, the Central Intelli-
gence Agency could utilize the reserve for con-
tingencies unless both Intelligence Committees
disapproved.

We could have forced a deadlock and killed both
the Intelligence Authorization Bill and the De-
fense Appropriations Bill.

But the Central Intelligence Agency would still
have been able to fund the covert action from the
Continuing Resolution and from the reserve for
contingencies — and would have had available to
it much more than $24 million. Instead, we
agreed to a compromise — a $24 million cap on
funding from whatever source.^*

The key to this compromise from the House's
standpoint was the amount of aid provided, enough to
carry the Contras "at present rate of expenditure"
only through June 1984. ^^ At that point, according to
Representative Boland, the Administration would
have to terminate its covert program or come "back
to both Houses of Congress and request additional
funds. . . ."2^

The conference language, included in both the In-
telligence Authorization Act (Public Law 98-212) and
the Defense Appropriations Act (Public Law 98-215)
for fiscal year 1984, read:

During fiscal year 1984, not more than $24 mil-
lion of the funds available to the Central Intelli-
gence Agency, the Department of Defense, or
any other agency or entity of the United States
involved in intelligence activities may be obligat-
ed or expended for the purpose or which would
have the effect of supporting, directly or indirect-

ly, military or paramilitary operations in Nicara-
gua by any nation, group, organization, move-
ment, or individual. ^^

Significantly, these pieces of legislation, which
became effective on December 8 and December 9,
1983, included within the $24 million cap all funds
expended to assist the Contras from the beginning of
the fiscal year on October 1, 1983. Thus, by the time
these enactments became law, there was already less
than $24 million that could be provided by the cov-
ered agencies.

Boland II: October 3, 1984, to
December 3, 1985

The period between October 12, 1984 (the effective
date of Boland II), and August 8, 1985 (the effective
date of the legislation providing for "humanitarian
aid"), was the high-water mark of restrictions on as-
sisting the Contras. During this period, the covered
agencies and entities were proscribed from expending
any funds whatsoever to support, directly or indirect-
ly, those resistance forces.

But Boland II was itself a compromise. As will be
seen, even as Congress shut off aid at the beginning of
fiscal year 1985, the Senate insisted on providing a
procedure that might expedite support for the Contras
after February 28, 1985, upon the passage of a joint
resolution. 2* An important question would also arise
after the Committees began their investigation as to
the application of Boland II to the NSC and its staff.
As before, an examination of the events leading to this
version of the Boland Amendment is essential to its
understanding.

The Evolution of Boland II

A major factor in the formulation and passage of
Boland II was the revelation regarding the mining of
Nicaraguan harbors. On April 6, 1984, The Wall
Street Journal reported the CIA's involvement in that
mining. Additionally, the CIA's role in military at-
tacks on Nicaraguan oil facilities at the port of Cor-
into was soon thereafter revealed. ^^

Many Members of Congress expressed astonishment
at these revelations. A dispute arose as to whether
CIA Director Casey had adequately notified the Intel-
ligence Committees. Senator Goldwater, Chairman of
the Senate Committee, protested to Casey. 3° National
Security Adviser Robert McFarlane responded that
Congress had been adequately briefed about the
mining. In support of Senator Goldwater's position,
his vice-chairman. Senator Moynihan, resigned from
that post, only to be persuaded to stay on.^' Both the
Senate and the House ultimately voted to condemn
the CIA's involvement in the incident. ^^ The revela-
tions also produced an intense negative international
reaction, particularly when Nicaragua sued the United

397

Chapter 26

States in the International Court of Justice alleging,
and ultimately proving to the satisfaction of that
court, that the United States violated international
law.^^

As the end of fiscal year 1984 approached, the
House considered an Intelligence Authorization Bill
(H.R. 5399), and a Continuing Appropriations Bill
(H.J. Res. 648), both of which prohibited the use of
any funds available to the CIA, DOD, or any entity
involved in intelligence activities to support "directly
or indirectly" military or paramilitary operations in
Nicaragua. The prohibitory language was identical to
that contained in H.R. 2760, the House's earlier, un-
successful attempt to amend the Intelligence Authori-
zation Act for fiscal year 1983. The House debated
this version of the Boland Amendment on August 2,
1984, and passed it by a vote of 294 to 1 18.3*

On the Senate side, the majority once again defeat-
ed an effort to include a parallel prohibition in that
Chamber's version of intelligence authorization legis-
lation. The vote, which took place after lengthy
debate on October 3, 1984, was 42 in favor of includ-
ing such a prohibition and 57 against. ^^

The conferees ultimately agreed to adopt the House
prohibition, but to couple it with an explicit promise
to revisit the issue in another 4 months. As finally
enacted. Section 8066 of Public Law 98-473, the Con-
tinuing Appropriations Act for fiscal year 1985, read:

(a) During fiscal year 1985, no funds available to
the Central Intelligence Agency, the Department
of Defense, or any other agency or entity of the
United States involved in intelligence activities
may be obligated or expended for the purpose or
which would have the effect of supporting, di-
rectly or indirectly, military or paramilitary oper-
ations in Nicaragua by any nation, group, organi-
zation, movement, or individual.

(b) The prohibition concerning Nicaragua con-
tained in subsection (a) shall cease to apply if,
after February 28, 1985—

(1) the President submits to Congress a report —

(A) stating that the Government of Nicaragua is
providing material or monetary support to anti-
government forces engaged in military or para-
military operations in El Salvador or other Cen-
tral American countries;

(B) analyzing the military significance of such
support;

(C) stating that the President has determined that
assistance for military or paramilitary operations
prohibited by subsection (a) is necessary;

(D) justifying the amount and type of such assist-
ance and describing its objectives; and

(E) explaining the goals of United States policy
for the Central American region and how the
proposed assistance would further such goals, in-
cluding the achievement of peace and security in
Central America through a comprehensive, veri-
fiable and enforceable agreement based upon the
Contadora Document of Objectives; and

(2) a joint resolution approving assistance for
military or paramilitary operations in Nicaragua
is enacted.

According to the conferees, up to $14 million in aid
to the Contras could be made available upon passage
of the joint resolution described in Section 8066(b). ^®

Representative Boland reported to his colleagues
that:

the compromise provision [Section 8066] clearly
ends United States support for the war in Nicara-
gua. Such support for the war can only be re-
newed if the President can convince the Con-
gress that this very strict prohibition should be
overturned. ^^

Responding to an inquiry from another Member, Rep-
resentative Boland specified "there are no exceptions
to the prohibition."^* Representative Boland plainly
viewed the conference compromise as terminating all
U.S. Government assistance of any kind until Con-
gress revisited the issue.

On the other side of the Capitol, the Senate empha-
sized that the prohibition was not necessarily perma-
nent. As Senator Ted Stevens described it, the com-
promise did not cut the Contras' lifeline, but rather
"[put] off the decision until next year." Reacting to a
pessimistic assessment from Senator John P. East, he
continued:

Under these circumstances, I do believe the Sena-
tor would be unwise to send a message to the
Sandinistas that we have abandoned completely
support for the Contras. We have set in motion a
process by which the President can once again
trigger support for the Contras should the Sandi-
nista government persist [in exporting revolu-
tion].

I say to my friend we did not win and we did not
lose . . . what we are saying to the Sandinistas is,
"we have a period of time here because of our
internal process and our process of selecting our
leader for the next four years . . . and you are
put on notice that if the President asks for this
money on February 28 ... we can approve
it." 39

In the interim, according to Senator Stevens, the Con-
tras would be able to tap other sources of support:

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Chapter 26

The Contras [already] are supporting themselves
with assistance they are getting from elsewhere
in the world. Having that assistance out there to
be made available on March 31 will encourage
that assistance from other sources to the Contras
during this period.*"

Thus, while House conferees hailed Boland II as a
victory in the effort to end U.S. involvement in Ni-
caragua's civil war, the Senate conferees billed it as a
draw or, at worst, a temporary setback to be over-
come after the Presidential election. But not even
Senator Stevens suggested that entities within the
U.S. Government could continue covert support for
the Contras after enactment of Boland II.

As it turned out. Congress never approved the $14
million allocation. President Reagan made the neces-
sary certification under Section 8066 early in April
1985. ■" The Senate approved the joint resolution on
April 23, 1985, by a vote of 53 to 46.''2 The measure
failed in the House, however, by a vote of 180 to
248.''^ As a result, no funds should have been expend-
ed by covered entities to support the Contras from
the exhaustion of the $24 million appropriation some-
time in June, 1984, to the effective date of legislation
providing humanitarian aid, August 8, 1985.

Boland II and the NSC Staff

Unlike Boland I, which applied by its terms solely
to the CIA and the DOD, Boland II also applied to
"any other agency or entity . . . involved in intelli-
gence activities." After this investigation began, mem-
bers of the Administration asserted that Boland II did
not apply to the NSC staff. The Committees disagree,
and note that this assertion never was made publicly
prior to this investigation.

By its terms, Boland II reached any agency "in-
volved in intelligence activities." Thus, Boland II did
not put just the CIA out of the Contra support busi-
ness; it prevented other government agencies from
covertly taking the CIA's place.

The Administration has asserted that Boland II did
not apply to the NSC staff because; (1) the NSC does
not traditionally engage in intelligence activities; and
(2) the phrase "agency involved in intelligence activi-
ties" is a statutory term of art which does not include
the NSC. These post hoc arguments are not persua-
sive for a number of reasons.

The statutory language is clear on its face: if an
agency is "involved in intelligence activities," then it
cannot engage in the proscribed conduct of assisting
the Contras. That Boland II did not specifically men-
tion the NSC is of no consequence. The statute men-
tioned by name those agencies which Congress knew
would be engaged in intelligence activities, and in-
cluded a "catch-all" provision to describe all other
agencies that were intended to fall within Boland IPs
reach. This "catch-all" provision is no statutory term
of art. Rather, the phrase used by Congress — "any

other agency or entity . . . involved in intelligence
activities" — is descriptive. For instance, had the NSC
staff remained true to the NSC's traditional statutory
functions of coordination and oversight, Boland II
would not have applied to its activities.

Thus, the law could not be evaded by assigning the
prohibited activities or the persons engaged in those
activities to a government agency that typically did
not engage in "intelligence activities." Any other in-
terpretation would have rendered the law meaning-
less. The target of Boland II was not the CIA, but
any covert operation supporting the Contras, directly
or indirectly. Shifting responsibility from the CIA to
the NSC staff would have accomplished nothing,
other than to change the personnel running the
Contra support operation.

North and Poindexter, however, both testified that
there was discussion among the NSC staff after
Boland II was adopted that it did not apply to the
NSC staff. No documentary evidence exists, however,
to suggest that this interpretation was ever put for-
ward before August 1985. On the contrary. North's
memos and McFarlane's and Poindexter's responses in
late 1984 and early 1985 reflect a sensitivity that, at
least for the record, the NSC staff had to comply
with Boland. McFarlane in his public testimony
scoffed at the view that Boland II did not apply to
the NSC staff*" — even though, because McFarlane
had not sought immunity, it was in his interest to
deny Boland's applicability.

If North and Poindexter had any doubt about the
reach of Boland II, they could have obtained legal
opinions. The Office of Legal Counsel of the Depart-
ment of Justice exists to provide legal opinions to the
executive branch. The Counsel to the President also
renders legal opinions on statutory interpretation; and
the Attorney General issues both informal and formal
opinions from time to time. But the Justice Depart-
ment, the Counsel to the President, and the Attorney
General were never asked for legal opinions on
whether Boland II applied to the NSC staff.**

North testified that Professor John Norton Moore
of the University of Virginia gave him an opinion that
Boland II did not apply to the NSC.*^ Moore is a
distinguished professor of law who has written exten-
sively on Executive power. His opinion would carry
weight. But Moore has denied that he had ever been
asked for or given an opinion on the applicability of
Boland II.*' No written evidence of such an opinion
exists.

Because McFarlane headed the NSC staff as Na-
tional Security Adviser at the time Boland II was
enacted, his contemporaneous interpretation of the ap-
plicability of Boland II to that staff carries consider-
able weight. According to McFarlane:

. . . [T]he law expressly foreclosed even a liaison
role for the CIA, or for the Defense Department.

399

Chapter 26

I interpreted it as well that the NSC was not to
itself get involved in military or paramilitary ac-
tivities or replicating the CIA function in those
domains.*®

Indeed, McFarlane acted on this interpretation.*^

Such a contemporaneous reading carries the most
weight when, as in this matter, the official making the
interpretation informed Congress of it.''" McFarlane's
correspondence with Representative Lee H. Hamil-
ton, Representative Michael D. Barnes, and Senator
David Durenberger all reflected his understanding, ^i

Legal analysis available at the time reached the
same conclusion. An undated memorandum prepared
by the Congressional Research Service of the Library
of Congress in response to an inquiry dated August
13, 1985, found "strong, if not conclusive evidence
that the [language] was intended to apply to the Na-
tional Security Council. "^^ Similarly, a staff memo-
randum prepared for Representative Henry J. Hyde,
which the FBI later found in North's files, explained
that the "NSC is clearly a U.S. entity involved in
intelligence activities, subject to the Section 8066(a)
prohibition." ^^

The opposing view, that the Boland prohibition did
not apply to the NSC staff, found its only contempo-
raneous expression in an opinion by Bretton Sciaroni,
counsel to the Intelligence Oversight Board. ^^ During
Sciaroni's testimony, however, questions were raised
about his qualifications to render this opinion. He had
never practiced law before becoming the Board coun-
sel. ^^ This written opinion was his first on legisla-
tion.*®

More importantly, Sciaroni based his opinion on
certain key factual premises that turned out to be
incorrect. Addressing the statute's language, Sciaroni
admitted in his opinion that, "on the face of it the
NSC would appear to be an agency or entity of the
United States covered by the amendment."*'' He con-
cluded that the NSC was not an agency or entity
"involved" in intelligence activities from the factual
premise that "it is a coordinating body with no oper-
ational role," so that the NSC "does not function as
an operational unit."**

North, however, confirmed that he had been con-
ducting the "full-service covert operation," depicted
in extensive evidence before the Committees. By
itself, this assertion put the NSC within Boland II's
coverage of "any agency or entity of the United
States Government involved in intelligence activi-
ties."

Asked at the hearings, "[were you] told at that time
that [the NSC staff] was, in fact, involved in intelli-
gence operations?" Sciaroni responded, "No, I was
not told that."** He explained more fully:

Q: Well, I am simply asking you, sir, isn't it true
that the conclusion [of your opinion] was based
on failure to communicate information to you?

A: True.

Q: You didn't have the facts?

A: That is true.

Q: And it was the incorrect facts in part upon
which your opinion was based?

A: That is absolutely correct.®"

In any event, the Sciaroni opinion was not unveiled
until long after North's activities began to unravel.
Poindexter acknowledged his reason for keeping its
conclusion under wraps: fear that if Congress learned
that the NSC staff was even entertaining the notion
that it was exempt from Boland II, Congress would
act to eliminate any such misconception.®' Instead.
Congress was told that the NSC staff was observing
the letter and spirit of Boland.

In August 1985, the House and Senate Intelligence
Committees and the House Foreign Affairs Commit-
tee each inquired about the activities of the NSC staff
and of North. McFarlane replied that the NSC was
complying with the letter and spirit of the law.®^

Poindexter denied that he saw this response at the
time, although the record shows that he assembled
the team to handle the response and that he was sent
a draft for comment.®^ He claimed that, when he
finally saw the McFarlane draft in the Tower Review
Board Report, he was surprised by its language.®*

But, in the summer of 1986, the House Intelligence
Committee would conduct another inquiry of North,
an inquiry Poindexter deflected by noting that
McFarlane had previously certified that "the actions
of the National Security Council staff were in compli-
ance with both the spirit and the letter of the law
regarding support of the Nicaraguan resistance."®*

The message to Congress was clear and consistent:
Boland II did not need clarification. It covered the
NSC, which "was complying." Indeed, no one ex-
pressed this more forcefully than McFarlane at the
public hearings:

And I think also that the evidence that surely I
did believe that the Boland Amendment applied
to the NSC staff is expressed in the fact that
otherwise why would we have worked so hard
to get rid of it after it was passed? If we felt that
we were not covered, what was I doing? What
were we doing coming up here day after day
trying to get rid of it? ®®

Even by its terms, the Sciaroni opinion did not give
North — or Poindexter — a clean bill of health. Sciaroni
noted that if North's salary was borne by the DOD,
an entity expressly named in Boland II, he could be
subject to its restrictions. This, in fact, was the case.®''
Referring to this caveat in Sciaroni's opinion, Poin-
dexter testified in his deposition that, "we were will-

400

Chapter 26

ing to take some risks in order to keep the Contras
alive. . . ." •**

The Meaning of "Indirect" Support

Boland II prohibited the obligation or expenditure
of appropriated funds "for the purpose or which
would have the effect of supporting" the Contras
"directly or indirectly." Viewed narrowly, this statute
forbade only the provision of government money or
material to the Contras.

Representative Boland, on the other hand, read his
amendment more broadly at the time of its enactment
so as to give meaning to the phrase "directly or
indirectly":

Let me make very clear that this prohibition ap-
plies to all funds available in fiscal year 1985
regardless of any accounting procedure at any
agency. It clearly prohibits any expenditure, in-
cluding those from accounts for salaries and all
support costs. The prohibition is so strictly writ-
ten that it also prohibits transfers of equipment
acquired at no cost.^*

Opinions issued by the Comptroller General of the
United States in other contexts would seem to con-
firm Representative Boland's interpretation.'" More-
over, McFarlane candidly told the Committees that,
during his tenure as National Security Adviser, he
understood that Boland II precluded any assistance by
the NSC staff to the Contras.'' ^

Once again, North took a position contrary to that
of his former boss. After describing his "full-service
covert operation,"''^ North agreed on the one hand
that the Boland Amendment applied to "U.S. Govern-
ment funds":

And my understanding — and I have not read
Boland, the Boland amendments in some time,
but my understanding then was that what we
could not do is take and expend funds which had
been made available to the CIA and the DOD, et
cetera, for the purpose of providing direct or
indirect support for military and paramilitary op-
erations in Nicaragua.

That is a memory that is over seven months old,
but I think that was what the intent was.

Certainly the way we pursued it and we made
every effort not to expend U.S. Government
funds to support the Nicaraguan resistance. . . .''^

On the other hand. North did not count fixed operat-
ing costs, such as his appropriated salary, as covered
by the Boland II prohibition:

Q: You were aware, I take it, that salaries were
included in the Boland Amendment?

A: No — not mine.''*

But, as noted above. Representative Boland clearly
considered salaries within the ambit of the legislation
he sponsored.

The historical background provides the reason for
Boland II's comprehensive coverage. Boland II had
emerged in reaction to the revelation of the CIA's
role in the mining of Nicaraguan harbors. At that
time, the CIA had allegedly exceeded the $24 million
limit in conducting that operation. According to re-
ports, the CIA had attempted to obscure this overrun
by charging to its overall operating budget the $1.2
million cost of a vessel deployed during the mining of
the harbors.''^ Representative Boland's explanation
that the amendment "clearly prohibits any expendi-
ture, including those from accounts for salaries and all
support costs" anticipated and rejected use of a ra-
tionalization similar to North's by which costs
charged to an "overall operating budget" were ig-
nored for determining compliance with a funding cut-
off. The prohibition against the CIA funds "available"
to it precluded that agency from using its contingency
reserve or any funds at its disposal.

In the Committees' view, Boland II had a discerni-
ble purpose: to end covert support for the Contras by
the United States. Once the NSC staff became in-
volved in intelligence operations and continuing
covert, albeit quasi-private, assistance to the Contras,
both the letter and spirit of Boland II were violated.

Humanitarian Aid: August 8, 1985, to
March 31, 1986

The day after rejecting the joint resolution required
by Boland II to "unfence" the $14 million in military
aid, the House — by a vote of 213 to 215 — rejected an
amendment that would have released that amount as
"humanitarian assistance." '*

Six weeks later, in June 1985, the Senate consid-
ered, and the House reconsidered, the concept of hu-
manitarian aid to the Contras. In both Chambers, pro-
ponents stressed the Contras' needs for food, clothing,
and medical supplies.'''' In both Chambers, opponents
suggested that the provision of humanitarian assist-
ance to a fighting force was a Trojan horse conceal-
ing military assistance.''^

The Senate approved its version of this legislation
on June 6, by a vote of 52 to 42. In addition to
unfencing the previously appropriated $14 million, it
authorized an additional $24 million, with the entire
$38 million to be spent solely on humanitarian aid.'"

Thereafter, a major reversal occurred in the House.
On June 12, that Chamber voted 248 to 184 to include
$27 million in humanitarian aid in a supplemental ap-
propriations bill.*" This change may have been attrib-
utable, at least in part, to a highly publicized trip
made by Nicaraguan President Daniel Ortega to
Moscow shortly before that vote.*'

During consideration of this legislation, some atten-
tion was focused on which agency would administer

-Oz6 0-87-14

401

Chapter 26

the humanitarian assistance. The Senate bill included a
provision allowing "the National Security Council to
monitor the use of funds.""- This approach would
have given the NSC staff a legal role in managing
funds for the Contras. Proposals for a CIA role were
also made. On the other hand, the House, opposed
any statutory role for DOD or CIA.*-'

In the end, the conferees declined to include the
NSC in the administration of the humanitarian aid
program.*''' Instead, the Nicaraguan Humanitarian As-
sistance Office (NHAO) was created in the Depart-
ment of State to administer the humanitarian aid. Sig-
nificantly, the NHAO appropriation retained the pro-
hibitions of Boland II except for that relaxation neces-
sary to authorize the humanitarian aid itself. In addi-
tion, related legislation included:

—The "Pell Amendment." a prohibition against
the United States "enter[ing] into any arrange-
ment conditioning, expressly or implicitly, the
provision of assistance under [the International
Security and Development Act] or the purchase
of defense articles and services under the Arms
Export Control Act upon the provision of assist-
ance by a recipient" to the Contras;*'^ and

— The "Kerry Amendment," which prohibited
the use of any funds to support, "directly or
indirectly, activities against the government of
Nicaragua which have not been authorized by. or
pursuant to law, and which would place the
United States" in violation of international law.**

All these provisions became effective on August 8,
1985.

Exchange of Intelligence

One week later, the President signed a Supplemen-
tal Appropriations Act for fiscal year 1985. Public
Law 99-88, that included another provision relevant
to the Committees' inquiry. After incorporating by
reference the prohibitions contained in Boland II and
suspending those prohibitions only insofar as neces-
sary to distribute the humanitarian aid authorized a
week earlier, the Act provided:

Nothing in this Act [or Boland II] shall be con-
strued to prohibit the United States government
from exchanging information with the Nicara-
guan democratic resistance."^

The conference report accompanying the earlier
legislation providing humanitarian assistance similarly
prescribed that, "none of the prohibitions on the pro-
vision of military or paramilitary assistance to the
democratic resistance prohibits the sharing of intelli-
gence information with the democratic resistance. """

Beginning with the enactment of Boland II, debate
had arisen over the permissibility and desirability of
providing the Contras with intelligence information.

Keyed as it was to the expenditure or obligation of
funds, including salaries and support costs, Boland II
prohibited any significant transfer of intelligence in-
formation or resources to the Contras. This conclu-
sion is bolstered by the legislative history of H.R.
2760, the textually similar but unapproved amendment
to the Intelligence Authorization Act for fiscal year
1983. «'•'

The breadth of Boland IPs original prohibition had
raised concern in the intelligence community about
the handling of "defensive" intelligence, that is, intel-
ligence that, if provided to the Contras, could prevent
needless loss of life.

Responding to this perceived problem, the CIA had
proposed guidelines, which met resistance from the
House Intelligence Committee, that would have al-
lowed it to pass intelligence:

on a case by case basis where:

(1) the lives of U.S. persons are at stake either
inside or outside Nicaragua;

(2) the lives of third country non-combatants are
at stake either inside or outside Nicaragua; or

(3) a holocaust-type situation may occur involv-
ing substantial loss of life, or threatening the con-
tinued existence of the opposition groups (for ex-
ample, ambush or imminent attack).""

Ultimately, the CIA agreed to notify the Intelli-
gence Committees each time they invoked these
guidelines to transfer intelligence, and to justify that
action fully as a humanitarian necessity.*'

While textual support in Boland II for a distinction
between offensive and defensive intelligence is diffi-
cult to discern, the abstract utility of defensive intelli-
gence had some appeal. Speaking against an amend-
ment to provide a more explicit exception allowing
for the exchange of intelligence. Representative
Boland pointed to the CIA's guidelines:

[W]hal about a situation where a large concentra-
tion of Contras — perhaps unarmed or in a sanctu-
ary along the border — is about to be attacked by
the Sandinistas in their new Soviet helicopters.

Can't the Central Intelligence Agency warn
them?

Well, Mr. Chairman, they can.

Now, where do I get that interpretation?

I get it, Mr. Chairman, from the Central Intelli-
gence Agency.

They have told the Intelligence Committee that it
is their interpretation of the present limitation
that it does not prohibit the provision of intelli-
gence— so called defensive intelligence — to the

402

Chapter 26

Conlriis to pri-vcnt ii mnsHacrc or n lioloiiiiisl-
typc of siluiilion.

They say llu-y lan'l provide iiid-lligi-ncc (o sup-
porl riijlilary iKiivilics in llic Held, hul llu-y can
proviiK' huiiiaiiitariaii waiiiiiig ol (.alasliopliii' at-
tacks.

So, Mr. Cliairinaii. my anu-ii(liiiciil Iwhicli would
have conliMUcd (lu- lloland II pi)>hihilions| docs
permit as the iuteliinente eominuinly tells UH —
the provision of intelligence m extraordinary cir-
cumstances where the real prospect of a siibslaii'
tial loss of life exists.'"'

The legislation that became edective August l*i,
l''K.S, provided that iiolhing in Holand II or the Inter-
national Security and Development Acl would llu-re-
alter prohibil "extliangiiig iiiloiirjaliou" willi the (Oii-
tras. As llie li'gislalive history makes clear, moreover,
the "inibrmalioii" llial could l)e exchanged included
intelligence."'' Kepresenlative Hyde, a supporter ol
the exception, suggested that the exception would
allow the transfer of intelligence, not only in support
of humanitarian aid, hut also "so (the C'ontrasj can
defend lliemselves against the helicopter gunslups ""'
Representative Joseph I' A<l(lal)l)o, an opponent ol
the exception, cited its amhiguily as a reason to reject
it:

Under Section 102 . . . the ciirrenl prohibition
... is interpreted to allow the United Slates
government to exchange information with the
Contra.s. I am not sure anyboily can tell me the
effect of this interpretation but, of course, this
would mean that the Cenlral Inlelligi-nce Agency
involvemeni with llic Conlras would be started
again. What ly|>e of mrorinalioti will ()e ex
changed is liiruled only by your miagmalion In
addition lo inlelligence inforirialion, could train-
ing procedures for the Contras be exchanged,
could instruction in terrorist activities be ex-
changed, could instruction on the planting of
bombs or ships be exchanged? Who would define
the type of information to be exchanged? Nobody
knows, is the answer "■'

The Permissibility of Solicitation

Boland II (lid not coiilain a provision specifically
addressing Ihird-touiilry solicitalion liiil the subject
had not been overlooked either in Congress or in the
executive branch.

In l'JX4, before Holand II was a(lo()led but as
Contra funding was running out, third-country fund-
ing became the focus of a legal debate within the
Administration, At a National Security IManning
Group meeting in June l'W4, Secretary of St;ile
Shult/. conveyed the concern of While House Cluel
of Staff James A Uaker, III, who was not present,
that solicitation and control of third-country funding

for the Contra program was an "impeachable of-
fense." (>thets at the meeting asseil(-d that if the
United Stales did not serve as a conduil loi tin- luiids,
thiril country solicitation was permissible I he lollow-
iiig day, Attorney Ciciieral William l-'rench Smith
orally expresse<l his opinion to Casey that solicitation
was lawful as long as ihen- was no (|uid pro (|iio "" In
()ctol>er l')H4, Congress complicated the h-gal pit t tire
fuilhei l)y passing lioland II with its piohil)ilicin of
expending funds to provide suppojl, "dnectly or ludi
reitly."

After Holand II was in phu (-, llii- SlaU- I )(-pailiiienl
agreed in early fJH*) thai the legislation baii<-d solici-
tation or eni'oiirag(-ni(-iil ol t'oiiliibulions lo the ('( Ul-
tras. In Maich I'lX*), appi-aiing before the Senate
Commillee on I'oieign l<(-lalioiis. Assistant Secretary
of State for Inter-American Affairs, A. I .anghornc
Motley lilliott Abrains' predecessor was asked for
assurances that the Admimstralion knew, and agreed,
ihal solicitalion of funds lioni third countries was
proliil>iled; lie agreed with Ihal inlerprelation and
gave those assuranies. Motley slated, "even if today
we wanted to go to thiril countries to encourage or
solicil, we could not because there is a prohibition."

Senator Christopher J Dodd asked, "all I am
asking from you is, and lioin llie adminislralion more
dirt-i lly, IS wli(-lliei or not we ( iiii hav(- an assurance
that Ilu-K- will l)(- no iii(lii(-( I efloils iiia<le lo finance
the Coiilia opcralioii through lliirti party
nation . . . ." Motley responded: "I think thai was
one thing that was loud and clear with us when I
started. I lold you that wi- understood what it irreans,
direct and irrdiii-cl, iik lulling lliiid paily "

All(-i l)(-iiig asked again, and giving that same assur-
aiK:e (Senator Dodil: "We have that assurance, llien?"
Motley: "I'hat is right. ... I think that is an easy
assurance lo givi-, Senator. . . ."), Motley described
llol.'iiid H\ proliibilion tins way:

Nobody is trying to play games with you oi any
other Member of Congress Ihal resolution
stands, and it will conliniK- lo stand, and it says
no direct or indirect. And that is pretty plain
Ijiglish; it does not have to be written by any
bright, young lawyers. And we arc going to t:on
liniK- to comply with Ihal "'

llie .Slate Deparlmeiit gave Ihe same interpretation
and assurance in at least one other hearing."" The
CIA also look Ihe [xisiliiin llial llolan<l II proliibitcd
rt Irorii (-ngaging in any lliird ( oiirili y 'iiilii ilalion.""

Mclarlanc took a similar position with lespel to
the NSC; and, according to his testimony, so instruct
ed his staff '"" He specifically toUl (longress that the
NS(,' staff was not soliciting funds "" North denied
receiving any such inslriu lion, but nevertheless pre-
faced every meeting with pol(-ntial (onlribiilois with
a disclaimer that he was nol soliciting. '"^

403

Chapter 26

Indeed, North wrote a memorandum to McFarlane
outlining the options for financing the Contras. He
noted that Boland II was silent on third-country fund-
ing but that Congress would regard it as an evasion of
the law. He therefore concluded that third-country
solicitation could be safely undertaken only upon con-
sultation with Congress and with the risk that it might
say no.'"^ At the time North wrote the memoran-
dum, he was secretly involved in trying to raise
money from Far Eastern countries, and a Middle
Eastern country had already contributed $32 million.

On August 8, 1985, with the enactment of the Pell
Amendment, U.S. officials were prohibited from
agreeing, "expressly or implicitly," that foreign aid or
military assistance would be contingent upon assist-
ance to the Contras. In their report on that legislation,
the conferees attempted to draw a distinction between
discussing U.S. policies in Central America and agree-
ing on a quid pro quo:

The purpose of the [Pell Amendment] is to pro-
hibit the United States from furnishing economic
or military assistance or selling United States
military equipment on the condition, either ex-
pressly or implicitly, that the recipient or pur-
chaser provide assistance to insurgents involved
in the struggle in Nicaragua. This section does
not prohibit United States government officials
from discussing United States policy in Central
America with recipients of United States assist-
ance or purchasers of United States military
equipment. '"■'

The conferees specified that the legislation did not
prohibit "recipients of United States assistance from
furnishing assistance to any third party on their own
volition and from their own resources." '°^

Thus, at least as of August 8, 1985, while Congress
acknowledged that Administration officials were per-
mitted to discuss Central American policy with for-
eign countries, and that those foreign countries could
"on their own volition" contribute their own funds to
the Contras, it clearly proscribed any quid pro quo,
expressed or implied, for any contribution by a for-
eign country. '"8 A question not addressed by the
conferees was whether Administration officials could,
consistent with Boland II, solicit contributions from
foreign countries. In the Committees' judgment, how-
ever, any such solicitation by a covered entity, includ-
ing the NSC staff, would have been prohibited by
Boland II because it would have involved, at a mini-
mum, salaried employees.

Boland III: December 4, 1985, to
October 17, 1986

Boland III was embodied in various statutory provi-
sions covering aid to the Contras during the period
from December 4, 1985 to October 17, 1986, particu-

larly in Public Law 99-169, Section 105, and Public
Law 99-190, Section 8050. Public Laws 99-88 and 99-
83, which approved humanitarian assistance, extend
into this period but are considered in the previous
section of this chapter.

Public Law 99-169, enacted on December 4, 1985,
reads:

Funds available to the Central Intelligence
Agency, the Department of Defense, or any
other agency or entity of the United States in-
volved in intelligence activities may be obligated
and expended during fiscal year 1986 to provide
funds, materiel, or other assistance to the Nicara-
guan democratic resistance to support military or
paramilitary operations in Nicaragua only as au-
thorized in section 101 and as specified in the
classified Schedule of Authorizations referred to
in section 102, or pursuant to section 502 of the
National Security Act of 1947, or to section 106
of the Supplemental Appropriations Act, 1985
(Public Law 99-88). Nothing in this section pre-
cludes— (1) administration, by the Nicaraguan
Humanitarian Assistance Office established by
Executive order 12530, of the program of human-
itarian assistance to the Nicaraguan democratic
resistance provided for in the Supplemental Ap-
propriations Act, 1985, or (2) activities of the
Department of State to solicit such humanitarian
assistance for the Nicaraguan democratic resist-
ance.

Public Law 99-190, Section 8050, became effective
on December 19, 1985, and reads:

None of the funds available to the Central Intelli-
gence Agency, the Department of Defense, or
any other agency or entity of the United States
involved in intelligence activities may be obligat-
ed or expended during fiscal year 1986 to provide
funds, materiel, or other assistance to the Nicara-
guan democratic resistance unless in accordance
with the terms and conditions specified by sec-
tion 105 of the Intelligence Authorization Act
(Public Law 99-169) for fiscal year 1986.

A classified amount was appropriated to the CIA to
provide the Contras with communication equipment
and related training. An additional classified amount
was allocated to bolster intelligence-gathering in the
region. Thus, Boland III permitted covered agencies
to support the Contras only in particular ways, specif-
ically by the provision of communications equipment,
related training, and intelligence "information and
advice."

Exchange of Intelligence

The Administration's ability to offer intelligence to
the Contras, first acknowledged in August 1985, con-

404

Chapter 26

tinued with the enactment of Boland III. In addition,
specific, classified appropriations were made to en-
hance the exchanges of intelHgence. But ambiguities
as to the scope of the exception persisted.

The CIA, for example, believed that it was not
authorized to provide specialized logistics training.'"'
The President's Intelligence Oversight Board, on the
other hand, interpreted the legislation as allowing
military training, "so long as such training does not
amount to the participation in the planning or execu-
tion of military or paramilitary operations in Nicara-
gua."'"*

Solicitation

Section 105(b)(2) of Public Law 99-169 explicitly
stated that "nothing in this section
precludes . . . activities of the Department of State
to solicit . . . humanitarian assistance for the Nicara-
guan democratic resistance." The Administration had
sought this exception, but notably did not ask for
permission to solicit lethal aid. The House conferees,
moreover, specified that Boland III was intended to
prohibit any solicitation that it did not authorize ex-
plicitly:

[The] State Department may solicit, through its
normal diplomatic contacts, humanitarian assist-
ance of the same type as is authorized by the
. Supplemental Appropriations Act for fiscal year
1985. No other department or agency involved in
intelligence activities may engage in any type of
solicitation for the Contras^"^

Renewed Assistance: October 18, 1986,
to September 30, 1987

By mid- 1986, the mood of Congress had shifted
back in favor of supporting the Contras. Ultimately,
Congress would provide $100 million for the Nicara-
guan opposition, of which $70 million could be used
for non-humanitarian purposes.

This swing began on March 27, 1986, when the
Senate approved S.J. Res. 283 to provide $100 million
for the anti-Sandinista forces. Senator Lugar spon-
sored an amendment that contained no restrictions on
the use of the CIA; it passed by a vote of 53 to 47."°
Amendments offered by Senators Edward M. Kenne-
dy and Jim Sasser seeking to prevent funds from
being used for military purposes were rejected. ' ' '

On June 25, 1986, the House approved an amend-
ment offered by Representative Don Edwards, which
became Title II of the Military Construction Appro-
priation Act for Fiscal Year 1987, by a vote of 221 to
209. "2 Under this legislation, $100 million of unobli-
gated DOD funds for fiscal year 1986 could be used
for the Nicaraguan opposition."^ On August 13,
1986, the Senate adopted the House position and sub-
sequently approved the entire bill. Title II was ulti-

mately incorporated into Public Law 99-500, which
became effective on October 18, 1986."''

The Boland Amendments Were
Violated In Letter and Spirit

Boland II forced the CIA to withdraw from its role
of financing, arming, training, clothing, feeding, and
supervising the Contras. But the vacuum was quickly
filled. Acting to carry out the President's direction to
keep the Contras together "body and soul," North,
with the express approval of Poindexter and at least
the acquiescence of McFarlane, took over where the
CIA left off. With North as the action officer, the
NSC staff raised funds from third countries, directed
whether those funds should be sent to Secord or
Calero, recruited the Enterprise to handle the logis-
tics, helped the Enterprise run the resupply operation
for the men in the field, and gave the ultimate direc-
tions to Secord and his aides on how to conduct the
operation. Even an ambassador, Lewis Tambs, took
orders from North on opening a front against the
Sandinistas.

An isolated act of assisting the Contras may have
presented a close question of law under Boland II and
III. But the NSC staffs activities were not so limited.
Its support for the Contras was systematic and perva-
sive. As the CIA had done before Boland II, the NSC
staff now ran the Contra insurgency. According to
Poindexter, North "was the switching point that made
the whole system work .... I viewed Ollie as the
kingpin to the Central American opposition once the
CIA was restricted.""*

Moreover, while the NSC staff started its support
of the Contras at least in part with private funds, the
diversion gave it control over funds that belonged to
the United States. The profits that were skimmed
were generated by the sale of weapons belonging to
the United States. North, sometimes with the assist-
ance of Earl, fixed the mark-up to ensure that there
would be money to divert. The Secord-Hakim Enter-
prise was not only brought into the sales as the "agent
of the CIA," but, according to Hakim's and Secord's
testimony, functioned at North's direction.

Because Boland II and III both prohibited direct or
indirect use of the United States funds, the diversion
was a flagrant violation of those proscriptions.

Even the amendment to Boland III, authorizing the
State Department to solicit humanitarian funds for the
Contras, was abused by the NSC. When Brunei
agreed to transfer $10 million. North gave Abrams
the account number of Lake Resources. According to
Abrams, North represented that this account was one
of Calero's and that the money would be used for
non-lethal expenditures. But, in fact, it was controlled
by the Enterprise and was used to pay for arms for
the Contras, to pay their leaders, and to finance the
military airlift. Giving Abrams the Lake Resources

405

Chapter 26

account was a deliberate effort to divert funds solicit-
ed for humanitarian purposes to lethal ends, and was
foiled only because of an error in the account
number.

The Administration only recently has asserted that
Congress lacked the authority to restrict the Presi-
dent's options in Nicaragua in the manner it did. As in
the case of the Sciaroni opinion, at no time prior to
public disclosure of alleged violations of the Boland
Amendments did the Administration come forward to
challenge their constitutionality. On the contrary,
Congress and the American people were routinely
being assured that the statutes were being observed,
"in letter and in spirit." As President Reagan himself
stated during a press conference on April 14, 1983,
"But what I might wish or our government might
wish still would not justify us violating the law of the
land."' '6

Surely an Administration should identify in a timely
fashion those laws it claims a constitutional preroga-
tive to ignore or subvert. But even beyond the aura of
disingenuousness, the attack on the constitutionality of
the Boland Amendment falls, in the Committees' col-
lective opinion, far short of the mark.

The analysis must begin, of course, with an appro-
priate statement of what is, and is not, in issue. Some
have attempted, for example, to cast the Boland
Amendments as violative of the Supreme Court's
famous dictum in United States v. Curtiss-Wright
Export Corp.,^^'' referring to:

the very delicate, plenary and exclusive power of
the President as the sole organ of the federal
government in the field of international rela-
tions— a power which does not require as a basis
for its exercise an act of Congress . . ."

But one does not have to be a proponent of an
imperial Congress to see that this language has little
application to the situation presented here. We are not
confronted with a situation where the President is
claiming inherent constitutional authority in the ab-
sence of an Act of Congress. Instead, to succeed on
this argument the Administration must claim it retains
authority to proceed in derogation of an Act of Con-
gress— and not just any act, at that. Here, Congress
relied on its traditional authority over appropriations,
the "power of the purse," to specify that no funds
were to be expended by certain entities in a certain
fashion.

Bearing this in mind, the Committees believe a
more instructive decision than Curtiss- Wright is Dames
& Moore v. Reagan.^ ^^ There, the Supreme Court
upheld Executive Orders issued by President Carter
to govern the treatment of claims against Iran after
resolution of the hostage crisis 1979 and 1980. Chief
Justice Rehnquist, then an associate justice, wrote for
the Court and quoted portions of a concurring opin-

ion filed by Justice Jackson in the Steel Seizure
Cflie."^ According to Chief Justice Rehnquist:

When the President acts pursuant to an express
or implied authorization from Congress, he exer-
cises not only his powers but also those delegated
by Congress. In such a case the executive action
"would be supported by the strongest presump-
tions and widest latitude of judicial interpretation,
and the burden of persuasion would rest heavily
upon any who might attack it." When the Presi-
dent acts in the absence of congressional authori-
zation he may enter a "zone of twilight in which
he and Congress may have concurrent authority,
or in which its distribution is uncertain." In such
a case, the analysis becomes more complicated,
and the validity of the President's action, at least
so far as separation-of-powers principles are con-
cerned, hinges on a consideration of all the cir-
cumstances which might shed light on the views
of the Legislative Branch toward such action,
including "congressional inertia, indifference or
quiescence." Finally, when the President acts in
contravention of the will of Congress, "his power is
at its lowest ebb" and the Court can sustain his
actions "only by disabling the Congress from
action on the subject." ^^°

As the Committees have already noted, the Admin-
istration's activities in support of the Contras were
conducted in direct contravention of the will of Con-
gress. It follows, then, that the President's constitu-
tional authority to conduct those activities was "at its
lowest ebb."

It strains credulity to suggest that the President has
the constitutional prerogative to staff and fund a mili-
tary operation without the knowledge of Congress
and in direct disregard of contrary legislation. To
endorse such a prerogative would, in the language of
Dames & Moore, "[disable] the Congress from action
on the subject" and leave the Administration entirely
unaccountable for such clandestine initiatives.

In Federalist 75, Alexander Hamilton cautioned
against granting the President too much authority
over foreign affairs:

The history of human conduct does not warrant
that exalted opinion of human virtue which
would make it wise in a nation to commit inter-
ests so delicate and momentous a kind as those
which concern its intercourse with the rest of the
world to the sole disposal of a magistrate, created
and circumstanced, as would be a president of
the United States.

While each branch of our Government undoubtedly
has primacy in certain spheres, none can function in
secret disregard of the others in any sphere. That, in
essence, was the Administration's attempt here.

406

Chapter 26

Congress must be able to depend upon the Presi-
dent for the execution of laws. It cannot be thrust into
an adversarial role in which it must treat representa-
tions from the President's staff with skepticism and
incredulity. If the President believes that a law has
provisions that are unconstitutional, he must either
veto it or put Congress on notice of his position — as
he did with portions of Gramm-Rudman. The one

option the executive branch does not have is to pre-
tend that it is executing the law when it is, in fact,
evading it.

The American system works well only when its
branches of government trust one another. The Iran-
Contra Affair is a perfect example of how to destroy
that trust.

407

Chapter 26

Chapter 26

1. Report of the National Bipartisan Commission on Cen-
tral America, Henry Kissinger, Chairman, Washington,
DC, 116 (1984).

2. The Congressional Research Service has compiled a
complete legislative history of the Boland Amendments,
which is reproduced at Vol. 133, No. 97, Cong. Rec. (daily
ed., June 15, 1987), 4577-4990.

3. The contingency reserve is comprised of funds appro-
priated by Congress for use by the CIA in covert oper-
ations.

4. See generally. Amendment to the Intelligence Authori-
zation Act for Fiscal Year 1983, 98th Cong., H. Rep. 98-
122, parts 1 and 2, May 13 and June 14, 1982.

5. Amendment to the Intelligence Authorization Act for
Fiscal Year 1983, 98th Cong., H. Rep. 98-122, at 8.

6. See, e.g., "Fears of War Along the Border: A Covert
United States Operation Slowly Spins Out of Control,"
Time, Dec. 6, 1982, at 37, 40; "A Secret War for Nicara-
gua," Newsweek, Nov. 8, 1982, at 42-53.

7. Vol. 128, No. 143, Cong. Rec, H9148-49 (daily ed.,
Dec. 8, 1982).

8. Vol. 128, No. 143, Cong Rec., H9158 (daily ed., Dec.
8, 1982).

9. Vol. 128, No. 143, Cong. Rec, H9156 (daily ed., Dec.
8, 1982).

10. Vol. 128, No. 143, Cong. Rec, H9159 (daily ed., Dec.
8, 1982).

11. Vol. 128, No. 151, Cong. Rec, S15350-51 (daily ed.,
Dec. 18, 1982).

12. P.L. 97-377, Section 793, 96 Stat. 1830.

13. The Continuing Appropriations Act for Fiscal Year
1984, P.L. 98-107, Section 101(c), 97 Stat. 735, provided, in
a section devoted to appropriations for DOD and CIA
appropriations, that "no appropriation or funds made avail-
able or authority granted pursuant to this subsection shall be
used to initiate or resume any project, activity, or organiza-
tion ... for which appropriations, funds, or other authority
were not available during FY83." This provision would
appear to have extended Boland I's prohibition from Oct. 1,
1983, to the enactment of Boland II as part of the Depart-
ment of Defense Appropriations Act, P.L. 98-212, 97 Stat.
1452, on Dec. 8, 1983.

14. H.R. Rep. No. 98-122, 98th Cong., 1st Sess., Pt. 1 at
11 (May 13, 1983).

15. This conclusion was reached both by the Office of
Legal Counsel of the Department of Justice and by the
President's Intelligence Oversight Board. See Memorandum
for the Attorney General from Theodore B. Olsen, Assist-
ant Attorney General, Office of Legal Counsel, dated Apr.
27, 1984 (J7905-J7926), at 12; Memorandum for the Presi-
dent's Intelligence Oversight Board from Robert F. Turner,
Counsel, dated Apr. 6, 1983 (J4808-J4837), at 16-21.

16. The transition in the Administration's rationale for its
support of the Contras can be traced through public state-
ments made by the President and also through the evolution
of the Presidential Findings on Central America and Nicara-
gua. See Public Papers of the President: Ronald Reagan,
Vol. I, January to June 1984 (Washington, DC: U.S. Gov-
ernment Printing Office, 1986), at 384, 503-504, 726; see also
Presidential Findings on Central America and Nicaragua,
NI6574, C06930, N32OO3-N320O5, N 1 708 1-N 17082, N9246-
N9247.

17. Amendment to the Intelligence Authorization Act for
Fiscal Year 1983, 98th Cong., H.R. 2760, July 28, 1983. See
Section 801(a).

18. Amendment to the Intelligence Authorization Act for
Fiscal Year 1983, 98th Cong., H.R. 2760, July 28, 1983.

19. See note 13, supra, regarding the status of Boland I
after September 30, 1983.

20. Intelligence Authorization Act for Fiscal Year 1984,
98th Congress, H.R. 2968, May 16, 1983. The Committee's
report simply incorporated by reference its earlier report on
H.R. 2760.

21. See note 13, supra, regarding the status of Boland I
after September 30, 1983.

22. Vol. 129, No. 138, Cong. Rec, H8389-8432 (daily ed.,
Oct. 20, 1983).

23. Vol. 129, No. 149, Cong. Rec, S15295 (daily ed., Nov.
3, 1983).

24. Vol. 129, No. 161, Cong. Rec, H10544 (daily ed.,
Nov. 18, 1983). Representative Boland's comments and
House debate of November 18 on H.R. 2968.

25. Vol. 129, No. 161, Cong. Rec, H10544 (daily ed.,
Nov. 18, 1983).

26. Vol. 129, No. 161, Cong. Rec. H10487 (daily ed.,
Nov. 18, 1983).

27. Department of Defense Appropriations Act for Fiscal
Year 1984, 98th Cong., P.L. 98-212, Stat. 1952, Section 775;
Intelligence Authorization Act for Fiscal Year 1984, 98th
Cong., P.L. 98-215, Stat. 1975, Section 108.

28. Continuing Appropriations for Fiscal Year 1985, 98th
Cong., P.L. 98-473, Section 8066, Stat. 1935, 1984.

29. 1984 Cong. Quarterly Almanac 89.

30. Letter of April 9, 1984, from Chairman Gold water to
Director Casey.

31. 1984 Cong. Quarterly Almanac 89.

32. Senate amendment to H.R. 2163; House, adoption of
H. Con. Res. 290.

33. The United States contested the Court's jurisdiction,
and made no presentation on the merits of the suit.

34. Vol. 130, No. 101, Cong. Rec, H8284 (daily ed., Aug.

2, 1984).

35. Vol. 130, No. 129, Cong Rec, S12879 (daily ed., Oct.

3, 1984).

36. Continuing Appropriations for Fiscal Year 1985 and
for Other Purposes, 98th Cong., 2nd Sess., H. Rep. 98-1159
at 382.

37. Vol. 130, No. 133, Cong. Rec, HI 1974 (daily ed., Oct.
10, 1984).

38. Vol. 130, No. 133, Cong. Rec, HI 1980 (daily ed., Oct.

10, 1984).

39. Vol. 130, No. 134, Cong. Rec, S14205 (daily ed., Oct.

11, 1984).

40. Vol. 130, No. 134, Cong. Rec, S14205 (daily ed., Oct.
11, 1984).

41. President Reagan "Central American Peace Propos-
al," Apr. 4, 1985, from Weekly Compilation of Presidential
Documents, Vol. 21, No. 14. at 416-20.

42. Vol. 131, No. 48, Cong Rec, S58924-25 (daily ed.,
Apr. 23, 1985).

43. Vol. 131, No. 48, Cong Rec, H9085-86 (daily ed.,
Apr. 23, 1985).

408

Chapter 26

44. McFarlane Test., Hearings, 100-2. at 129-30; id..
Hearings, 100-7 Part II, 7/14/87, at 202.

45. Poindexter Test., Hearings. 100-8, 7/17/87, at 176.

46. North Test., Hearings. 100-7, Part I, 7/9/87, at 203.

47. Moore Int., 8/5/87; The Dallas Morning News, 7/16/
87, at lOA.

48. McFarlane Test., Hearings. 100-2, 5/14/87, at 20.

49. See, e.g.. Ex. RCM 30B (Memorandum from North
recommending that North be allowed to approach private
donors for replacement of Contra helicopter; handwritten
notation by McFarlane on memorandum that "I don't think
this is legal").

50. See. e.g.. Bob Jones University v. United States, 461
U.S. 574(1983).

51. Exs. RCM 41C, 40B, and 41E.

52. Memorandum of Raymond J. Celada, Senior Special-
ist in American Public Law, American Law Division,
Cong. Research Service, Library of Congress, regarding
"Legality of NSC Involvement in Support of the Contras,"
[hereinafter "Celada memorandum"] at 12. On the copy
provided to the Committee, the addressee and the date of
the memorandum have been deleted. According to its text,
however, it was written in response to an "inquiry of
August 13, 1985." W., at 1.

53. Ex. BSG 26. These contemporaneous opinions relied
to varying degrees upon the basic legal authorities under
which the NSC staff operated., The NSC and its staff were
created by the National Security Act of 1947. The Act
provides; "the function of the Council shall be to advise the
President with respect to the integration of domestic, for-
eign, and military policies relating to the national
security. . . ." Section 402(c) states: "the Council shall
have a staff to be headed by a civilian executive secretary
who shall be appointed by the President. . . ." Section 102,
which created the CIA, begins by stating, "there is hereby
established under the National Security Council a Central
Intelligence Agency. . . ." 50 U.S.C. sec. 403 [emphasis
added]. From its inception, the CIA has been "under" the
NSC. Executive Order No. 12,333, the Administration's
charter for intelligence activities, states that the NSC "shall
act as the highest Executive Branch entity that provides
review of, guidance for and direction to the conduct of all
national foreign intelligence, counterintelligence, and special
activities, and attendant policies and programs." ("Special
activities" is a term generally applied to covert actions.)

54. Ex. BGS-9.

55. Sciaroni Test., Hearings. 100-5, 6/8/87, at 33; id. at
46.

56. Id at 145.

57. Ex. BGS 9 at 2.

58. Ex. BGS 9 at 5, 6.

59. Sciaroni Test., Hearings. 100-5, 6/8/87, at 20.

60. W.

61. Poindexter Test. Hearings, 100-8, 7/15/87, at 84-85.

62. Ex, RCM 40B.

63. Exs. JMP 7A, JMP 8, JMP 9 and JMP 10.

64. Poindexter Dep., 7/2/87, at 56.

65. Ex. JMP 14.

66. McFarlane Test., Hearings, 100-8, 7/14/87, at 204.

67. See Ex. BGS 9, at 3, n.5.

68. Poindexter Dep., 5/2/87, at 51.

69. Vol. 130, No. 133-4, Cong Rec. (daily ed., Oct. 10
and 11, 1984).

70 In Decision B-201260, 60 Comp. Gen. 440 (1981), for
example, the Comptroller General found that a provision
forbidding the Customs Service from using any funds in its
appropriation to pay overtime in excess of $20,000 to any
single employee had been violated by an overpayment of
$194.17, even though that amount had been reimbursed to
the Service. In fmding a violation, the Comptroller General
cited, in particular, "the Administrative expenses of paying
the excess $194.17 in overtime compensation," even though
those expenses were "minimal." See also Decision B-196559,
59 Comp. Gen. 115 (1979) (interpretation of anti-lobbying
restriction). See generally Principles of Federal Appropria-
tions Law, at 3-24 to 3-210 (GAO 1982).

71. McFarlane Test., Hearings. 100-2, 5/12/87, at 129-30.

72. North Test., Hearings. 100-7, Part I, 7/8/87, at 154.

73. Id. at 164.

74. Id, at 170.

75. 1984 Cong. Quarterly Almanac 90.

76. Vol. 131, No. 49, Cong Rec. (daily ed., Apr. 24, 1985)
vote on Michael amendment.

77. Vol. 131, No. 73, Cong. Rec, S7637 (daily ed., June 6,
1985) Senate debate.

78. Vol. 131, Nos. 73, 80, Cong Rec. (daily ed., June 6
and 12, 1985).

79. Vol. 131, No. 73, Cong Rec. S7628-S7648 (daily ed.,
June 5, 1985).

80. Vol. 131, No. 80, Cong Rec, H4169-H4170 (daily ed.,
June 12, 1985).

81. Daniel Ortega went to Moscow on April 28, 1985.

82. 131 Cong. Rec, S7628, June 6, 1985.

83. H.R. 2577, Ch. V.

84. Conf Rep. No. 99-236, 99th Cong., 1st Sess., at 56
(July 2, 1985).

85. International Security and Development Cooperation
Act of 1985, 99th Cong., P.L. 99-83, Section 722(d), Stat.
149, Aug. 8, 1985.

86. International Security and Development Cooperation
Act of 1985, 99th Cong., P.L. 99-83, Section 722(e), Stat.
149, Aug. 8, 1985.

87. Supplemental Appropriations for the Fiscal Year
Ending September 30, 1985, 99th Cong., P.L. 99-88, Stat.
324, Section 102(b).

88. International Security and Development Cooperation
Act of 1985, P.L. 99-83, 99th Cong., Section 722(g), Stat.
249, Aug. 8, 1985; Conference Committee Report on 99-83,
at 144.

89. H. Rep. 98-122, which accompanied H.R. 2760, stated
that the legislation would "not prohibit the collection, pro-
duction, or analysis of intelligence by U.S. intelligence ele-
ments, nor the provision of such intelligence to friendly
foreign countries, as long as such activity does not support
military or paramilitary operations in Nicaragua by any
foreign nations or other entity," at 14.

90. 15071.

91. See Vol. 131, No. 80, Cong. Rec, H4143 (daily ed.,
June 12, 1985) (Statement of Rep. Boland).

92. Vol. 131, No. 80, Cong Rec. H4143 (daily ed., June
12, 1985); see also Vol. 131, No. 80, Cong. Rec, H4131
(daily ed., June 12, 1985) (Statement of Rep. Bonior).

93. Vol. 131, No. 80, Cong. Rec. H4144 (daily ed., June
12, 1985).

94. The Conference Report on the International Security
and Development Cooperation Act of 1985 explained that
this exception allowed "the sharing of intelligence informa-

409

Chapter 26

tion with the democratic resistance." H. Rep. 99-237, at
144.

95. Vol. 131, No. 80, Cong. Rec. H4145 (daily ed., June
12, 1985).

96. Q338.

97. Security and Development Assistance; Hearings
Before the Sen. Comm. on Foreign Relations, 99th Cong.,
1st Sess., at 908-10(1985).

98. Department of Defense Appropriations for 1986:
Hearings Before a Subcomm. of the House Comm. for Ap-
propriations, 99th Cong., 1st Sess. 1091-92 (1985).

99. Memorandum for the General Counsel, 8/23/84,
C415.

100. McFarlane Test., Hearings, 100-2, at 44-48; id., at
127,

101. Ex. RCM 408.

102. North Test., 7/9/87, at Hearings. 100-7, Part 1, at
271; Id. 7/7/87, at 91; see e.g. O'Boyle Test., 5/21/87, at
100-3 at 118.

103. North Memo, 1/15/86 to McFarlane: Subj: "Nicara-
gua Options," N45025.

104. International Security and Development Cooperation
Act of 1985; Conference Report 99-237 to accompany S.
960, 99th Cong., July 29, 1985, at 143.

105. International Security and Development Cooperation
Act of 1985; Conference Report 99-237 to accompany S.
960, 99th Cong., July 29, 1985, at 143.

106. As early as December 11, 1984, Representative Ad-
dabbo had expressed concern over the possibility that for-
eign assistance funds were being redirected to the Contras.
In a letter to Secretary Shultz, he wrote "I am concerned
that countries receiving U.S. foreign assistance aid may be
utilizing a portion of such aid to assist the Contras and, in
doing so, effect a rather devious contravention of the law
prohibiting such aid," N31162.

107. CIA document, Subj.: "Question for the Record re-
garding January 28 Covert Action Update Briefing,"
C5284-85.

108. Intelligence Oversight Board memorandum of Apr.
8, 1986, discussing the communications and advice provision
of legislation concerning the Nicaraguan opposition,
N33562. See also C924 (letters from Representative Hamil-
ton and Senator Durenberger).

109. Vol. 131, No. 159, Cong Rec. H 10294 (daily ed.,
Nov. 19, 1985) (emphasis added).

110. Vol. 132, No. 40, Cong Rec. (daily record, Mar. 27,
1986). Senate floor debate and vote on S.J. Res. 283,

111. Vol. 132, No. 40, Cong Rec. (daily record, Mar. 27,
1986). Kennedy Amendment No. 1716 to S.J. Res. 283 to
prohibit any United States assistance to military and para-
military groups operating in Nicaragua was rejected by a
vote of 76 nays to 24 yeas. Similarly defeated was a second
Kennedy Amendment, No. 1727, which sought to prevent
the introduction of United States personnel into Nicaragua.
A Cranston-Sasser amendment, No. 1722, calling for bilater-
al negotiations, also was rejected.,

112. Vol. 132. No. 88, Cong. Rec, H4253 (daily ed., June
25, 1986).

113. Vol. 132, No. 88, Cong Rec, H4237 (daily ed., June
25, 1986).

114. Continuing Appropriations for Fiscal Year 1987,
99th Cong., P.L. 99-500, Section 201, Stat. 1783, 295-300,
Oct. 18, 1986. See also discussion in Vol. 132, No. 88, Cong.
Rec (daily ed., June 25, 1986), House floor debate, H4253-
80.

115. Poindexter Dep., 5/2/87, at 63.

116. Public Papers of the President: Ronald Reagan. 1983,
at 541.

117. 299 U.S. 304, 319-20(1936).

118. 453 U.S. 654(1981).

1 19. Youngstown Sheet & Tube Co. v. Sawyer. 343 U.S.
579 (1952).

120. 453 U.S. at 668-69 (emphasis supplied; quoting m
part from Jackson. J., concurring in Youngstown Sheet &
Tube Co. V. Sawyer. 343 U.S. at 637-38).

410

Chapter 27
Rule of Law

SIR THOMAS MORE: The law, Roper, the
law. I know what's legal not what's right. And
I'll stick to what's legal ....

WILLIAM ROPER: So now you'd give the
Devil benefit of law!

MORE: Yes. What would you do? Cut a great
road through the law to get after the Devil?

ROPER: I'd cut down every law in England to
do that!

MORE: Oh? And when the last law was down,
and the Devil turned round on you — where
would you hide. Roper, the laws all being flat?
This country's planted thick with laws from coast
to coast — Man's law, not God's — and if you cut
them down — and you're just the man to do it —
d'you really think you could stand upright in the
winds that would blow then?

— A Man For All Seasons by Robert Bolt

Too many laws were "cut down" in the Iran-
Contra Affair by officials who, like Roper, decided
that the laws inhibited pursuit of their goals.

This process began when members of the National
Security Council staff decided "to take some risks"
wdth the law, in John Poindexter's words, in order to
continue support for the Contras. At the end, as
Oliver North acknowledged, they were engaging in
conduct such as lying to Congress that they knew
was plainly "wrong."

TTie Committees were charged by their Houses
with reporting violations of law' and "illegal" or
"unethical" conduct,^ and if the Committees are to be
true to their mandates, they cannot hesitate to draw
the inevitable conclusions from the conduct these offi-
cials displayed during this affair.

The judgments of these Committees are not the
same as those required of the Independent Counsel.
He must decide whether there was criminal intent
behind any violation, whether there are any extenuat-
ing circumstances, and whether prosecution is in the
public interest. The Committees express no opinions
on these subjects and our comments in this section are
purposefully general so as not to prejudice any indi-
vidual's rights. Our focus is not on whether the tech-

nical and demanding requirements of criminal statutes
have been met, but on whether the policy underlying
such statutes has been frustrated. Moreover, the list of
statutes implicated by the Iran-Contra Affair is not
exhaustive.

Because of the importance of the Boland Amend-
ment to this investigation, this Report considers the
applicability of that Amendment to the NSC in a
separate chapter. The only issue under the Boland
Amendment that is addressed in this chapter is the
legality of the diversion. The Boland Amendment
aside, however, the Committees find that activities in
the Iran-Contra Affair, including the diversion, were
conducted and later covered up by members of the
NSC staff in violation of the Constitution and of ap-
plicable laws and regulations.

Use of Donated Funds to Evade
Congress' Power of the Purse

Overview

The Committees fmd that the scheme, taken as a
whole, to raise money to conduct a secret Contra-
support operation through an "off-the-shelf covert
capacity (the Enterprise) operating as an appendage
of the NSC staff violated cardinal principles of the
Constitution.

Several witnesses at the public hearings contended
that the covert action to support the Contras did not
violate the Boland Amendment because it was fi-
nanced by contributions, not appropriated funds. The
Boland Amendment by its terms, they maintained,
only prevented the President from spending appropri-
ated funds to support the Contras. But that ignores a
greater principle. The Constitution contemplates that
the Government will conduct its affairs only with
funds appropriated by Congress. By resorting to funds
not appropriated by Congress — indeed funds denied
the executive branch by Congress — Administration of-
ficials committed a transgression far more basic than a
violation of the Boland Amendment.

The power of the purse, which the Framers vested
in Congress, has long been recognized as "the most
important single curb in the Constitution on Presiden-
tial Power." ^ The Framers were determined not to

411

Chapter 27

combine the power of the purse and the power of the
sword in the same branch of government. They were
concerned that if the executive branch had both the
power to raise and spend money, and control over the
armed forces, it could unilaterally embroil the country
in war without consent of Congress, notwithstanding
Congress' exclusive power to declare war.

When members of the executive branch raised
money from third countries and private citizens, took
control over that money through the Enterprise, and
used it to support the Contras' war in Nicaragua, they
bypassed this crucial safeguard in the Constitution. As
Secretary of State George Shultz testified at the
public hearings: "You cannot spend funds that the
Congress doesn't either authorize you to obtain or
appropriate. That is what the Constitution says, and
we have to stick to it.'"*

The Power of the Purse and the
Constitution

Article I, Section 9, Clause 7 of the Constitution,
the appropriations clause, provides:

No money shall be drawn from the Treasury, but
in consequence of appropriations made by law.

The appropriations clause was intended to give Con-
gress exclusive control of funds spent by the Govern-
ment, and to give the democratically elected repre-
sentatives of the people an absolute check on Execu-
tive action requiring expenditure of funds.

The Framers viewed Congress' exclusive power of
the purse as intrinsic to the system of checks and
balances that is the genius of the United States Consti-
tution.

James Madison, the principal architect of the Con-
stitution, explained:

The House of Representatives alone can propose
the supplies requisite for the support of govern-
ment. They, in a word, hold the purse. . . . This
power of the purse may, in fact, be regarded as
the most complete and effectual weapon with
which any constitution can arm the immediate
representatives of the people for obtaining a re-
dress of every grievance, and for carrying into
effect every just and salutary measure.^

Col. George Mason, another Constitutional Conven-
tion delegate, stated, ". . . the purse and the sword
ought never to get into the same hands, whether
legislative or executive . . . ."^

This concept has been a guiding constitutional prin-
ciple for 200 years. As President Reagan stated at an
October 22, 1987, press conference: "The President of
the United States cannot spend a nickel. Only Con-
gress can authorize the spending of money."''

Congress' exclusive control over the expenditure of
funds cannot legally be evaded through use of gifts or
donations made to the executive branch. Were it oth-

erwise, a President whose appropriation requests were
rejected by Congress could raise money from private
sources or third countries for armies, military actions,
arms systems, and even domestic programs.

The Government may, of course, receive gifts.*
However, consistent with Congress' constitutionally
exclusive power of the purse, gifts like all other "mis-
cellaneous receipts" must, by statute (31 U.S.C. Sec-
tion 484) be placed directly into the Treasury of the
United States,^ and may be spent only pursuant to a
Congressional appropriation.'" *

The Constitutional process that lodges control of
Government expenditures exclusively in Congress is
further enforced by the Anti-Deficiency Act (31
U.S.C. Section 1341) which prohibits an officer of the
United States from authorizing an expenditure that
has not been the subject of a Congressional appropria-
tion, or that exceeds the amount of any applicable
appropriation. Thus it provides:

An officer or employee of the United States
Government may not make or authorize an ex-
penditure or obligation exceeding an amount
available in an appropriation or fund for the ex-
penditure or obligation; or involve [the] govern-
ment in a contract or obligation for the payment
of money before an appropriation is made unless
authorized by law.

Violations of the Anti-Deficiency Act are made
crimes by 31 U.S.C. Section 1350. **

*The significance of this proposition is explained in a major
General Accounting Office publication on Appropriations Law,
which serves as a guide for Government officials:
Once money is deposited into a "miscellaneous receipts" ac-
count, it takes an appropriation to get it back out. E.g. 3
Comp. Gen. 296 (1923); 2 Comp. Gen. 599,600 (1923). Thus,
the effect of 31 U.S.C. Section 484 is to ensure that the execu-
tive branch remains dependent on the Congressional appropria-
tions process. . . [it] emerges as another element in the statuto-
ry pattern by which Congress retains control of the public
purse under the separation of powers doctrine.
See 51 Comp. Gen. 506,507 (1972). (Principles of Federal Appro-
priations Law. United States General Accounting Office. Office of
General Counsel, pp. 5-65).

••Use by the Executive of gifts to pay for programs not funded
by Congress is also prohibited by the doctrine against augmentation
of appropriations, which the GAO also explained:
The prohibition against augmentation is a corollary of the
separation-of-powers doctrine. ... To permit an agency to
operate beyond (its appropriation] with funds derived from
some other source without specific congressional sanction
would amount to a usurpation of the congressional prerogative.
Restated, the objective of the theory against augmentation of
appropriated funds is to prevent a government agency from
undercutting the congressional power of the purse by circu-
itously exceeding the amount Congress has appropriated for
that activity ....
(Id. at pp. 5-62.)

412

Chapter 27

Use of the Enterprise to Mask the Fact
that the U.S. Government Had Taken
Control of the Donations

The constitutional scheme, which these laws ampli-
fy, is thus a simple one. Congress is dependent upon
the executive branch to execute the law it passes; and
the executive branch is dependent upon Congress to
appropriate the funds to carry on its activities. This
mutual dependence is at the heart of the system of
checks and balances.

The Constitutional plan did not prohibit the Presi-
dent from urging other countries to give money di-
rectly to the Contras.i' But the Constitution does
prohibit receipt and expenditure of such funds by this
Government absent an appropriation. This prohibition
may not lawfully be evaded by use of a nominally
private entity, if the private entity is in reality an arm
of the Government and the Government is able to
direct how the money is spent.

The law with respect to when a nominally private
company is an arm of the Government such that
expenditure of its funds is governed by rules applica-
ble to expenditure of Government funds is summa-
rized in Motor Coach Industries, Inc. v. Dole, 125 F.2d
958, 964-65 (4th Cir. 1984). There, the Court articulat-
ed a multifactor approach for resolving when an os-
tensibly private entity like a trust is a Federal entity:

We must consider, at a minimum, the purposes
for which the trust was established; the public or
private character of the entity spearheading the
trust's creation; the identity of the trust's benefici-
ary and administrators; the degree of control ex-
ercised by the public agency over disbursements
and other details of administration; and the
method by which the trust is funded.*^

Lake Resources, the flagship of the Enterprise, was
created by Richard Secord and Albert Hakim at
North's request in July 1985. North did not like the
way Contra leader Adolpho Calero was spending the
donations received earlier, and he wanted more con-
trol over expenditures. By North's own admission.
Lake Resources was to be an "off-the-shelf company
to conduct a "full service covert action" in support of
the Contras and other governmental projects. North
referred to it in his PROF messages to Poindexter as
"our Lake Resources company."

North was responsible, directly or indirectly, for
virtually all the income of Lake Resources and the
other companies in the Enterprise, and he had the
power to direct its expenditures. North instructed
Secord to spend money for airplanes, an airstrip, and
munitions for the Contras and Secord did. He in-
structed Secord to spend money on radios for a politi-
cal party in a foreign country and Secord did. He
instructed Secord to spend its money for a ship to
conduct an intelligence operation and Secord did. He
instructed Secord to spend cash in support of a Drug

Enforcement Agency operation to free U.S. hostages
and Secord did.

North had secure communication devices in his
office and those of all principal operatives in the
covert action. Using these devices. North was able to
maintain control of the most minute details of the
operation. On one occasion, he even instructed pilots
on the coordinates to be used in a weapons drop to
the Contras inside Nicaragua.

Lake Resources was created for the very purpose
of conducting Government operations while evading
the Congressional appropriations power. In describing
Director of Central Intelligence William Casey's plan
for an off-the-shelf covert capacity. North testified:

Q: Do you remember giving testimony about the
fact that Director Casey wanted something that
he could pull off the shelf and that is why he was
excited about the fact that you were now able to
generate some surpluses that could be used?

A: That is correct.

Q: Why don't you give us a description of what
he said, or as you understood it, what he meant
by pulling something off the shelf?

A: Director Casey had in mind, as I understood
it, an overseas entity that was capable of con-
ducting operations or activities of assistance to
U.S. foreign policy goals that was a stand-alone.

Q: Self-financed?

A: That was self-financing, independent of appro-
priated monies and capable of conducting activi-
ties similar to the ones that we had conducted
here.** (Emphasis added.)

The concept of an off-the-shelf covert company to
conduct operations with funds not appropriated by
Congress is contradictory to the Constitution. The
decision to use the Enterprise to fight a war with
unappropriated funds was a decision to combine the
power of the purse and the power of the sword in
one branch of government.

Referring to the concept of having independently
financed entities conduct covert actions to avoid Con-
gressional review. Secretary Shultz said: "This is not
sharing power, this is not in line with what was
agreed to in Philadelphia. This is a piece of junk and
it ought to be treated that way."'*

As former Secretary of State Henry Kissinger re-
cently wrote with particular reference to the use of
the proceeds of the Iranian arms sales:

On the formal level the case is obvious. The
Executive branch cannot be allowed — on any
claim of national security — to circumvent the
Congressional prerogative over appropriations by

413

Chapter 27

raising its own funds through the sale of govern-
ment property.'^

Legal Advice

The President may have received support for use of
third country funds from a decision at the June 1985
National Security Policy Group meeting, which he
attended, to seek the advice of Attorney General Wil-
liam French Smith before any funds were obtained
from third countries.

At that meeting. Secretary Shultz warned that so-
licitation of third-country funds that the Government
could control might be an "impeachable offense," at-
tributing this opinion to Chief of Staff James Baker.
Casey disagreed and offered to obtain an opinion
from Attorney General Smith. '^

When Casey approached the Attorney General the
following day, however, he drew the question nar-
rowly, asking only whether Nicaragua's neighbors
could be urged to help the Contras. The Committees
have received evidence that Attorney General Smith
gave an oral opinion that this would not be unlawful.
As noted above, the Constitution does not prohibit a
President from urging foreign countries and private
citizens to give money to causes which the President
supports, so long as this Government does not take
control of the money.

But no representatives of the Justice Department
were ever asked to express an opinion that it was
constitutional for members of the executive branch to
do what they did here — raise money from third coun-
tries and private parties, put the money in an entity
controlled by the Executive, and direct its expendi-
ture for projects of the executive branch. Nor did any
legal officer of the Government ever suggest that it
was lawful or constitutional to divert proceeds from
the sale of U.S. property for purposes forbidden by
the Congress.

The oral, on-the-spot advice of Attorney General
Smith to Casey that Central American countries
could be approached may in the transmission have
been given a broader interpretation. The Committees
simply do not know. But the Iran-Contra Affair
cannot stand as a precedent for bypassing the consti-
tutional requirement for appropriations. Securing
funds, without Congressional authorization, to fund
Government programs run by Government officials,
is a direct violation of the Constitution that cannot be
condoned.

Section 501 of the National
Security Act and Related
Regulation

The Committees find that the failure to notify the
House Permanent Select Committee on Intelligence
and the Senate Select Committee on Intelligence of
the covert action to support the Contras violated the

Congressional notice provisions of Section 501 of the
National Security Act; and that the delay in notifying
Congress of the Iran arms sales abused whatever flexi-
bility Congress built into the statute.

Section 501 of the National Security Act requires
that Congress be notified of all covert actions con-
ducted by any agency of Government. The statute
provides:

The Director of Central Intelligence and the
heads of all departments, agencies and other entities
of the United States involved in intelligence activities
shall:

(1) keep the Select Committee on Intelligence of
the Senate and Permanent Select Committee on
Intelligence of the House of Representatives
(hereinafter in this section referred to as the "In-
telligence Committee") fully and currently in-
formed of all intelligence activities which are the
responsibility of are engaged in by or are carried
out for or on behalf of any department, agency, or
entity of the United States, including any signifi-
cant anticipated intelligence activity. (Emphasis
added.)

There are only two exceptions or qualifications to
the requirement of prior notice. First, the relevant
head of a department, in lieu of notifying both Intelli-
gence Committees, may notify the two ranking Mem-
bers of each Intelligence Committee, and the two
ranking Members of each House of Congress. This
requires a personal decision by the President of the
United States.

Second, the Act recognizes that there are circum-
stances under which the President may not have pro-
vided any prior notice to Congress. In such a case, he
must "fully inform the Intelligence Committees in a
timely fashion" with a "statement of the reasons for
not giving prior notice." This also requires a personal
decision by the President.'''

The notification provision of Section 501 serves
vital purposes for both Congress and the executive
branch. First, the required notification allows for ben-
eficial congressional input in decisions that may affect
important national interests. As former Director of
Central Intellience William E. Colby said during con-
sideration of the Act, discussion with Congressional
officials of planned covert actions "enables the Execu-
tive to get a sense of Congressional reaction and
avoid the rather clamorous repudiation which has oc-
curred in certain cases. ... I think that is a helpful
device."'*

Second, notification enables Congress to fulfill its
constitutionally mandated role of monitoring Execu-
tive actions in the area of national defense and foreign
policy lest covert actions entangle the country in
overt hostilities. As a mechanism for consultation be-
tween the executive and legislative branches, notifica-

414

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tion helps to address the anomaly of formulating plans
for secret action within a democracy.

The language of Section 501, as well as its legisla-
tive history, was the product of a delicate compro-
mise between Congress and the executive branch. The
purpose of the compromise was to avoid a confronta-
tion with President Carter, who maintained there
might be situations in which he should not be re-
quired to give prior notice, and that a statute requir-
ing such disclosure in every case would interfere with
his constitutional responsibilities. After lengthy con-
sultation with the Administration, the statute was
crafted so as to permit the Congress and the President
to continue to disagree. This was done by the inclu-
sion of a preamble that states that the notice require-
ments apply "to the extent consistent with all applica-
ble authorities and duties, including those conferred
upon the executive and legislative branches of the
Government," and by recognizing that there might be
circumstances where prior notice is not given.

Deferral of notice was intended to be the exception,
not the rule. For example. Senator Dee Huddleston,
the lead sponsor of the bill, stated:

I myself believe that the only constitutional basis
for the President to withhold prior notice of a
significant intelligence activity would be exigent
circumstances when time does not permit prior
notice; in such a case the committee could be
notified as soon as possible. ' ®

Similarly, Senator Daniel Inouye said during consid-
eration of the Conference Report on the Intelligence
Oversight Act:

I am of the firm belief that the only time the
President has the constitutional authority to with-
hold prior notice to the intelligence committees
would be in matters of extreme exigency. In my
experience as chairman of the Intelligence Com-
mittee and as a continuing member of that com-
mittee, and after 4 years of reviewing the covert
operations of our intelligence system, I cannot
conceive of any circumstance which would re-
quire the withholding of prior notice except
where the nation is under attack and the Presi-
dent has no time to consult with Congress before
responding to save the country. ^^

The Administration's conduct in the Iran-Contra
Affair was inconsistent with these standards.

The Contra Covert Operation

Under Section 501, the President alone can make a
determination to delay notice of a covert operation.
The President did not make a personal determination
that notice of the NSC staffs Contra support activity
should either be delayed or hmited. Indeed, he has
publicly disclaimed knowledge of the covert action.

Thus, prior notice to Congress of the covert action by
the NSC staff was required.

No notice of any kind was ever sent to Congress
concerning the Contra covert action conducted by
the NSC staff. On the contrary, the NSC staff took
every step to keep Congress from discovering its ac-
tivities. The covert action was carried out in violation
of the Congressional notice provisions of the National
Security Act.

The Iranian Arms Sales

The President did know of the Iran arms sales, and
he made a deliberate decision not to notify Congress.
Thus, Congress did not learn of direct arms sales to
Iran, approved by the Finding of January 17, 1986,
until the press reported it in November 1986. Con-
gress did not learn of the December 5, 1985, Finding
approving U.S. participation in the Israeli shipments
until Poindexter's testimony was compelled under a
grant of immunity. As a consequence of the Presi-
dent's decisions not to notify Congress, the operation
continued for over a year through failure after failure,
and when Congress finally did learn, it was not
through notification by the Administration, but from a
story published in a Beirut weekly.

The flexibility afforded the President for providing
notice to Congress was abused by this delay. The
reason cited for not notifying Congress was not that
there was insufficient time to notify Congress — the
only reason recognized in the legislative history justi-
fying absence of prior notice — but that leaks might
result and could endanger the hostages. There was no
evidence to support such a rationale. The hostages
had value to their holders only while they were
alive.^' The Intelligence Committees frequently are
entrusted with information about covert operations in
which disclosure would put American lives at risk.
Moreover, the information the Administration with-
held from Congress was given at various times to an
Iranian intermediary who failed several CIA lie detec-
tor tests, officials of the Government of Iran, officials
of the Government of Israel, officials of the Govern-
ment of a European country, private Israeli business-
men, and private U.S. citizens who did not have secu-
rity clearances, such as Hakim.

It is a fair conclusion, therefore, that the Adminis-
tration chose not to notify Congress of the arms-for-
hostages initiative precisely because it anticipated
Congress' objections and knew that the Secretaries of
State and Defense would not defend the initiative.
Indeed, the Iran initiative was contrary to longstand-
ing national policies and to common sense, and the
Administration might have abandoned the plan rather
than disclose it to Congress.

All covert actions can be supported by strong argu-
ments for secrecy. If the Administration can use these
arguments as reasons to withhold notice where its
plans are most suspect. Section 501 of the National

415

Chapter 27

Security Act is all but nullified. It is precisely when a
covert action is suspect and potentially embarrassing
that Congressional notice is most important. It is also
then that the Administration is most in need of inde-
pendent evaluations and criticism of proposed poli-
cies. And it is then when Congress, the representative
of the people, must be given at least the opportunity
to be heard in secret before action that could be
calamitous for the Nation is carried out.

The DEA Hostage Rescue Operation

In 1985 and 1986, the NSC used DEA agents to
conduct a covert operation designed to free the hos-
tages. The details of this operation are described in
Chapter 23 of this Report. Congress must be notified
of such operations under Section 501 of the National
Security Act.

No notice of any kind was provided to Congress
about this operation, and no decision was ever made
by the President that prior notice should be withheld
or delayed. Thus, failure to notify Congress of the
DEA covert operation violated the law.

Executive Order 12333, and NSDD
159

The procedures applicable to covert actions are gov-
erned not only by statutes, but by executive orders
and National Security Decision Directives (NSDDs).
These are written regulations signed by the President
of the United States, and are binding on the entire
executive branch until they are rescinded or changed
by the President. They, too, were violated.

Executive Order 12333 issued by the President pro-
vides that "no agency except the CIA . . . may
conduct any special activity (elsewhere defined to
include covert actions overseas) unless the President
determines that another agency is more likely to
achieve a particular objective."

There was no Presidential determination that the
NSC staff should conduct the Contra covert oper-
ation, and thus the NSC stafFs covert action in sup-
port of the Contras violated the President's executive
order.

Similarly, National Security Decision Directive
159, promulgated by the President, provides that no
covert action overseas may be conducted by any
agency of Government unless it is authorized by a
written Finding signed by the President.

There was no written Finding signed by the Presi-
dent approving the covert action by the NSC staff in
support of the Contras. Thus the NSC staffs activity
violated this directive.

Violations of 18 U.S.C. Section
1001

We have described elsewhere (Part IV) the elaborate
efforts by Government officials to conceal their
Contra-support activities from Congress.

It is enough to say here that, among other things,
Congress was told by an Administration official orally
and in writing in 1985 that the NSC staff was not
engaged in fundraising or arranging military support
for the Contras. Congress was personally told by
North in 1986 that he was not engaged in fundraising
or giving military advice to the Contras. Congress
was told in testimony by Administration officials in
October 1986 that the Government had no connection
to the plane carrying Eugene Hasenfus. And Congress
was told in testimony by Administration officials in
October, November, and December 1986 that the Ad-
ministration was not involved in raising funds for the
Contras from foreign countries, including specifically
funds from Country 2.

These statements were all untrue. They were made
by officials who had varying degrees of knowledge
about the facts they discussed. Some of the statements
may have been unintentionally misleading and made
by officials who were themselves deceived; others
were outright falsehoods.

Most of these statements were not under oath. But
for the branches to operate in a cooperative relation-
ship. Congress must be able to rely on statements
even if unsworn. Congress and the executive branch
are partners, not adversaries.

The law recognizes this, and the false statement
statute, 18 U.S.C. 1001, provides felony criminal pen-
alties for knowingly false, fictitious, and fraudulent
statements to Congress, ^^ even if not made under
oath. 2 3

Some officials claimed they were forced to choose
between making false statements and revealing infor-
mation they believed should remain secret. Govern-
ment officials may claim any valid privilege including
executive privilege, as a basis for refusing to answer
questions or provide documents, and thus set in
motion procedures for lawfully resolving the claim.
But under the U.S. legal system, public officials do
not have the option of making false statements to
Congress. 2^

The Diversion— Boland
Amendment

The Committees find that the diversion of arms sales
proceeds to the Contras' war effort was an evasion of
the Boland Amendment no matter how narrowly that
noncriminal statute is construed.

The Boland Amendment provides that "no funds
available to the Central Intelligence Agency, the De-

416

Chapter 27

parlment of Defense, or any other agency or entity
involved in intelligence activities" may be spent for
military support of the Contras. (Emphasis added.)

The missiles that were sold to Iran in 1986 came
from Department of Defense stocks. The missiles had
been purchased with money appropriated for the De-
partment of Defense by Congress, and the missiles
belonged to the Department of Defense. The Depart-
ment of Defense sold the missiles to the Central Intel-
ligence Agency, and the Central Intelligence Agency
sold the missiles to Iran.

The memorandum to the President dated January
17, 1986, outlining the arms sales the President ap-
proved that day spells this out very clearly. It states
that the CIA would purchase the missiles from DOD
and would sell the missiles "directly" to Iran, using
an "agent" — i.e., the various Enterprise companies —
to handle the actual transactions.

Iran paid $28.5 million for those weapons. In the
ordinary course, the purchase price is paid to the
seller, i.e., the CIA. In this case, however, National
Security Adviser Poindexter decided, on North's rec-
ommendation, that only a portion of the money
should go to the CIA, with the rest remaining in the
custody of Secord's companies before being used to
support the Contras. Thus, Poindexter testified:

Q: Who decided how that money would be used?

A: The — my guidance to Colonel North what he
requested and I approved, was that those funds
should be used for support of the contras in Cen-
tral America so they could keep pressure on the
Sandinistas.

Q: So the decision — and I think you said earlier
in your testimony, "the buck stops here" — the
decision as to how that money was to be used
was made by you?

A: Was my decision; that is correct. ^^

Poindexter could also have decided that all of the
purchase price be remitted to the CIA. North testified
as follows:

Q: The question was, if those higher-ups in the
U.S. Government from whom you sought ap-
proval decided that the $10 million [residue]
should not, any part of it, be sent to the contras
but should all come back to the U.S. Treasury,
that is what would have happened isn't it?

A: Yes. 2 6

Given the Enterprise's status as an agent, and the
NSC staffs control over the pricing and the proceeds
of the arms sales, the full purchase price was available
to the CIA. These funds, generated from the sale of
U.S. weapons, could no more be diverted to the Con-
tras than the weapons themselves.

Proceeds of Arms Sales— Funds of
the United States

The Committees find that the full proceeds of the
arms sales to Iran belong to the U.S. Government.
Consequently, these funds are governed by statutes
applicable to Government funds, including statutes
prohibiting conversion of U.S. Government funds to
unauthorized purposes.

As already noted in the previous section, Secord's
Enterprise received the purchase price for the missiles
in its capacity as agent for the United States. This
conclusion is strongly supported by the documentary
and testimonial evidence. The President approved the
arms sales based on the January 17, 1986, memoran-
dum, which states that the purchase price "would be
transferred to an agent of the CIA," and that the CIA
would "deliver the weapons to Iran through the
agent." That memorandum is consistent on this point
with other documents in the Committees' possession.*
Moreover, as noted above, the Enterprise conducted
itself in a manner consistent with its status as an agent
of the United States, spending money for Government
purposes — for the Contras, for a foreign country, for
a ship, and for a DEA operation — all at the direction
of Government officials. ^^ The Enterprise's profits
from the Iran arms sales were not the result of entre-
peneurial risks or skills. The Government determined
the price which the Enterprise paid for the missiles
and approved and negotiated the price at which the
missiles were sold to Iran.

Government funds include not only funds in the
physical possession of the Government, but funds
that, although in the possession of another, are under
the Government's control.^* When an agent of the
Government collects money owed to the Government
by a customer of the Government, the money belongs
to the Government and cannot be converted to some
other use. Arbuckle v. United States. 146 F.2d 657
(D.C. Cir. 1944).

The chief legal officer of the United States appears
to be in agreement with the Committees on this point.
The Attorney General of the United States took the
position in an official request for assistance to the
Central Authority of Switzerland, dated December
12, 1986, that the full proceeds of the arms sales were
funds of the United States; and gave similar testimony
to these Committees. Thus, referring to these funds he

• Other memorandums confirm the Enterprise's role as agent in
the Iran arms sales. The proposal to sell missiles directly to Iran
first appeared in a December 9. 1985, memorandum from North to
Poindexter, suggesting "using Secord as our conduit." A memoran-
dum by CIA General Counsel Stanley Sporkin dated January 15,
1986, makes three separate references to an "agent" who would
supply the weapons to Iran and "act as a middleman with our
authority." And the January 17. 1986. Memorandum to the Presi-
dent makes the final proposal to have the CIA transfer the weapons
"directly" to Iran "using an authorized agent as necessary."

417

Chapter 27

said: "I would say that as a general matter, it is highly
probable that those funds should be on a constructive
trust theory or agency theory the property of the
United States." ^9

Government funds coming into the hands of an
officer or agent of the United States must be paid
immediately into the Treasury (31 U.S.C. Sections
484, 3302) and may not be applied to some other use
(18 U.S.C. Section 641). Consequently, it is the Com-
mittees' judgment that all funds derived from the pro-
ceeds of the sale of arms to Iran currently in the
custody of the Enterprise or its representatives belong
to the United States and by law should be returned to
the United States Treasury forthwith.

Iran Arms Sales: Arms Export
Control Act

The Committees find that the Administration's ap-
proval of the transfer of weapons to Iran by Israel
violated the Arms Export Control Act (AECA).3o

All the HAWKs and TOWs that Israel transferred
to Iran in 1985 had earlier been obtained from the
United States under the AECA. Agreements between
this country and Israel prohibited Israel from transfer-
ring the arms to any third country without first ob-
taining written consent of the United States.^'

Under the AECA, the President may not provide
that consent unless: (1) the United States itself would
transfer those arms to that country; (2) the transferee
country (here Iran) agrees in writing that it will not
further transfer the items without obtaining the con-
sent of the President; and (3) the President notifies
Congress of the transfer (22 U.S.C. Section
2753(a)). =» 2

The President's authorization of the 1985 Israeli
transfers to Iran were made without even a pretense
of compliance with the AECA or Israel's written
agreements with the United States. No written con-
sent was sought or given; and even if Israel had
sought a written consent, this Government could not
have given it without changing its own regulations.
This is so because Iran, which was considered a ter-
rorist nation by the United States and which was the
subject of a U.S. arms embargo, was not eligible for
direct sales. *^ No written Iranian retransfer assur-
ances were obtained nor could they have been. Final-
ly, no notice was given to Congress.

In 1985, the Secretary of Defense stated vigorously
to the President that he believed the sales were ille-
gal. He restated his belief before these Committees in
1987:

A: But my feeling about that was, as I've men-
tioned to you earlier, that the Export Control
Act doesn't permit a blanket approval in advance
or anything of that kind and does not permit
exports, did not permit exports to Iran, neither
that Act nor some others, and did not permit the

Israelis to export anything we hadn't specifically
authorized.

Q: So if Israel had earlier purchased arms from
the United States under the Arms Export Control
Act and not pursuant to an intelligence activity,
your position was that the law forbade them to
transfer them to any third country without going
through varius kinds of waivers and reporting
requirements?

A: Yes. Right.34
Later he testified:

Q: So it would have been — you're saying it
would have been a violation of law for Israel to
have — ?

A: I don't know of anything that would have
taken it out of the normal course. I haven't re-
searched the problem and had a legal opinion on
it. My view is that our Arms Export Control Act
would make that kind of transaction illegal, yes.
That is just my own conclusion. ^s

The Administration takes the position that the CIA
may transfer weapons as part of an intelligence oper-
ation, outside the context of the AECA, by using the
President's powers under the National Security Act.
That is the approach the President used in 1986 re-
garding his January 17, 1986, Finding. However, no
such Finding existed for the sale of 504 TOWs; only a
retroactive Finding existed for the November 1985
HAWKs sale; and the weapons transferred by Israel
to Iran were governed by the AECA having been
earlier transferred to Israel pursuant to that Act.^®

The Department of Justice, in a legal opinion on
December 17, 1986, concluded that the 1985 Israeli
shipments did not violate the AECA.''' In reaching
this conclusion, the opinion assumed that Israel was
acting solely as a "conduit" in a direct sale by the
United States to Iran; that the United States promptly
replenished all Israeli weapons with identical weap-
ons; that the Israelis had no financial interest in the
transaction; and that the United States asked Israel to
engage in these transfers as an accommodation to the
United States.'* The opinion also recognized that its
conclusion depended on the correctness of these as-
sumptions.

The assumptions are, in fact, incorrect. It was the
Israelis who first suggested and engaged in the arms
sales. Israel was more than a conduit. The initiative
was considered a joint venture by the United States
and Israel; Israel ended with newer TOWs than it
started with; and the prolonged negotiations over re-
plenishment reveal the financial interest Israel had in
the transaction. Since its assumptions were incorrect,
the legal conclusion of the Department of Justice
opinion must be discounted. Moreover, even if the

418

Chapter 27

assumptions were correct, it is not clear that the De-
partment of Justice legal opinion is correct.

Violation of 18 U.S.C. Section 1505
and the Presidential Records Act

The destruction or alteration of documents^ ^ or the
giving of false testimony'"' to frustrate a Congression-
al inquiry is a felony if done with "corrupt" intent —
i.e., the purpose of impeding an inquiry (18 U.S.C.
Section 1505).*'

Even if a subpoena has not been issued, an individ-
ual on notice of a planned Congressional inquiry
cannot lawfully alter or destroy documents for the
purpose of preventing Congress from developing the
facts if he knows such documents may be subpoenaed
or requested. E.g., see United States v. Vesich, 724
F.2d 471 (5th Cir. 1984); United States v. Tallant. 407
F.Supp. 878, 888 (N.D. Ga. 1975).

Starting at least as early as November 10, 1986, the
Administration was put on notice that various Con-
gressional committees planned inquiries into the sale
of arms to Iran. Both the House and Senate Intelli-
gence Committees told the White House of the inquir-
ies and arranged for Poindexter and Casey to appear
before them on Friday, November 21, 1986. Thereaf-
ter, several Administration officials took actions
which had the effect of concealing this Government's
participation in the Israeli shipments that violated the
Arms Export Control Act.

On November 18, 1986, 3 days before the sched-
uled appearance of Casey and Poindexter, Presidential
aides began to focus on the legal problems attending
U.S. involvement in the Israeli shipments made prior
to the January 17, 1986, Finding. Then during the
next 3 days, several Administration officials involved
in the pre-Finding shipments told conforming stories
denying U.S. involvement in these shipments, at times
using a false cover story that the United States had
been told that the Israelis were shipping oil-drilling
equipment, not arms. These officials wrote this false
cover story into NSC chronologies; they told the
false cover story in one version or another to Con-
gress and to the Attorney General; and they de-
stroyed documents that would have revealed the
truth.

The full facts concerning this effort, in the face of
imminent Congressional probes, to alter the historical
record, are described in Part IV. Whether or not any
of the individuals had the requisite criminal intent to
violate 18 U.S.C. Section 1505, their conduct violated
the very thrust of that law — to ensure that Congress'
access to the truth would not be obstructed.

Iran: The Presidential Records Act

Government employees do not have the discretion to
destroy or alter embarrassing or incriminating docu-

ments. The Presidential Records Act was enacted
after Watergate for the very purpose of ensuring that
official records would be preserved. The Act has no
criminal penalties but it was willfully violated by
Poindexter in destroying the December 1985 Finding.

Conclusion

Article II, Section 3 of the Constitution directs that
the President "shall take care that the laws be faithful-
ly executed." *^ The "take care" clause was derived
from the English Bill of Rights, which forbade the
King from suspending laws that he did not like. As
Justice Jackson stated, the "take care" clause signifies
"that ours is a government of laws, not of men." *^

The "take care" clause embodies the principle of
accountability. As Gouverneur Morris, one of the
Constitutional Convention delegates, stated, the Fram-
ers were quite cognizant that "without . . . ministers
the Executive can do nothing of consequence."** At
the same time, however, they understood that a gov-
ernment of the people could not function unless the
elected chief executive was responsible for the actions
of his appointed subordinates. In 1789, Madison wrote
that "[NJo principle is more clearly laid down in the
Constitution, than that of responsibility."*^ The "take
care" clause so unpretentious in its wording, made
accountability compatible with delegation. Although
they recognized that executive power must be exer-
cised by subordinate departments, the Framers never-
theless required the President to superintend the ac-
tions of those departments, thus correcting the tend-
ency of "plurality in the executive ... to conceal
faults and destroy responsibility." *^

The President's responsibility to supervise his ap-
pointees was vigorously debated in the first session of
Congress when the President's power to remove Cab-
inet officers was questioned, tslany of the members
had been delegates to the Constitutional convention
or the ratifying conventions, and they had firsthand
knowledge of the Framers' intent. One Member of
Congress, Fisher Ames, stated, "The executive
powers are delegated to the President with a view to
have a responsible officer to superintend, control, in-
spect, and check the officers necessarily employed in
administering the laws."*'' "If anything in its nature"
is executive, James Madison explained, "it must be
that power which is employed in superintending and
seeing that the laws are faithfully executed." Repre-
sentative Lee answered his own rhetorical question,
"Is not the President responsible for the Administra-
tion? He certainly is."**

In modern government, with its hundreds of thou-
sands of employees, a President obviously cannot per-
sonally supervise the acts of all who act in his name.
But if the "take care" clause has any vitality, it in-
vests in a President the responsibility for cultivating a
respect for the Constitution and the law by his staff

419

Chapter 27

and closest associates. When the President's National deception of Congress is proper; and when laws like

Security Adviser, who had daily contact with the the Boland Amendment can be treated as if they do

President, can assume that he is carrying out the not exist, then clearly there has been a failure in the

President's wishes and policy in authorizing the diver- leadership and supervision that the "take care" clause

sion; when NSC staff members believe that the de- contemplated,
struction of official documents is appropriate and the

420

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Chapter 27

1. H, Res. 12 at 3.

2. S. Res. 23 at 3.

3. Corwin, The Constitution and What It Means Today,
101 (13th ed., 1975).

4. Shultz Test., Hearings. 100-9, at 254.

5. Federalist 58.

6. Madison's Notes of the Constitutional Convention,
Ohio University Press, 1966 at p. 81.

7. New York Times, "Televised Press Conference," 10/
22/87, p. 8.

8. See, e.g.. United States v. Burnison. 339 U.S. 87, 90
(1950).

9. See 31 U.S.C. section 484 (known as the Miscellaneous
Receipts Statute).

10. Principles of Federal Appropriations Law, United
States General Accounting Office, Office of General Coun-
sel, at 5-65.

11. The Administration received precisely that advice. At
the June 1985 NSPG meeting. Secretary Shultz warned that
the United States could not receive money from third coun-
tries and spend it for the Contras and that to do so might be
an "impeachable offense," attributing this opinion to Chief
of Staff James Baker. Casey said that they could ask the
third countries to give directly to the Contras and sought
the opinion of Attorney General Smith, who gave oral
advice that it was lawful for the President to urge Nicara-
gua's neighbors to help the Contras. The Attorney General
was not asked, and expressed no opinion, that it was consti-
tutional for the NSC staff to raise money for the Contras
which they would control directly or indirectly.

12. 725 F.2d at 965.

13. North Test., Hearings, 100-7, Part I, at 314.

14. Shultz Test., Hearings. 100-9, at 255.

15. The Washington Post, 7/28/87, p. 15.

16. The minutes of the NSPG meeting, attended by the
President, reflect Shultz's warning. North's notes also indi-
cate he was told that fundraising might be considered an
impeachable offense and that the opinion of the Attorney
General was going to be sought.

17. National Security Act Section 501.

18. Id.; 126 Cong. Rec. 13095 (1980) (Statement of Sen.
Huddleston, quoting statement of former Director Colby).

19. 126 Cong. Rec. 13096 (1980).

20. 6/3/80 at 13105; Ex. EM-U, Hearings, 100-9.

21. In fact, public disclosure did not result in any loss of
life of which the Committees are aware.

22. The Supreme Court has held that Section 1001 applies
to false statements made to Congress, just as it applies to
false statements made to other parts of the Government.
United States v. Bramblett. 348 U.S. 503 (1955).

23. Attorney General Meese acknowledged that 18
U.S.C. Section 1001 applies to statements made to Congress
whether or not under oath, and that there is no exception
for NSC employees. Meese Test., Hearings. 100-9, at 68-69,
149.

24. For the reasons set forth below a violation of 18
U.S.C. Section 1001 may also constitute an obstruction of a
Congressional proceeding and violate 18 U.S.C. Section
1505.

25. Poindexter Test., Hearings, 100-8. at 150.

26. North Test., Hearings, 100-7, Part I, at 115.

27. Secord denied he was acting as an agent of the Gov-
ernment. He testified that he was independent and could
have sold the missiles to some other country and spent the
money as he wished. Secord Test., Hearings, 100-1, at 132.
This testimony was largely contradicted by Hakim, the doc-
umentary record, the conduct of the parties, and common-
sense. The Committees do not find Secord's testimony to be
credible.

28. It is a basic legal principle that Government funds
include funds over which the Government exercises con-
trol. E.g., Motor Coach Industries v. Dole. 725 F.2d 958, 964-
65 (4th Cir. 1984); United States v. Bailey. 734 F.2d 296, 300
(7th Cir. 1984); United States v. Mitchell. 625 F.2d 158, 160-
61 (7th Cir. 1980); United States v. Mcintosh. 655 F.2d 80,
83-84 (5th Cir. 1981); United States v. Evans. 572 F.2d 455,
471-72 (5th Cir. 1978); see also United States v. Benefield,
721 F.2d 128, 129 (4th Cir. 1983); United Slates v. Canales.
596 F.2d 662, 664 (5th Cir. 1974); United Stales v, Banneda.
607 F.Supp. 419 (N.D. Ind. 1985); United States v. Johnson.
596 F.2d 842, 846 (9th Cir. 1979).

29. Meese Test., Hearings, 100-9, at 113. See also Meese
Test., Hearings, 100-9, at 65.

30. 22 U.S.C. Section 2751 et seq.

31. See 22 U.S.C. Sections 2314(a), 2753(a)(2).

32. See analogous provisions of the Foreign Assistance
Act: 22 U.S.C. Section 2311 et. seq.. at 2314(a) and (e),
applicable to weapons initially sold under the Act.

33. See Gaffney Test., Hearings, 100-6, at 61-62. The
provision that would have prohibited sales to Iran may be
waived by the President, but not without a separate notifi-
cation to both Houses of Congress.

34. Weinberger Dep., 6/17/87 at 62.

35. Weinberger Dep., 6/17/87 at 29; Similar testimony
was given to the Committees by other DOD witnesses
experienced in AECA transfers.

36. See Opinion of Jerome Silber, General Counsel to
Defense Security Assistance Agency, dated January 21,
1987.

37. The Committees have been given access to a legal
opinion ("Opinion") written by Charles Cooper, Assistant
Attorney General, Office of Legal Counsel, Department of
Justice. (See Ex. EM-69, pp. 14-17, Hearings, 100-9.)

38. See Opinion written by Charles Cooper at 16.

39. E.g. United States v. Presser. 187 F.Supp. 64 (N.D.
Ohio 1960), afPd 292 F.2d 171 (6th Cir. 1961), affd by an
evenly divided court, 371 U.S. 71 (1962).

40. E.g. United States v. Lavelle. 751 F.2d 1266 (D.C. Cir.
1985). The giving of false testimony may also violate 18
U.S.C. Section 1621 (perjury) and 18 U.S.C. Section 1001
(false statements not under oath).

41. U.S. V. Langella. 716 F.2d 1078 (2d Cir. 1985).

42. W. Crosskey, Politics and the Constitution. 434 (1953);
Stewart, The Trial of the Seven Bishops, 55 Col. St. B. J.
70(1980).

43. Youngstown Sheet and Tube Co. v. Sawyer. 343 U.S.
579 at 646 (1952).

44. W. Benton, 1787 Drafting the U.S. Constitution, Vol. 2
at p. 1240(1986).

45. 1 Annals of Congress at 480.

46. The Federalist 70 (A. Hamilton).

47. 1 Annals of Congress 495.

48. Id at 544.

421

Chapter 28
Recommendations

It is the conclusion of these Committees that the Iran-
Contra Affair resulted from the failure of individuals
to observe the law, not from deficiencies in existing
law or in our system of governance. This is an impor-
tant lesson to be learned from these investigations
because it points to the fundamental soundness of our
constitutional processes.

Thus, the principal recommendations emerging
from the investigation are not for new laws but for a
renewal of the commitment to constitutional govern-
ment and sound processes of decisionmaking.

The President must "take care" that the laws be
faithfully executed. This is both a moral and legal
responsibility.

Government officials must observe the law, even
when they disagree with it.

Decisionmaking processes in foreign policy matters,
including covert action, must provide for careful con-
sideration of all options and their consequences. Op-
posing views must be weighed, not ignored. Unsound
processes, in which participants cannot even agree on
what was decided (as in the case of the initial Iranian
arms sale) produce unsound decisions.

Congress' role in foreign policy must be recog-
nized, not dismissed, if the benefit of its counsel is to
be realized and if public support is to be secured and
maintained.

The Administration must not lie to Congress about
what it is doing. Congress is the partner, not the
adversary of the executive branch, in the formulation
of policy.

Excessive secrecy in the making of important
policy decisions is profoundly antidemocratic and
rarely promotes sound policy decisions.

These recommendations are not remarkable. They
embody the principles on which this country's success
has been based for 200 years. What is remarkable is
that they were violated so freely and so repeatedly in
the Iran-Contra Affair.

Congress cannot legislate good judgment, honesty,
or fidelity to law. But there are some changes in law,
particularly relating to oversight of covert operations,
that would make our processes function better in the
future. They are set forth below:

1. Findings: Timely Notice

The Committees recommend that Section 501 of
the National Security Act be amended to require that
Congress be notified prior to the commencement of a
covert action except in certain rare instances and in
no event later than 48 hours after a Finding is ap-
proved. This recommendation is designed to assure
timely notification to Congress of covert operations.

Congress was never notified of the Iranian arms
sales, in spite of the existence of a statute requiring
prior notice to Congress of all covert actions, or, in
rare situations, notice "in a timely fashion." The Ad-
ministration has reasoned that the risks of leaks justi-
fied delaying notice to Congress until after the covert
action was over, and claims that notice after the
action is over constitutes notice "in a timely fashion."
This reasoning defeats the purpose of the law.

2. Written Findings

The Committees recommend legislation requiring
that all covert action Findings be in writing and per-
sonally signed by the President. Similarly, the Com-
mittees recommend legislation that requires that the
Finding be signed prior to the commencement of the
covert action, unless the press of time prevents it, in
which case it must be signed within 48 hours of
approval by the President.

The legislation should prohibit retroactive Findings.
The legal concept of ratification, which commonly
arises in commercial law, is inconsistent with the ra-
tionale of Findings, which is to require Presidential
approval before any covert action is initiated.

The existing law does not require explicitly that a
Presidential Finding approving a covert operation be
in writing, although executive orders signed by both
Presidents Carter and Reagan required that they be in
writing. Despite this requirement, a PROF note by
McFarlane suggested that the initial arms sales to Iran
were approved by a "mental finding," and there is
conflicting testimony about whether certain actions
were orally approved by the President. The require-
ment of a written Finding will remove such uncer-
tainties in the future.

423

Chapter 28

3. Disclosure of Written Findings to Congress

The Committees recommend legislation requiring
that copies of all signed written Findings be sent to
the Congressional Intelligence Committees.

Since existing law does not require that covert
action Findings be in writing, there currently is no
requirement that written Findings be disclosed to
Congress. The existing practice has been not to pro-
vide the Intelligence Committees with a signed writ-
ten Finding.

4. Findings: Agencies Covered

The Committees recommend that a Finding by the
President should be required before a covert action is
commenced by any department, agency, or entity of
the United States Government regardless of what
source of funds is used.

The existing statutes require a Presidential Finding
before a covert action is conducted only if the covert
action uses appropriated funds and is conducted by
the Central Intelligence Agency (CIA). By executive
order and National Security Decision Directive
(NSDD), Presidential Findings are required before
covert actions may be conducted by any agency.
Nonetheless, both the National Security Council
(NSC) and the Drug Enforcement Administration
(DEA) became engaged in covert actions without
Presidential Findings fully authorizing their involve-
ment.

The executive order requirement is sound. In the
Committees' judgment. Presidential Findings for
covert actions conducted by any agency should be
required by law. Experience suggests that Presidential
accountability, as mandated by the Finding require-
ment, is equally as important in the case of covert
actions conducted by agencies other than the CIA.

The Committees also believe the Finding require-
ment should apply regardless of the source of funding
for the covert action.

5. Findings: Identifying Participants

The Committees recommend legislation requiring
that each Finding should specify each and every de-
partment, agency, or entity of the United States Gov-
ernment authorized to fund or otherwise participate in
any way in any covert action and whether any third
party, including any foreign country, will be used in
carrying out or providing funds for the covert action.
The Congress should be informed of the identities of
such third parties in an appropriate fashion.

Current law does not require a Finding to state
what agencies, third parties, or countries will be uti-
lized in conducting a covert action. The Iran-Contra
investigation demonstrates that disclosure of what
U.S. agencies (such as the NSC), private parties, or
foreign countries will be engaged in covert actions

are matters of considerable importance if Congress is
to fulfill its oversight responsibilities adequately.

The record of the Iran-Contra investigation reflects
repeated efforts by the executive branch to obtain
funds from third countries for covert operations and
for other causes the Administration supports.

These actions raise concerns of two kinds. First,
there is a risk that foreign countries will expect some-
thing in return. Second, in an extreme case such as
that presented by the record of these hearings, the use
of third country or private funds threatens to circum-
vent Congress' exclusive power of the purse.

6. Findings: The Attorney General

The Committees recommend that the Attorney
General be provided with a copy of all proposed
Findings for purposes of legal review.

The first Iranian arms Finding of December 5,
1985, was not reviewed by the Attorney General. The
Attorney General did give oral advice on the January
17 Finding but did not do the analysis or research
that a written opinion would have entailed. The Presi-
dent, the intelligence community, and Congress are
entitled to a review by the country's chief legal offi-
cer to ensure that planned covert operations are
lawful.

7. Findings: Presidential Reporting

The Committees recommend that consistent with
the concepts of accountability inherent in the Finding
process, the obligtion to report covert action Findings
should be placed on the President.

Under current law, it is the head of the intelligence
entity involved which has the obligation to report to
Congress on covert action. Yet policy choices are
inherently part of the Findings process and it is the
President who must authorize covert operations
through the signing of Findings.

8. Recertification of Findings

The Committees recommend that each Finding
shall cease to be operative after one year unless the
President certifies that the Finding is still in the na-
tional interest. The executive branch and the Intelli-
gence Committees should conduct frequent periodic
reviews of all covert operations.

9. Covert Actions Carried Out by Other Countries

The Committees believe that the definition of
covert action should be changed so that it includes a
request by an agency of the United Sttes to a foreign
country or a private citizen to conduct a covert
action on behalf of the United States.

424

Chapter 28

10. Reporting Covert Arms Transfers

The Committees recommend that the law regulat-
ing the reporting of covert arms transfers be changed
to require notice to Congress on any covert shipment
of arms where the transfer is valued at more than $1
million.

Under current law, the Administration must report
covert arms transfers involving any single item valued
at more than $1 million. Since a TOW or a HAWK
missile is individually worth less than $1 million, this
reporting requirement did not apply to the Iranian
arms sales even though two shipments involved $10
million in arms or more. It is the value of a transfer,
not the value of each component of a transfer, that
matters.

11. NSC Operational Activities

The Committees recommend that the members and
staff of the NSC not engage in covert actions.

By statute the NSC was created to provide advice
to the President on national security matters. But
there is no express statutory prohibition on the NSC
engaging in operational intelligence activities.

12. NSC Reporting to Congress

The Committees recommend legislation requiring
that the President report to Congress periodically on
the organization, size, function, and procedures of the
NSC staff.

Such a report should include a list of duties for
each NSC staff position from the National Security
Adviser on down, and whether incumbents have been
detailed from a particular department or agency. It
should include a description of the President's guide-
lines and other instructions to the NSC, the National
Security Adviser, and NSC staff for their activities.
Particular attention should be paid to the number and
tenure of uniformed military personnel assigned to the
NSC.

13. Privatization

The Committees recommend a strict accounting of
all U.S. Government funds managed by private citi-
zens during the course of a covert action.

The record of the Iran-Contra hearings reflects use
of private parties to conduct diplomatic missions and
covert actions. Private parties can be of considerable
use to the Government in both types of ventures and
their use should be permitted. However, the record
reflects that funds generated during a covert action
are subject to abuse in the hands of a private citizen
involved in conducting a covert action.

14. Preservation of Presidential Documents

The Committees recommend that the Presidential
Records Act be reviewed to determine how it can be
made more effective. Possible improvements include

the establishment of a system of consultation with the
Archivist of the United States to ensure complete
compliance with the Act, the creation of a program
of education of affected staff as to the Act's provi-
sions, and the attachment of criminal penalties for
violations of the Act.

During the Iran-Contra hearings, Oliver North,
John Poindexter, Fawn Hall, and others admitted to
having altered and destroyed key documents relating
to their activities. Such actions constitute violations of
the Presidential Records Act, which was intended to
ensure the preservation of documents of historical
value that were generated by the Chief Executive and
his immediate staff.

15. CIA Inspector General and General Counsel

The Committees recommend that a system be de-
veloped so that the CIA has an independent statutory
Inspector General confirmed by the Senate, like the
Inspectors General of other agencies, and that the
General Counsel of the CIA be confirmed by the
Senate.

The CIA's internal investigation of the Iran-Contra
Affair — conducted by the Office of the Inspector
General — paralleled those of the Intelligence Commit-
tees and then the Iran Committees. It contributed to,
and cooperated with, the Tower Board. Yet, the
Office of the Inspector General appears not to have
had the manpower, resources or tenacity to acquire
key facts uncovered by the other investigations.

The Committees also believe the General Counsel
plays an important role in these matters and accord-
ingly should be confirmed by the Senate.

16. Foreign Bank Records Treaties

The Committees recommend that treaties be negoti-
ated with foreign countries whose banks are used to
conceal financial transactions by U.S. citizens, and
that these treaties covering foreign bank records
specify that Congress, not just the Department of
Justice, has the right to request, to receive, and to
utilize such records.

Many of the important records relating to the Iran-
Contra Affair were generated by foreign banks that
were used by the Enterprise for the covert arms sales
to Iran and the Contra supply operation. The Inde-
pendent Counsel has sought access to these Swiss
bank records pursuant to a treaty with Switzerland.
But the Independent Counsel and the Justice Depart-
ment do not believe the Congressional Committees
are entitled under the terms of the treaty to receive
these records. New treaties should assure Congress of
access to such records and should streamline the
process for obtaining them. The Independent Counsel
had not received all of the Swiss bank records after 9
months of waiting. Given the use of foreign banks by
drug dealers, terrorists, and others involved in unlaw-

425

Chapter 28

ful activity, it is more essential than ever that binding
secrecy not be a shield for serious criminal conduct.

17. National Security Council

The Committees recommend that all statutory
members of the National Security Council should be
informed of Findings.

18. Findings Cannot Supercede Law

The Committees recommend legislation affirming
what the Committees believe to be the existing law:
that a Finding cannot be used by the President or any
member of the executive branch to authorize an
action inconsistent with, or contrary to, any statute of
the United States.

19. Improving Consistency in Dealing with
Security Breaches

The Committees recommend that consistent meth-
ods of dealing with leaks of classified information by
government officials be developed.

The record of these hearings is replete with expres-
sions of concern by executive branch officials over
the problem of unauthorized handling and disclosure
of classified information. The record is also replete
with evidence that high NSC officials breached secu-
rity regulations and disclosed classified documents to
unauthorized persons when it suited their purposes.
Yet no steps have been taken to withdraw or even
review clearances of such people.

20. Review of Congressional Contempt Statutes

The Committees recommend that the Congressional
contempt statutes be reviewed by the appropriate
Committees.

There is a need, in Congressional investigations, for
a swift and sure method of compelling compliance
with Congressional orders for production of docu-
ments and the obtaining of testimony. These investiga-
tions raised questions about the adequacy of existing
statutes.

In addition, new legislation should make clear that
a Congressional deposition, including one conducted
by staff, is a "proceeding" at which testimony may be
compelled under the immunity statute, 18 U.S.C. Sec-
tion 6001 et. seq.

21. Review of Special Compartmented
Operations Within the Department of Defense

The Committees recommend that oversight by In-
telligence and Armed Services Committees of Con-
gress of special compartmented operations within the
Department of Defense be strengthened to include
systematic and comprehensive review of all such pro-
grams.

22. Review of Weapons Transfers by Chairman
of Joint Chiefs of Staff

The Committees recommend that the President
issue an order requiring that the Chairman of the
Joint Chiefs of Staff should be consulted prior to any
transfer of arms by the United States for purposes of
presenting his views as to the potential impact on the
military balance and on the readiness of United States
forces.

23. National Security Adviser

The Committees recommend that Presidents adopt
as a matter of policy the principle that the National
Security Adviser to the President of the United States
should not be an active military officer and that there
should be a limit placed on the tour of military offi-
cers assigned to the staff of the National Security
Council.

24. Intelligence Oversight Board

The Committees recommend that the Intelligence
Oversight Board be revitalized and strengthened.

25. Review of Other Laws

The Committees suggest that appropriate standing
Committees review certain laws for possible changes:

a. Should restrictions on sales of arms to certain
countries under the Arms Export Control Act
("AECA") and other statutes governing overt
sales be made applicable to covert sales?

b. Should the Hostage Act be repealed or amend-
ed?

c. Should enforcement or monitoring provisions
be added to the AECA so that we better control
retransfers of U.S. -manufactured arms by coun-
tries to whom we sell them?

26. Recommendations for Congress

a. The Committees recommend that the oversight
capabilities of the Intelligence Committees be
strengthened by acquisition of an audit staff

b. The Committees recommend that the appropriate
oversight committees conduct review of sole-source
contracts for potential abuse.

c. The Committees recommend that uniform proce-
dures be developed to ensure that classified informa-
tion is handled in a secure manner and that such
procedures should include clear and strengthened
sanctions for unauthorized disclosure of national secu-
rity secrets or classified information which shall be
strictly enforced.

426

Chapter 28

27. Joint Intelligence Committee with intelligence activities and covert operations.

T, „ . , . ,■ . ■ Congress has structured its system for effective over-

Ihe Committees recommend aeamst consolidatme • , ° . ,,. ^ ,, j r .i_ .

^, » Ti J o . I . 11- r^ -7 sight in this area to meet the need for secrecy that

the separate House and Senate Intelligence Commit- ., ... . . . , .,

. , ■ , .,, II, u 1- -u • necessarily accompanies intelligence activities and the

tees into a single oint committee. We believe that v. . , . ^ ° , . . ,

, y. .. ij ■ '. ui A 1^ ' creation of a single oversight committee would simply

such consolidation would inevitably erode Congress Art w u' ff

ability to perform its oversight function in connection ^

427

Section II
The Minority Report

Minority Report

of

Representative Dick Cheney
of Wyoming

Representative William S. Broomfield
of Michigan

Representative Henry J. Hyde
of Illinois

Representative Jim Courier
of New Jersey

Representative Bill McCollum
of Florida

Representative Michael DeWine
of Ohio

Senator James McClure
of Idaho

Senator Orrin Hatch
of Utah

Members. House Select Committee to
Investigate Covert Arms Transactions
with Iran

Members, Senate Select Committee on
Secret Military Assistance to Iran and the
Nicaraguan Opposition

431

Minority Staff

Thomas R. Smeeton
Minority Staff Director

George W. Van Cleve
Chief Minority Counsel

Richard J. Leon
Deputy Chief Minority Counsel

Associate Minority Counsel
Assistant Minority Counsel
Minority Research Director

Robert W. Genzman
Kenneth R. Buck
Bruce Fein

Minority Editor /Writer
Minority Executive Assistant

Minority Staff Assistant

Michael J.Malbin
Molly W. Tully
Margaret W. Dillenburg

Associate Staff

Representative Broomfield

Representative Hyde
Representative Courier
Representative McCollum
Representative DeWine

House of Representatives

Steven K. Berry
David S. Addington
Diane S Doman
Dennis E. Teti
Tina L. Westby
Nicholas P. Wise

Associate Staff

Senator McClure
Senator Hatch

Senate

Jack Gerard
Dee Benson

432

Table of Contents

Part I Introduction

Chapter 1 Introduction 437

Part II The Foreign Affairs Powers of the Constitution and the Iran-Contra Affair

Chapter 2 The Foreign Affairs Powers and the Framers' Intentions 457

Chapter 3 The President's Foreign PoHcy Powers in Early Constitutional History 463

Chapter 4 Constitutional Principles In Court 471

Part III Nicaragua

Chapter 5 Nicaragua: The Context 483

Chapter 6 The Boland Amendments 489

Chapter 7 Who Did What to Help the Democratic Resistance 501

Part IV Iran

Chapter 8 The Iran Initiative 519

Chapter 9 Iran: The Legal Issues 539

Chapter 10 The Diversion 549

Part V Disclosures and Investigations

Chapter 11 The Disclosure and the Uncovering 561

Chapter 12 The NSC's Role in Investigations 567

Part VI Putting Congress' House in Order

Chapter 13 The Need to Patch Leaks 575

Part VII Recommendations

Chapter 14 Recommendations 583

Part VIII Appendixes

433

77-026 0 - 8/ - lb

Part I
Introduction

Chapter 1
Introduction

President Reagan and his staff made mistakes
in the Iran-Contra Affair.* It is important at
the outset, however, to note that the Presi-
dent himself has already taken the hard step
of acknowledging his mistakes and reacting
precisely to correct what went wrong. He
has directed the National Security Council
staff not to engage in covert operations. He
has changed the procedures for notifying
Congress when an intelligence activity does
take place. Finally, he has installed people
with seasoned judgment to be White House
Chief of Staff, National Security Adviser,
and Director of Central Intelligence.

The bottom line, however, is that the mis-
takes of the Iran-Contra Affair were just
that — mistakes in judgment, and nothing
more. There was no constitutional crisis, no
systematic disrespect for "the rule of law,"
no grand conspiracy, and no Administration-
wide dishonesty or coverup. In fact, the evi-
dence will not support any of the more hys-
terical conclusions the Committees' Report
tries to reach.

No one in the government was acting out
of corrupt motives. To understand what they
did, it is important to understand the context
within which they acted. The decisions we
have been investigating grew out of:

— Efforts to pursue important U.S. inter-
ests both in Central America and in the
Middle East;

— A compassionate, but disproportionate,
concern for the fate of American citizens
held hostage in Lebanon by terrorists, in-
cluding one CIA station chief who was
killed as a result of torture;

•See "Our View of the Iran-Contra Affair," below at 442 ff.

— A legitimate frustration with abuses of
power and irresolution by the legislative
branch; and

— An equally legitimate frustration with
leaks of sensitive national security secrets
coming out of both Congress and the execu-
tive branch.

Understanding this context can help explain
and mitigate the resulting mistakes. It does
not explain them away, or excuse their
having happened.

The Committees' Report and the
Ongoing Battle

The excesses of the Committees' Report are
reflections of something far more profound.
Deeper than the specifics of the Iran-Contra
Affair lies an underlying and festering insti-
tutional wound these Committees have been
unwilling to face. In order to support rhetor-
ical overstatements about democracy and the
rule of law, the Committees have rested their
case upon an aggrandizing theory of Con-
gress' foreign policy powers that is itself part
of the problem. Rather than seeking to heal,
the Committees' hearings and Report betray
an attitude that we fear will make matters
worse. The attitude is particularly regretta-
ble in light of the unprecedented steps the
President took to cooperate with the Com-
mittees, and in light of the actions he already
has taken to correct past errors.

A substantial number of the mistakes of
the Iran-Contra Affair resulted directly from
an ongoing state of political guerrilla warfare
over foreign policy between the legislative
and executive branches. We would include
in this category the excessive secrecy of the
Iran initiative that resulted from a history

437

Chapter 1

and legitimate fear of leaks. We also would
include the approach both branches took
toward the so-called Boland Amendments.
Congressional Democrats tried to use vague-
ly worded and constantly changing laws to
impose policies in Central America that went
well beyond the law itself For its own part,
the Administration decided to work within
the letter of the law covertly, instead of
forcing a public and principled confrontation
that would have been healthier in the long
run.

Given these kinds of problems, a sober
examination of legislative-executive branch
relations in foreign policy was sorely needed.
It still is. Judgments about the Iran-Contra
Affair ultimately must rest upon one's views
about the proper roles of Congress and the
President in foreign policy. There were
many statements during the public hearings,
for example, about the rule of law. But the
fundamental law of the land is the Constitu-
tion. Unconstitutional statutes violate the
rule of law every bit as much as do willful
violations of constitutional statutes. It is es-
sential, therefore, to frame any discussion of
what happened with a proper analysis of the
Constitutional allocation of legislative and
executive power in foreign affairs.

The country's future security depends
upon a modus vivendi in which each branch
recognizes the other's legitimate and consti-
tutionally sanctioned sphere of activity. Con-
gress must recognize that an effective foreign
policy requires, and the Constitution man-
dates, the President to be the country's for-
eign policy leader. At the same time, the
President must recognize that his preemi-
nence rests upon personal leadership, public
education, political support, and interbranch
comity. Interbranch comity does not require
Presidential obsequiousness, of course. Presi-
dents are elected to lead and to persuade.
But Presidents must also have Congressional
support for the tools to make foreign policy
effective. No President can ignore Congress
and be successful over the long term. Con-
gress must realize, however, that the power
of the purse does not make it supreme.

Limits must be recognized by both branches,
to protect the balance that was intended by
the Framers, and that is still needed today
for effective policy. This mutual recognition
has been sorely lacking in recent years.

Why We Reject the Committees'
Report

Sadly, the Committees' Report reads as if it
were a weapon in the ongoing guerrilla war-
fare, instead of an objective analysis. Evi-
dence is used selectively, and unsupported
inferences are drawn to support politically
biased interpretations. As a result, we feel
compelled to reject not only the Committees'
conclusions, but the supposedly "factual"
narrative as well.

We always knew, of course, that there
would be differences of interpretation. We
had hoped at the start of this process, how-
ever, to arrive at a mutually agreeable state-
ment of facts. Unfortunately, that was not to
be. The narrative is not a fair description of
events, but an advocate's legal brief that
arrays and selects so-called "facts" to fit pre-
conceived theories. Some of the resulting
narrative is accurate and supported by the
evidence. A great deal is overdrawn, specu-
lative, and built on a selective use of the
Committees' documentary materials.

The tone of the Report flows naturally
from the tone of the Committees' televised
hearings. We feel strongly that the decision
to air the hearings compromised some intelli-
gence sources and methods by broadcasting
inadvertent slips of the tongue. But one thing
television did do successfully was lay bare
the passions that animated too much of the
Committees' work. Who can forget the mas-
sive displays of travelers' checks being
shown to the country to discredit Col.
North's character, weeks before he would be
given a chance to reply? Or the "j'accuse"
atmosphere with which witnesses were con-
fronted, beginning with the first week's pros-
ecutorial confrontation with General Secord,
as Members used the witnesses as objects for
lecturing the cameras? These tactics had

438

Chapter 1

little to do with factfinding, or with a careful
review of policies and institutional processes.

But we shall not dwell on the hearings at
this stage. The respected constitutional
scholar, John Norton Moore, has written an
excellent article about them. We have at-
tached the article, "The Iran-Contra Hear-
ings and Intelligence Oversight in a Democ-
racy," along with other material Professor
Moore sent the Committees, as an appendix
to our Report. Suffice it to say that we agree
with Moore completely. We mention the
hearings now only to note that the same
spirit, not surprisingly, has dominated the
written Report.

Our reasons for rejecting the Committees'
Report can best be understood by sampling a
few of its major conclusions. By presenting
these examples, we hope to alert conscien-
tious readers — whether they agree with our
interpretations or not — to take the narrative
with a very large grain of salt. Regrettably,
readers seeking the truth will be forced to
wade through a mass of material to arrive at
an independent judgment.

The President's Knowledge of the
Diversion

The most politically charged example of the
Committees' misuse of evidence is in the
way it presents the President's lack of
knowledge about the "diversion" — that is,
the decision by the former National Security
Adviser, Admiral John Poindexter, to au-
thorize the use of some proceeds from Iran
arms sales to support the Nicaraguan demo-
cratic Resistance, or Contras. This is the one
case out of thousands in which the Commit-
tees— instead of going beyond the evidence
as the Report usually does — refused instead
to accept the overwhelming evidence with
which it was presented. The Report does
grudgingly acknowledge that it cannot refute
the President's repeated assertion that he
knew nothing about the diversion before At-
torney General Edwin Meese discovered it
in November 1986. Instead of moving for-
ward from this to more meaningful policy
questions, however, the Report seeks, with-

out any support, to plant doubts. We will
never know what was in the documents
shredded by Lt. Col. Oliver L. North in his
last days on the NSC staff, the Report says.
Of course we will not. That same point
could have been made, however, to cast un-
supported doubt upon every one of the Re-
port's own conclusions. This one seems to be
singled out because it was where the Presi-
dent put his own credibility squarely on the
line.

The evidence shows that the President did
not know about the diversion. As we discuss
at length in our chapter on the subject, this
evidence includes a great deal more than just
Poindexter's testimony. Poindexter was cor-
roborated in different ways by the Presi-
dent's own diaries and by testimony from
North, Meese, Commander Paul Thompson
(formerly the NSC's General Counsel), and
former White House Chief of Staff Donald
Regan. The conclusion that the President did
not know about the diversion, in other
words, is one of the strongest of all the infer-
ences one can make from the evidence
before these Committees. Any attempt to
suggest otherwise can only be seen as an
effort to sow meritless doubts in the hope of
reaping a partisan political advantage.

The Idea for the Diversion and the
Use of Israeli Evidence

In the normal course of the narrative's hun-
dreds of pages, the lack of objectivity stems
more from the way it selects, and makes
questionable inferences, from a scarcity of
evidence, rather than a deliberate decision to
ignore what is available. This becomes most
obvious when we see a witness dismissed as
being not credible for one set of events, and
then see the same witnesses' uncorroborated
testimony become the basis for a major set of
assertions about other events. If these flip-
flops could be explained by neutral rules of
evidence, or if they were random, we could
treat them more lightly. But something quite
different seems to be at work here. The nar-
rative seems to make every judgment about
the evidence in favor of the interpretation

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Chapter 1

that puts the Administration in the worst
possible Hght. Two examples involving
North will make the point clearly. The first
has to do with when he first got the idea for
a diversion.

North testified that he first got the idea for
diverting some of the Iran arms sale pro-
ceeds to the Contras from Manucher Ghor-
banifar at a London hotel meeting in late
January 1986.^ He acknowledged that the
subject of using the residuals to replenish
Israeli weapon supplies, and for related oper-
ations, came up in a discussion with Amiram
Nir, an Israeli official, in late December or
early January. North specifically said, how-
ever, that the Nir conversation had nothing
to do with the Contras.^

The Committees also received a chronolo-
gy from the Israeli Government, however,
that claimed North told Israeli supply offi-
cials in New York on December 6 that the
Contras needed money, and that he intended
to use proceeds from the Iran arms sales to
get them some. When North was asked
about the December 6 meeting, he reiterated
that he did not recall discussing the Contras
with anyone involved in the Iran initiative
before the late January meeting with Ghor-
banifar.^

The Committees' Report has used the Is-
raeli chronology, and the timing of North's
alleged December 6 conversation, to suggest
that the idea of gaining funds for the Nicara-
guan Resistance was an important consider-
ation that kept the Iran arms initiative alive,
more than a month before the President
signed the Finding of January 17. The prob-
lem with making this important inference is
that we have no way of knowing whether
the Israeli chronology is accurate. It may be,
but then again it may not. The Government
of Israel made its chronology available to
the Committees fairly late in our investiga-
tions, and consistently refused to let key Is-
raeli participants give depositions to the
Committees' counsel.

We have no quarrel with the fact that
Israel, or any other sovereign nation, may
refuse to let its officials and private citizens

be subject to interrogation by a foreign legis-
lature. The United States, no doubt, would
do the same. But we do object vehemently
to the idea that the Committees should use
unsworn and possibly self-serving informa-
tion from a foreign government to reject
sworn testimony given by a U.S. official —
particularly when the U.S. official's testimo-
ny was given under a grant of immunity that
protected him from prosecution arising out
of the testimony for any charge except perju-
ry-

Even if North did mention the Contras to
the Israeli supply officials in early Decem-
ber, however, the inference made from the
timing would be unfair. The Committees
have no evidence that would give them any
reason to believe that anyone other than
North even considered the Contras in con-
nection with the Iran arms sales before the
January Finding. Poindexter specifically tes-
tified that he first heard of the idea when
North asked him to authorize it in Febru-
ary."* North testified that he first mentioned
the idea to the Director of Central Intelli-
gence, William J. Casey, at about the same
time, in late January or early February, after
the post-finding London meeting.^ More im-
portantly, North and Poindexter both testi-
fied that no one else in the U.S. Government
was told about a diversion before this time.
What that means is that the diversion cannot
possibly have been a consideration for
people at the policymaking level when the
President decided to proceed with the Iran
initiative in January.

Off-the-Shelf, Privately Funded
Covert Operations

Paradoxically, the Committees seem to have
had no difficulty swallowing North's testi-
mony that Director Casey intended to create
a privately funded, off-the-shelf covert oper-
ations capability for use in a variety of un-
foreseen circumstances.^ This is despite the
fact that two people close to Casey at the
CIA, Deputy Director of Central Intelli-
gence John M. McMahon and Deputy Di-
rector for Operations Clair George, both

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Chapter 1

denied Casey would ever have countenanced
such an idea. "My experience with Bill
Casey was absolute," said George. "He
would never have approved it." ''

We have to concede the possibility, of
course, that Casey might have discussed
such an idea speculatively with North with-
out mentioning it to others at the CIA.* As
with so many other questions, we will never
know the answers with certainty. Casey's
terminal illness prevented him from testifying
between December 1986 and his death in
May 1987. Nevertheless, it is interesting to
note how much the majority is willing to
make of one uncorroborated, disputed North
statement that happens to suit its political
purpose, in light of the way it treats others
by North that are less convenient for the
narrative's thesis.

The Allegation of Systematic
Cover-up

The Report also tries to present the events
of November 1986 as if they represent a sys-
tematic attempt by the Administration to
cover up the facts of the Iran initiative. The
reason for the alleged coverup, it is suggest-
ed, was to keep the American people from
learning that the 1985 arms sales were "ille-
gal."

There can be no question that the Admin-
istration was reluctant to make all of the
facts public in early November, when news
of the arms sales first came out in a Lebanese
weekly. It is clear from the evidence that
this was a time when covert diplomatic dis-
cussions were still being conducted with
Iran, and there was some basis for thinking
more hostages might be released. We consid-
er the Administration's reticence in the early
part of the month to have been completely
justifiable.

However, as November 1986 wore on,
Poindexter and North did falsify the docu-
mentary record in a way that we find de-
plorable. The outstanding fact about the late

•We use the word "speculatively" here because North testified,
at the same time as he introduced the idea, that it never was put
into effect.

November events, however, is that Attorney
General Meese understood the importance of
getting at the truth. Working on a very tight
schedule, Meese and three others from the
Department of Justice managed to uncover
the so-called "diversion memorandum" and
reported it to the President. The President
immediately removed Poindexter and North
from the NSC staff. Shortly afterwards, he
asked for an Independent Counsel to be ap-
pointed, appointed the Tower Board, and
supported the establishment of select Con-
gressional investigative committees, to which
he has given unprecedented cooperation.

The Committees' Report criticizes Meese
for not turning his fact-finding operation into
a formal criminal investigation a day or two
earlier than he did. In fact, the Report
strongly tries to suggest that Meese either
must have been incompetent or must have
been trying to give Poindexter and North
more time to cover their tracks. We consider
the first of these charges to be untrue and
the second to be outrageous. We shall show
in a later chapter that Meese worked with
the right people, and the right number of
them, for a national security fact-finding in-
vestigation. Whatever after-the-fact criticism
people may want to make, it is irresponsible
to portray the Administration, in light of
Meese's behavior, as if it were interested in
anything but learning the truth and getting it
out as quickly as possible.

The "Rule of Law"

Finally, the Committees' Report tries —
almost as an overarching thesis — to portray
the Administration as if it were behaving
with wanton disregard for the law. In our
view, every single one of the Committees'
legal interpretations is open to serious ques-
tion. On some issues — particularly the ones
involving the statutes governing covert oper-
ations— we believe the law to be clearly on
the Administration's side. In every other
case, the issue is at least debatable. In some,
such as the Boland Amendment, we are con-
vinced we have by far the better argument.
In a few others — such as who owns the

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funds the Iranians paid Gen. Richard Secord
and Albert Hakim — we see the legal issue as
being close. During the course of our full
statement, we shall indicate which is which.
What the Committees' Report has done
with the legal questions, however, is to issue
a one-sided legal brief that pretends the Ad-
ministration did not even have worthwhile
arguments to make. As if that were not
enough, the Report tries to build upon these
one-sided assertions to present a politicized
picture of an Administration that behaved
with contempt for the law. If nothing else
would lead readers to view the Report with
extreme skepticism, the adversarial tone of
the legal discussion should settle the matter.

Our View of the Iran-Contra
Affair

The main issues raised by the Iran-Contra
Affair are not legal ones, in our opinion.
This opinion obviously does have to rest on
some legal conclusions, however. We have
summarized our legal conclusions at the end
of this introductory chapter. The full argu-
ments appear in subsequent chapters. In our
view, the Administration did proceed legally
in pursuing both its Contra policy and the
Iran arms initiative. We grant that the diver-
sion does raise some legal questions, as do
some technical and relatively insubstantial
matters relating to the Arms Export Control
Act. It is important to stress, however, that
the Administration could have avoided every
one of the legal problems it inadvertently
encountered, while continuing to pursue the
exact same policies as it did.

The fundamental issues, therefore, have to
do with the policy decisions themselves, and
with the political judgments underlying the
way policies were implemented. When these
matters are debated as if they were legal —
and even criminal — concerns, it is a sign that
interbranch intimidation is replacing and de-
basing deliberation. That is why we part
company not only with the Committees Re-
port's answers, but with the very questions it
identifies as being the most significant.

There are common threads to what we
think went wrong with the Administration's
policies toward Central America and Iran.
Before we can identify those threads, how-
ever, we will give a very brief overview of
the two halves of the Committees' investiga-
tions. For both halves, we begin with the
context within which decisions were made,
describe the decisions, and then offer some
judgments. After taking the parts separately,
we will then be in a position to talk about
commonalities.

Nicaragua

The Nicaraguan aspect of the Iran-Contra
Affair had its origins in several years of
bitter political warfare over U.S. policy
toward Central America between the
Reagan Administration and the Democratic
House of Representatives. The United States
had supported the Sandinistas in the last
phase of the dictatorial regime of Anastasio
Somoza and then gave foreign aid to Nicara-
gua in 1979 and 1980, the first years of San-
dinista rule. By 1980, however, the Sandinis-
tas had shed their earlier "democratic re-
former" disguise and begun to suppress civil
liberties at home and export revolution
abroad. As a result, the United States sus-
pended all aid to Nicaragua in the closing
days of the Carter Administration.

During the early years of the Reagan Ad-
ministration, the Soviet Union and its allies
dramatically increased their direct military
support for Nicaragua, and their indirect
support, through Nicaragua, of Communist
guerrillas in El Salvador. The Reagan Ad-
ministration decided to provide covert sup-
port for the Nicaraguan democratic Resist-
ance in late 1981, and Congress agreed. By
late 1982, however. Congress adopted the
first of a series of so-called "Boland Amend-
ments," prohibiting the CIA and Defense
Department from spending money "for the
purpose of overthrowing the Government of
Nicaragua or provoking a military exchange
between Nicaragua and Honduras." The
House voted for this "limitation" by a

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margin of 411-0, in large part because every-
one understood that the Administration
could continue to support the Resistance as
long as the purpose of the support was to
prevent the revolution from being exported
to El Salvador.

This approach left many unsatisfied. Some
within the Administration wanted a broader
attack on the Sandinista regime. Some within
Congress wanted to end all support for the
Contras and begin moving back toward the
1979-80 policy of providing economic assist-
ance to the Sandinistas. Neither side of the
policy debate was politically strong enough
to prevail. Instead, during the course of the
next several years. Congress and the Admin-
istration "compromised" on a series of am-
biguous formulas.

Meanwhile, the Soviet buildup acceler-
ated, and Sandinista support for the insur-
gents in El Salvador continued. In May
1983, the House Intelligence Committee,
chaired by Representative Edward P.
Boland, reported:

It is not popular support that sustains
the insurgents [in El Salvador]. As
will be discussed later, this insurgency
depends for its lifeblood — arms, am-
munition, financing, logistics and com-
mand-and-control facilities — upon out-
side assistance from Nicaragua and
Cuba. This Nicaraguan-Cuban contri-
bution to the Salvadoran insurgency is
long standing. It began shortly after
the overthrow of Somoza in July,
1979. It has provided — by land, sea
and air — the great bulk of the military
equipment and support received by
the insurgents.^

Despite this finding, House Democrats
succeeded in late 1983 in limiting appropri-
ated support for the Resistance to an amount
intentionally calculated to be insufficient for
the full fiscal year. The funds ran out by late
spring or summer 1984. By October, the
most stringent of the Boland Amendments
had taken effect. Paradoxically, Congress'
1983-85 decisions came in a context in

which it was continuing to pass laws that
accused the Sandinistas of violating the non-
aggression provisions of the charter of the
Organization of American States — a viola-
tion that the OAS charter says calls for a
response by other member nations, including
the United States.*

Actions

By the late spring of 1984, it became clear
that the Resistance would need some source
of money if it were to continue to survive
while the Administration tried to change
public and Congressional opinion. To help
bridge the gap, some Administration officials
began encouraging foreign governments and
U.S. private citizens to support the Contras.
NSC staff members played a major role in
these efforts, but were specifically ordered to
avoid direct solicitations. The President
clearly approved of private benefactor and
third-country funding, and neither he nor his
designated agents could constitutionally be
prohibited from encouraging it. To avoid po-
htical retribution, however, the Administra-
tion did not inform Congress of its actions.

In addition to encouraging contributions,
the NSC's North, with varying degrees of
authorization and knowledge by National Se-
curity Advisers Robert C. McFarlane and
Admiral John Poindexter:

— Helped coordinate or facilitate actions
taken by private citizens and by certain U.S.

•Despite the fact that the Committees announced that their hear-
ings were to be neither "pro-Contra nor anti-Contra," the fact is
that the Committees' staff left no stone unturned in its efforts to
obtain information that might be pohtically damaging to the Resist-
ance, even if irrelevant to the Committees' mandates. The Commit-
tees' investigators reviewed major portions, if not all, of the Con-
tras' financial records; met with witnesses who alleged the Resist-
ance was involved in terrorism or drug-running; investigated the
flnancial conduct of the NHAO program, and so on. TTie fact is,
however, that the Committees received no credible evidence of
misconduct by the Resistance. It comes as little surprise, of course,
that the Committees' majority does not explicitly acknowledge this.
To give but one example of the Committees' findings, investigators
produced a detailed memorandum concerning allegations of drug
running, and concluded that the allegation had no substance. This
memorandum was included in the Committees' record and is re-
printed as Appendix E to the Minority Report. For this reason,
suggestions that the Committees have not investigated such matters,
and other Committees of Congress should, ought to be seen for
what they are: political harassment by Congressional opponents of
the Resistance.

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Chapter 1

Government officials to direct money, arms,
or supplies from private U.S. citizens or for-
eign governments to the Nicaraguan Resist-
ance;

— Provided the Resistance with expert
military judgment or advice to assist in the
resupply effort; and

— Together with others in Government,
provided the Resistance with intelligence in-
formation that was useful in the resupply
effort.

Poindexter and North testified that they both
believed these activities were legally permis-
sible and authorized. They also said that the
President was kept generally informed of
their coordinating role. The President has
said, however, that he was not aware of the
NSC staffs military advice and coordination.
Because the Boland Amendment is an ap-
propriations rider, it is worth noting that
there is no evidence that any substantial
amounts of appropriated taxpayer funds were
used in support of these efforts. In addition,
the NSC staff believed — as we do — that the
prohibition did not cover the NSC.^ At no
time, in other words, did members of the
President's staff think their activities were
illegal. Nevertheless, the NSC staff did make
a concerted effort to conceal its actions from
Congress. There is no evidence, however, to
suggest that the President or other senior
Administration officials knew about this con-
cealment.

Judgments

The effort to raise foreign government and
private funds for the Resistance raised about
$35 million between mid- 1984 and mid-
1986 — virtually all of it from foreign coun-
tries. In addition, the much discussed and
unauthorized diversion orchestrated by
North and Poindexter contributed about $3.8
million more. Without this support, accord-
ing to uncontroverted testimony the Com-
mittees received, there can be no question
that the Resistance would have been annihi-
lated. In other words, the support clearly did
make an important strategic difference in the
2 years it took the Administration to per-

suade Congress to reverse its position. The
short-term benefits of the effort are therefore
undeniable. The long-term costs, however,
seem not to have been adequately consid-
ered.

We do believe, for reasons explained in
the appendix to this introductory chapter
and in our subsequent chapters on Nicara-
gua, that virtually all of the NSC staffs ac-
tivities were legal, with the possible excep-
tion of the diversion of Iran arms sale pro-
ceeds to the Resistance. We concede that
reasonable people may take a contrary view
of what Congress intended the Boland
Amendments to mean. But we also agree
with a letter from Prof John Norton Moore,
which appears as Appendix B to our Report,
that to the extent that the amendment was
ambiguous, "well recognized principles of
due process and separation of powers would
require that it be interpreted to protect Ex-
ecutive Branch flexibility." ^°

Notwithstanding our legal opinions, we
think it was a fundamental mistake for the
NSC staff to have been secretive and decep-
tive about what it was doing. The require-
ment for building long-term political support
means that the Administration would have
been better off if it had conducted its activi-
ties in the open. Thus, the President should
simply have vetoed the strict Boland
Amendment in mid-October 1984, even
though the Amendment was only a few
paragraphs in an approximately 1,200 page-
long continuing appropriations resolution,
and a veto therefore would have brought the
Government to a standstill within 3 weeks of
a national election. Once the President decid-
ed against a veto, it was self-defeating to
think a program this important could be sus-
tained by deceiving Congress. Whether tech-
nically illegal or not, it was politically fool-
ish and counterproductive to mislead Con-
gress, even if misleading took the form of
artful evasion or silence instead of overt mis-
statement.

We do believe firmly that the NSC staffs
deceits were not meant to hide illegalities.
Every witness we have heard told us his

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concern was not over legality, but with the
fear that Congress would respond to com-
plete disclosure with political reprisals, prin-
cipally by tightening the Boland Amend-
ments. That risk should have been taken.

We are convinced that the Constitution
protects much of what the NSC was doing —
particularly those aspects that had to do with
encouraging contributions and sharing infor-
mation. The President's inherent constitu-
tional powers are only as strong, however,
as the President's willingness to defend them.
As for the NSC actions Congress could con-
stitutionally have prohibited, it would have
been better for the White House to have
tackled that danger head on. Some day, Con-
gress' decision to withhold resources may
tragically require U.S. citizens to make an
even heavier commitment to Central Amer-
ica, perhaps one measured in blood and not
dollars. The commitment that might elimi-
nate such an awful future will not be forth-
coming unless the public is exposed to and
persuaded by a clear, sustained and princi-
pled debate on the merits.

Iran

The Iran arms sales had their roots in an
intelligence failure. The potential geopolitical
importance of Iran for the United States
would be obvious to anyone who looks at a
map. Despite Iran's importance, the United
States was taken by surprise when the Shah
fell in 1979, because it had not developed an
adequate human intelligence capability there.
Our hearings have established that essentially
nothing had been done to cure this failure by
the mid-1980's. Then, the United States was
approached by Israel in 1985 with a proposal
that the United States acquiesce in some
minor Israeli arms sales to Iran. This propos-
al came at a time when the United States
was already considering the advisability of
such sales. For long term, strategic reasons,
the United States had to improve relation-
ships with at least some of the currently im-
portant factions in Iran. The lack of adequate
intelligence about these factions made it im-
portant to pursue any potentially fruitful op-

portunity; it also made those pursuits inher-
ently risky. U.S. decisions had to be based
on the thinnest of independently verifiable
information. Lacking such independent intel-
ligence, the United States was forced to rely
on sources known to be biased and unreli-
able.

Well aware of the risk, the Administration
nonetheless decided the opportunity was
worth pursuing. The major participants in
the Iran arms affair obviously had some
common and some conflicting interests. The
key question the United States had to ex-
plore was whether the U.S. and Iranian lead-
ership actually felt enough of a common in-
terest to establish a strategic dialogue.

Actions

To explore the chance for an opening, the
President agreed first to approve Israeli sales
to Iran in 1985, and then in 1986 to sell U.S.
arms directly. The amounts involved were
meager. The total amount, including all of
the 1985 and 1986 sales combined, consisted
of 2004 TOW antitank missiles, 18 HAWK
antiaircraft missiles, and about 200 types of
HAWK spare parts.

There was a strong division of opinion in
the Administration about the advisability of
these arms sales, a division that never abated.
Unfortunately, this served as a pretext for
Poindexter's decision not to keep the Secre-
taries of State or Defense informed about the
detailed progress of the negotiations between
the United States and Iran. One reason for
the failure to inform appears to have been a
past history in which some Administration
officials may have leaked sensitive informa-
tion as a way to halt actions with which
they disagreed. Poindexter's secretive incli-
nations were abetted by Secretary Shultz,
who all but invited Poindexter not to keep
him informed because he did not want to be
accused of leaking. They also were abetted
by Secretary Weinberger, who — like
Shultz — was less than vigorous about keep-
ing himself informed about a policy he had
good reason to believe was still going for-
ward.

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Chapter 1

The first deals with the Iranian Govern-
ment were flawed by the unreHabiHty of our
intermediary, Manucher Ghorbanifar. For all
of his unreliability, however, Ghorbanifar
helped obtain the release of two U.S. hos-
tages and did produce high Iranian officials
for the first face-to-face meetings between
our governments in 5 years. At those meet-
ings, one of which was held in Tehran in
May 1986, U.S. officials sought consistently
to make clear that we were interested in a
long-term strategic relationship with Iran to
oppose the Soviet Union's territorial inter-
ests. As concerned as the President had
become personally for the fate of the hos-
tages— including the CIA's Beirut station
chief, William Buckley, who was repeatedly
tortured until he died — the hostages were
always presented in these negotiations as ob-
stacles to be overcome, not as the reason for
the initiative. But Ghorbanifar appeared to
have misled both sides, and the Iranian offi-
cials seemed to be interested only in weap-
ons, and in using the hostages for bargaining
leverage.

After the Tehran meeting, the United
States was able to approach a very high Ira-
nian official using a Second Channel ar-
ranged by Albert Hakim and his associates.
There is little doubt about Hakim's business
motives in arranging these meetings; there is
equally little doubt that this channel repre-
sented the highest levels of the Iranian Gov-
ernment. Discussions with this channel began
in the middle of 1986 and continued until
December. They resulted in the release of
one further hostage and U.S. officials expect-
ed them to result in some more. Perhaps
more importantly, these discussions appear
to have been qualitatively different from the
ones conducted through the First Channel
arranged by Ghorbanifar, and included some
talks about broad areas of strategic coopera-
tion.

As a result of factional infighting inside
the Iranian Government, the initiative was
exposed and substantive discussions were
suspended. Not surprisingly, given the nature
of Iranian politics, the Iranian Government

has publicly denied that significant negotia-
tions were underway. Congress was not in-
formed of the Administration's dealings with
Iran until after the public disclosure. The
failure to disclose resembled the Carter Ad-
ministration's similar decisions not to disclose
in the parallel Iranian hostage crisis of 1979-
81. President Reagan withheld disclosure
longer than Carter, however — by about 11
months to 6.

Judgments

The Iran initiative involved two govern-
ments that had sharp differences between
them. There were also very sharp internal
divisions in both Iran and the United States
about how to begin narrowing the differ-
ences between the two countries. In such a
situation, the margin between narrow failure
and success can seem much wider after the
fact than it does during the discussions.
While the initial contacts developed by Israel
and used by the United States do not appear
likely to have led to a long-term relationship,
we cannot rule out the possibility that nego-
tiations with the Second Channel might have
turned out differently. At this stage, we
never will know what might have been.

In retrospect, it seems clear that this initia-
tive degenerated into a series of "arms for
hostage" deals. It did not look that way to
many of the U.S. participants at the time.
Nevertheless, the fact that the negotiations
never were able clearly to separate the long-
term from the short-term issues, confirms our
instinctive judgment that the United States
should not have allowed arms to become the
currency by which our country's bona fides
were determined. There is no evidence that
these relatively minor sales materially altered
the military balance in the Iran-Iraq war.
However, the sales damaged U.S. credibility
with our allies, making it more difficult,
among other things, for the Administration
to enforce its preexisting efforts to embargo
arms sales to Iran.

The decision to keep Congress in the dark
for 1 1 months disturbs all Members of these
Committees. It is clear that the Reagan Ad-

446

Chapter 1

ministration simply did not trust the Con-
gress to keep secrets. Based on the history of
leaks we shall outline in a later chapter, it
unfortunately had good reason to be con-
cerned. This observation is not offered as a
justification, but as an important part of the
context that must be understood. To help
remove this concern as an excuse for future
Administrations, we are proposing a series of
legislative and administrative recommenda-
tions to improve both Congress' and the ex-
ecutive branch's ability to maintain national
security secrets and deter leaks.

Diversion

The lack of detailed information-sharing
within the Administration was what made it
possible for Poindexter to authorize the di-
version and successfully keep his decision to
do so from the President. We have already
indicated our reasons for being convinced
the President knew nothing about the diver-
sion. The majority Report says that if the
President did not know about it, he should
have. We agree, and so does the President.
But unlike some of the other decisions we
have been discussing, the President cannot
himself be faulted for this one. The decision
was Admiral Poindexter's, and Poindexter's
alone.

As supporters of a strong Presidential role
in foreign policy, we cannot take Poin-
dexter's decision lightly. The Constitution
strikes an implicit bargain with the President:
in return for getting significant discretionary
power to act, the President was supposed to
be held accountable for his decisions. By
keeping an important decision away from the
President, Poindexter was acting to undercut
one foundation for the discretionary Presi-
dential power he was exercising.

The diversion also differs from the basic
Nicaragua and Iran policies in another im-
portant respect: we can find nothing to justi-
fy or mitigate its having occurred. We do
understand the enthusiasm North displayed
when he told the Committees it was a "neat
idea" to use money from the Ayatollah, who
was helping the Sandinistas, to support the

Contras. But enthusiasm is not a sufficient
basis for important policy decisions. Even if
there were nothing else wrong with the di-
version, the decision to mix two intelligence
operations increased the risk of pursuing
either one, with predictably disastrous reper-
cussions.

Unlike the Committees' majority, we be-
lieve there are good legal arguments on both
sides of the question of whether the proceeds
of the arms sales belong to the U.S. Govern-
ment or to Secord and Hakim. For that
reason, we think it unlikely, under the cir-
cumstances, that the funds were acquired or
used with any criminal intent. Nevertheless,
the fact that the ownership seems unclear
under current law does not please us. We do
believe that Secord and Hakim were acting
as the moral equivalents of U.S. agents, even
if they were not U.S. agents in law.

The diversion has led some of the Com-
mittees' Members to express a great deal of
concern in the public hearings about the use
of private citizens in covert operations in
settings that mix private profits with public
benefits. We remain convinced that covert
operations will continue to have to use pri-
vate agents or contractors in the future, and
that those private parties will continue to
operate at least partly from profit motives. If
the United States tries to limit itself to deal-
ing only with people who act out of purely
patriotic motives, it effectively will rule out
any worthwhile dealing with most arms
dealers and foreign agents. In the real world
of international politics, it would be foolish
to avoid working with people whose motives
do not match our own. Nevertheless, we do
feel troubled by the fact that there was not
enough legal clarity, or accounting controls,
placed on the Enterprise by the NSC.

The Uncovering

It is clear that officials of the National Secu-
rity Council misled the Congress and other
members of the Administration about their
activities in support of the Nicaraguan Re-
sistance. This occurred without authorization

447

Chapter 1

from outside the NSC staff. It is also clear
that the NSC staff actively misled other Ad-
ministration officials and Congress about the
Iran initiative both before and after the first
public disclosure. The shredding of docu-
ments and other efforts at covering up what
had happened were also undertaken by NSC
staff members acting on their own, without
the knowledge, consent, or acquiescence of
the President or other major Administration
officials, with the possible exception of
Casey.

In the week or two immediately after the
Iran initiative was disclosed in a Lebanese
weekly, the President did not tell the public
all that he knew, because negotiations with
the Second Channel were still going on, and
there remained a good reason for hoping
some more hostages might soon be released.
Once the President learned that not all of the
relevant facts were being brought to his at-
tention, however, he authorized the Attor-
ney General immediately to begin making
inquiries. Attorney General Meese acted
properly in his investigation, pursuing the
matter as a fact-finding effort because he had
no reason at the time to believe a crime had
been committed. Arguments to the contrary
are based strictly on hindsight. In our opin-
ion, the Attorney General and other Justice
Department officials did an impressive job
with a complicated subject in a short time.
After all, it was their investigation that un-
covered and disclosed the diversion of funds
to the Contras.

Common Threads

The different strands of the Iran-Contra
Affair begin coming together, in the most
obvious way, on the level of personnel. Both
halves of the event were run by the NSC,
specifically by McFarlane, Poindexter, and
North. With respect to Nicaragua, the
Boland Amendment just about ruled all
other agencies out of the picture. With re-
spect to Iran, the other parts of the executive
branch — from the State and Defense Depart-
ments to the CIA — seemed more than happy
to let the NSC be in charge.

It is ironic that many have looked upon
these events as signs of an excessively pow-
erful NSC staff. In fact, the NSC's roles in
the Iran and Nicaragua policies were excep-
tions rather than the rule. The Reagan Ad-
ministration has been beleaguered from the
beginning by serious policy disagreements
between the Secretaries of State and De-
fense, among others, and the President has
too often not been willing to settle those
disputes definitively. The press accounts
written at the time Poindexter was promoted
to fill McFarlane's shoes saw his selection as
a decision to have the National Security Ad-
viser play the role of honest broker, with
little independent power. ^ ^ This image of
the NSC lasted almost until the Iran arms
initiative became public. Poindexter was seen
as a technician, chosen to perform a techni-
cal job, not to exercise political judgment. ^^

Once the NSC had to manage two oper-
ations that were bound to raise politically
sensitive questions, it should have been no
surprise to anyone that Poindexter made
some mistakes. It is not satisfactory, howev-
er, for people in the Administration simply
to point the finger at him and walk away
from all responsibility. For one thing, the
President himself does have to bear personal
responsibility for the people he picks for top
office. But just as it would not be appropri-
ate for the fingers to point only at Poin-
dexter, neither is it right for them only to
point to the top.

Everyone who had a stake in promoting a
technician to be National Security Adviser
should have realized that meant they had a
responsibility to follow and highlight the po-
litical consequences of operational decisions
for the President. Even if the Cabinet offi-
cials did not support the basic policy, they
had an obligation to remain engaged, if they
could manage to do so without constantly
rearguing the President's basic policy choice.
Similarly, Chief of Staff Donald Regan may
not have known, or had reason to know, the
details of the Iran initiative or Contra resup-
ply effort. But he should have known that
North's responses to Congressional inquiries

448

Chapter 1

generated by press reports were too impor-
tant politically to be left to the people who
ran the NSC staff.

The discussion of personnel ultimately gets
around to the importance of political judg-
ment. We can be more precise about what
that means, however, if we consider the
common threads in the decisions we have
already labelled as mistakes. These have in-
cluded:

— The President's decision to sign the
Boland Amendment of 1984, instead of veto-
ing it;

— The President's less-than-robust defense
of his office's constitutional powers, a mis-
take he repeated when he acceded too read-
ily and too completely to waive executive
privilege for our Committees' investigation;

— The NSC staffs decision to deceive
Congress about what it was doing in Central
America;

— The decision, in Iran, to pursue a covert
policy that was at odds with the Administra-
tion's public expressions, without any warn-
ing signals to Congress or our allies;

— The decision to use a necessary and con-
stitutionally protected power of withholding
information from Congress for unusually sen-
sitive covert operations, for a length of time
that stretches credulity;

— Poindexter's decision to authorize the
diversion on his own; and, finally,

— Poindexter and North's apparent belief
that covering up was in the President's polit-
ical interest.

We emphatically reject the idea that
through these mistakes, the executive branch
subverted the law, undermined the Constitu-
tion, or threatened democracy. The Presi-
dent is every bit as much of an elected repre-
sentative of the people as is a Member of
Congress. In fact, he and the Vice President
are the only officials elected by the whole
Nation. Nevertheless, we do believe the mis-
takes relate in a different way to the issue of
democratic accountability. They provide a
good starting point for seeing what both
sides of the great legislative-executive branch
divide must do to improve the way the Gov-
ernment makes foreign policy.

Congress

Congress has a hard time even conceiving of
itself as contributing to the problem of
democratic accountability. But the record of
ever-changing policies toward Central
America that contributed to the NSC staffs
behavior is symptomatic of a frequently re-
curring problem. When Congress is narrow-
ly divided over highly emotional issues, it
frequently ends up passing intentionally am-
biguous laws or amendments that postpone
the day of decision. In foreign policy, those
decisions often take the form of restrictive
amendments on money bills that are open to
being amended again every year, with new,
and equally ambiguous, language replacing
the old. This matter is exacerbated by the
way Congress, year after year, avoids pass-
ing appropriations bills before the fiscal year
starts and then wraps them together in a
governmentwide continuing resolution
loaded with amendments that cannot be
vetoed without threatening the whole Gov-
ernment's operation.

One properly democratic way to amelio-
rate the problem of foreign policy inconsist-
ency would be to give the President an op-
portunity to address the major differences
between himself and the Congress cleanly,
instead of combining them with unrelated
subjects. To restore the Presidency to the
position it held just a few administrations
ago. Congress should exercise the self-disci-
pline to split continuing resolutions into sep-
arate appropriation bills and present each of
them individually to the President for his
signature or veto. Even better would be a
line-item veto that would permit the Presi-
dent to force Congress to an override vote
without jeopardizing funding for the whole
Government. Matters of war and peace are
too important to be held hostage to govern-
mental decisions about funding Medicare or
highways. To describe this legislative hos-
tage taking as democracy in action is to turn
language on its head.

449

Chapter 1

The Presidency

The Constitution created the Presidency to
be a separate branch of government whose
occupant would have substantial discretion-
ary power to act. He was not given the
power of an 18th century monarch, but nei-
ther was he meant to be a creature of Con-
gress. The country needs a President who
can exercise the powers the Framers intend-
ed. As long as any President has those
powers, there will be mistakes. It would be
disastrous to respond to the possibility of
error by further restraining and limiting the
powers of the office. Then, instead of seeing
occasional actions turn out to be wrong, we
would be increasing the probability that
future Presidents would be unable to act de-
cisively, thus guaranteeing ourselves a per-
petually paralyzed, reactive, and unclear for-
eign policy in which mistake by inaction
would be the order of the day.

If Congress can learn something about
democratic responsibility from the Iran-
Contra Affair, future Presidents can learn
something too. The Administration would
have been better served over the long run by
insisting on a principled confrontation over
those strategic issues that can be debated
publicly. Where secrecy is necessary, as it
often must be, the Administration should
have paid more careful attention to consulta-
tion and the need for consistency between
what is public and what is covert. Inconsist-
ency carries a risk to a President's future
ability to persuade, and persuasion is at the
heart of a vigorous, successful presidency.

A President's most important priorities,
the ones that give him a chance to leave an
historic legacy, can be attained only through
persistent leadership that leads to a lasting
change in the public's understanding and
opinions. President Reagan has been praised
by his supporters as a "communicator" and
criticized by his opponents as an ideologue.
The mistakes of the Iran-Contra Affair, iron-
ically, came from a lack of communication
and an inadequate appreciation of the impor-
tance of ideas. During President Reagan's
terms of office, he has persistently taken two

major foreign policy themes to the American
people: a strong national defense for the
United States, and support for the institu-
tions of freedom abroad. The 1984 election
showed his success in persuading the people
to adopt his fundamental perspective. The
events since then have threatened to under-
mine that achievement by shifting the agenda
and refocusing the debate. If the President's
substantial successes are to be sustained, it is
up to him, and those of us who support his
objectives, to begin once again with the task
of democratic persuasion.

Afterword: Summary of Legal
Conclusions

Nicaragua

The main period under review during these
investigations was October 1984 through Oc-
tober 1986. During this period, various ver-
sions of the Boland Amendment restricted
the expenditure of appropriated funds avail-
able to agencies or entities involved in intel-
ligence activities from being spent directly or
indirectly to support military or paramilitary
operations in Nicaragua. In August 1985, the
State Department was authorized to spend
$27 million to provide humanitarian assist-
ance to the Nicaraguan democratic Resist-
ance. In December 1985, the CIA was au-
thorized to spend funds specifically appropri-
ated to provide communications equipment
and training and to provide intelligence and
counterintelligence advice and information to
assist military operations by the Resistance.
On October 18, 1986, $100 million in direct
military support for the Contras was made
available for fiscal year 1987. Our under-
standing of the effect of these prohibitions
rests on both statutory and constitutional in-
terpretations.

(1) The Constitution protects the power of
the President, either acting himself or
through agents of his choice, to engage in
whatever diplomatic communications with
other countries he may wish. It also protects
the ability of the President and his agents to

450

Chapter 1

persuade U.S. citizens to engage voluntarily
in otherwise legal activity to serve what
they consider to be the national interest.
That includes trying to persuade other coun-
tries to contribute their own funds for causes
both countries support. To whatever extent
the Boland Amendments tried to prohibit
such activity, they were clearly unconstitu-
tional.

(2) If the Constitution prohibits Congress
from restricting a particular Presidential
action directly, it cannot use the appropria-
tion power to achieve the same unconstitu-
tional effect. Congress does have the power
under the Constitution, however, to use ap-
propriations riders to prohibit the entire U.S.
Government from spending any money, in-
cluding salaries, to provide covert or overt
military support to the Contras. Thus, the
Clark Amendment prohibiting all U.S. sup-
port for the Angolan Resistance in 1976 was
constitutional. Some members of Congress
who supported the Boland Amendment may
have thought they were enacting a prohibi-
tion as broad as the Clark Amendment. The
specific language of the Boland Amendment
was considerably more restricted, however,
in two respects.

(a) By limiting the coverage to agen-
cies or entities involved in intelligence
activities, Congress chose to use lan-
guage borrowed directly from the In-
telligence Oversight Act of 1980. In
the course of settling on that language
in 1980, Congress deliberately decided
to exclude the National Security
Council (NSC) from its coverage. At
no time afterward did Congress indi-
cate an intention to change the lan-
guage's coverage. The NSC therefore
was excluded from the Boland
Amendment and its activities were
therefore legal under this statute.

(b) The Boland prohibitions also were
limited to spending that directly or
indirectly supported military or para-
military operations in Nicaragua.
Under this language, a wide range of

intelligence-gathering and political
support activities were still permitted,
and were carried out with the full
knowledge of the House and Senate
Intelligence Committees.

(c) Virtually all, if not all, of the
CIA's activities examined by these
Committees occurred after the De-
cember 1985 law authorized intelli-
gence sharing and communications
support and were fully legal under the
terms of that law.

(d) If the NSC had been covered by
the Boland Amendments, most of
Oliver North's activity still would
have fallen outside the prohibitions
for reasons stated in (b) and (c) above.

Iran

The Administration was also in substantial
compliance with the laws governing covert
actions throughout the Iran arms initiative.

(1) It is possible to make a respectable
legal argument to the effect that the 1985
Israeli arms transfers to Iran technically vio-
lated the terms of the Arms Export Control
Act (AECA) or Foreign Assistance Act
(FAA), assuming the arms Israel transferred
were received from the United States under
one or the other of these statutes. However:

(a) Covert transfers under the Na-
tional Security Act and Economy Act
were understood to be alternatives to
transfers under the AECA and FAA
that met both of these latter acts' es-
sential purposes by including provi-
sions for Presidential approval and
Congressional notification.

(b) The requirement for U.S. agree-
ment before a country can retransfer
arms obtained from the United States
is meant to insure that retransfers con-
form to U.S. national interests. In this
case, the Israeli retransfers occurred
with Presidential approval indicating
that they did so conform.

451

Chapter 1

(c) The Israeli retransfer and subse-
quent replenishment made the deal es-
sentially equivalent to a direct U.S.
sale, with Israel playing a role funda-
mentally equivalent to that of a mid-
dleman. Since the United States could
obviously have engaged in a direct
transfer, and did so in 1986, whatever
violation may have occurred was, at
most, a minor and inadvertent techni-
cality.

(2) A verbal approval for covert transac-
tions meets the requirements of the Hughes-
Ryan Amendment and National Security
Act. Verbal approvals ought to be reduced
to writing as a matter of sound policy, but
they are not illegal.

(3) Similarly, the President has the consti-
tutional and statutory authority to withhold
notifying Congress of covert activities under
very rare conditions. President Reagan's de-
cision to withhold notification was essential-
ly equivalent to President Carter's decisions
in 1979-1980 to withhold notice for between
3 and 6 months in parallel Iran hostage oper-
ations. We do not agree with President Rea-
gan's decision to withhold notification for as

long as he did. The decision was legal, how-
ever, and we think the Constitution man-
dates that it should remain so. If a President
withholds notification for too long and then
cannot adequately justify the decision to
Congress, that President can expect to pay a
stiff political price, as President Reagan has
certainly found out.

Diversion

We consider the ownership of the funds the
Iranians paid to the Secord-Hakim "Enter-
prise" to be in legal doubt. There are re-
spectable legal arguments to be made both
for the point of view that the funds belong
to the U.S. Treasury and for the contention
that they do not. If the funds do not belong
to the United States, then the diversion
amounted to third-country or private funds
being shipped to the Contras. If they did
belong to the United States, there would be
legal questions (although not, technically,
Boland Amendment questions) about using
U.S. -owned funds for purposes not specifi-
cally approved by law. The answer does not
seem to us to be so obvious, however, as to
warrant treating the matter as if it were
criminal.

452

Endnotes

Chapter 1

1. North Test., Hearings. 100-7, Part I, 7/8/87, at p. 106;
7/10/87, at 295-96; Vol. II, l/U/%1, at pp. 164-65.

2. Id., Vol. I, 7/10/87, at p. 296.

3. Id., at p. 295.

4. Poindexter Test., Hearings, 100-8, 7/15/87, at p. 35.

5. North Test., Hearings, 100-7, Part I, 7/8/87, at p. 139.

6. North Test., Hearings, 100-7, Part I, 7/8/87, at p. 140.

7. George Test., Hearings, 100-11, 8/6/87, at p. 172. See
also McMahon Dep., 9/2/87, at 3-8.

8. U.S. House of Representatives, Permanent Select Com-
mittee on Intelligence, Report to Accompany H.R. 2760,
Amendment to the Intelligence Authorization Act for Fiscal
Year 1983, May 13, 1983, p. 2.

9. McFarlane may be an arguable exception. See chapter
7 below.

10. John Norton Moore, letter to Brendan Sullivan, July
9, 1987, p. 2, reprinted along with other Moore material at
the end of our separate views.

11. See, for example, "Primus, Pares and Poindexter,"
New York Times editorial, December 6, 1985; Mary Belch-
er, "White House shift realigns influence in foreign policy;
more clout likely for State, Defense," The Washington
Times, December 5, 1985, p. 1.

12. Leslie H. Gelb, "How the New Admiral at the White
House Fares," New York Times, September 23, 1986, p. 24.

453

Part II

The Foreign Affairs Powers of the
Constitution and the Iran-Contra Affair

Chapter 2

The Foreign Affairs Powers and the Framers'

Intentions

Judgments about the Iran-Contra Affair ultimately
must rest upon one's views about the proper roles of
Congress and the President in foreign policy. There
were many statements during the public hearings, for
example, about the rule of law. But the fundamental
law of the land is the Constitution. Unconstitutional
statutes violate the rule of law every bit as much as
do willful violations of constitutional statutes. It is
essential, therefore, to frame any discussion of what
happened with a proper analysis of the Constitutional
allocation of legislative and executive power in for-
eign affairs.

One point stands out from the historical record: the
Constitution's Framers expected the President to be
much more than a minister or clerk. The President
was supposed to execute the laws, but that was only
the beginning. He also was given important powers,
independent of the legislature's, and these substantive-
ly were focused on foreign policy.

Our analysis will cover three chapters. The first
will be about the debates in and around the Constitu-
tional Convention of 1787 and will show the particu-
lar importance of what Alexander Hamilton called
"energy in the executive" in this policy arena. The
second reviews historical examples. It shows that,
throughout the Nation's history. Congress has accept-
ed substantial exercises of Presidential power — in the
conduct of diplomacy, the use of force and covert
action — which had no basis in statute and only a gen-
eral basis in the Constitution itself The third consid-
ers the applicable court cases and legal principles.

Taken together, the three chapters will show that
much of what President Reagan did in his actions
toward Nicaragua and Iran were constitutionally pro-
tected exercises of inherent Presidential powers. How-
ever unwise some of those actions may have been, the
rule of law cannot permit Congress to usurp judg-
ments that constitutionally are not its to make. It is
true that the Constitution also gives substantial for-
eign policy powers to Congress, including the power
of the purse. But the power of the purse — which
forms the core of the majority argument — is not and
was never intended to be a license for Congress to
usurp Presidential powers and functions. Some of the
statutes most central to the Iran-Contra Affair contain
a mixture of constitutionally legitimate and illegit-

imate prohibitions. By the end of the three chapters,
we will be in a position to start sorting them out.

"Necessary and Proper" and the
"Invitation to Struggle"

In order to sort out constitutional from unconstitu-
tional exercises of power, however, one first must
have a basis, or a set of principles, to guide the
sorting. It is a commonplace to note that foreign
policy was meant to be shared between the branches.
The two branches' respective powers clearly were
meant to overlap somewhat, with each branch having
different means for addressing parallel policy issues.
This overlap led the respected Presidential scholar,
Edward S. Corwin, to describe the Constitution as
"an invitation to struggle for the privilege of directing
American foreign policy." '

But to acknowledge the existence of a struggle is a
far cry from seeing the Constitution as if it permits
any branch to go after another's powers, without
bounds. The boundless view of Congressional power
began to take hold in the 1970's, in the wake of the
Vietnam War. The 1972 Senate Foreign Relations
Committee's report recommending the War Powers
Act, and the 1974 report of the Select Committee on
Intelligence Activities (chaired by Senator Frank
Church and known as the Church Committee), both
tried to support an all but unlimited Congressional
power by invoking the "Necessary and Proper"
clause. That clause says Congress may "make all
Laws which shall be necessary and proper for carry-
ing into Execution the foregoing [legislative] Powers,
and all other Powers vested by this Constitution in
the Government of the United States, or in any De-
partment or Officer thereof." The argument of these
two prominent committees was that by granting Con-
gress the power to make rules for the other depart-
ments, the Constitution meant to enshrine legislative
supremacy except for those few activities explicitly
reserved for the other branches.^

One must ignore 200 years of constitutional history
to suggest that Congress has a vast reservoir of im-
plied power whose only limits are the powers explicit-
ly reserved to the other branches. It seems clear, for
example, that Congress could not legislate away the
Supreme Court's power of judicial review, even

457

Chapter 2

though judicial review is not mentioned expHcitly in
Article III. The same applies to the Presidency. The
Necessary and Proper clause does not permit Con-
gress to pass a law usurping Presidential power. A
law negating Presidential power cannot be treated as
if it were "necessary and proper for carrying" Presi-
dential powers "into Execution." To suggest other-
wise would smack of Orwellian Doublespeak.

The issue for this investigation, therefore, is not
whether Congress and the President both have a le-
gitimate role in foreign policy. Clearly, both do.
Rather, the question is how to interpret the powers
the two branches were given. All three of the Gov-
ernment's branches were given both express and im-
plied powers. Congress does not have the authority to
arrogate all of the implied power to itself. What we
need to determine is whether these implied powers all
fall into an undefined war zone, or whether there are
theoretical and historical principles that allow one to
decide when powers are more properly exercised by
one branch or another.

Separation of Powers

One commonly held, but mistaken view of the separa-
tion of powers sees its whole function as having been
preventive. Justice Louis D. Brandeis, for example,
wrote that the "doctrine of separation of powers was
adopted by the Convention of 1787, not to promote
efficiency but to preclude the exercise of arbitrary
power." ^ His statement has been accepted in some
Congressional quarters as if it holds the force of con-
ventional wisdom,* but it misses half of the historical
truth.

The fallacy of Brandeis' statement becomes appar-
ent when one considers the defects of the U. S. Gov-
ernment before the Constitution. The Constitutional
Convention, among other things, was taking the exec-
utive from being under the legislature's thumb, not
the legislature from being under the executive's. After
suffering through the Articles of Confederation (and
various state constitutions) that had overcompensated
for monarchy, the 1787 delegates wanted to empower
a government, not enfeeble it. Brandeis was partly
right to point out that the Framers did not want
power to be used arbitrarily, and that checks and
balances were among the means used to guard against
arbitrariness. But the principles underlying separation
had to do with increasing the Government's power as
much as with checking it.^

For the Government to overcome the Articles'
problems, the executive and judiciary had to act di-
rectly upon citizens throughout the far-flung new
nation. As Charles Thach said in his classic study,
"the delegates' chief concern was thus to secure an
executive strong enough, not one weak enough." ^
The delegates did not want a monarchy, but felt they
had no reason to fear such a threat as long as Mem-
bers of Congress retained their independent political

connection to the people. The problem was to make
sure the other branches were not drawn, to use James
Madison's word, into the legislature's "vortex." ''

Constitutional Convention

The need for a strong Executive was not seen or
articulated clearly at the beginning of the Constitu-
tional Convention by all of the delegates. On June 1,
1787, in the first debate on the subject, Connecticut's
Roger Sherman said "he considered the Executive
magistracy as nothing more than an institution for
carrying the will of the Legislature into effect." * For
that reason, Sherman supported the original Virginia
Plan's provisions for the office. As submitted on the
first day of the convention's substantive business on
May 29, these included election by the legislature, no
reeligibility for reelection and a short list of powers.

The Presidency grew considerably in stature be-
tween June 1 and September 17, the convention's last
day. The leading strong Executive proponents, includ-
ing James Wilson of Pennsylvania and Gouverneur
Morris of New York, persuaded their colleagues to
borrow key provisions from the New York State
Constitution, whose independently powerful governor
stood out from the much weaker executives in the
other states. By the time the convention had finished,
the Presidency (like the governorship of New York)
was to be unified in one person who had an electoral
base independent from the legislature's, who was al-
lowed to run for reelection and who was given a
qualified veto over legislative bills. With those
changes in place, the delegates insured that the Presi-
dency would not be the subservient clerkship original-
ly envisioned by Sherman.

The President's enumerated powers were not dis-
cussed until the second half of the Constitutional Con-
vention. For a week after the July 16 Great Compro-
mise on legislative representation, the delegates debat-
ed the Presidency without reaching final conclusions.
On July 26, they recessed to let a Committee of
Detail work on a draft Constitution. At this point, the
convention had only given the President the power to
enforce laws, appoint officers, and exercise a qualified
veto over legislation.

The Committee of Detail's report of August 6 listed
specific powers for all three branches, significantly
expanding the ones for the President. To the ones
listed on July 26, the committee added the ability to
recommend legislation, to receive ambassadors, to
communicate with other heads of state and to act as
commander in chief. '

Beyond these powers, however, the committee did
not yet see the President as being preeminent in for-
eign policy. Reflecting the stake that small state dele-
gates felt they had in the Senate, the committee gave
the Senate the power to make treaties and appoint

458

Chapter 2

ambassadors and judges, and gave the full Congress
the power to make war.

Over the next several weeks, all of these foreign
policy decisions were modified to increase the Presi-
dent's power. On August 17, "Mr. Madison and Mr.
Gerry moved to insert 'declare', striking out [Con-
gress's power to] 'make' war; leaving the Executive
the power to repel sudden attacks." '° This sentence
is sometimes read by advocates of Congressional
power as if the President was to be left only with the
power to repel sudden attacks. ' ' The next sentence
muddies this interpretation substantially, however.
Roger Sherman — the same delegate who was so suspi-
cious of Executive power — said he would oppose the
change because he interpreted it to mean the Presi-
dent was being given the power "to commence war."
Oliver Ellsworth joined Sherman's reasoning, and
Madison's notes (much skimpier for September than
earlier) made George Mason's remarks inscrutable.'^
The motion was adopted, but an honest reading of
these contradictory interpretations compels the con-
clusion that the scope of Executive power on this
point was not settled. The President clearly was being
given some discretion to use force without a declara-
tion of war, but how much would have to be worked
out in subsequent practice.

The treaty power was debated on August 23, but
left unresolved.'^ On September 4, a Committee of
Eleven reported a provision that said, "the President
by and with the advice and consent of the Senate,
shall have power to make Treaties; and he shall nomi-
nate and by and with the advice and consent of the
Senate shall appoint ambassadors", other public Min-
isters, judges and other officers not otherwise provid-
ed for in the Constitution. The votes of two-thirds of
the Senators present were to be needed to ratify a
treaty.'* The provision for treaties was adopted with
little recorded debate on September 7. James Wilson
did move to require ratification to be shared by the
House of Representatives, but the motion was defeat-
ed 1-10 after Sherman said "the necessity of secrecy
in the case of treaties forbade a reference of them to
the whole Legislature." '^ The delegates reduced the
two-thirds requirement for advice and consent to a
simple majority for treaties of peace, but reversed
themselves the next day.'® As with the war power,
shifting the power to make treaties away from the
Senate clearly was meant to expand the President's
role — this time to take the lead in international negoti-
ations. This expansion would parallel the President's
sole authority to receive ambassadors and his author-
ity to nominate ambassadors with advice and consent
of the Senate. Once again, however, the exact scope
of the relationship implied by the treaty power was
left to be worked out in practice.

The Federalist Analysis of Political
Principles

Although the convention left a great deal unsettled,
that does not mean the Framers considered the distri-
bution of foreign policy powers to be unimportant.
"Problems of security and diplomacy were among the
dominant preoccupations of the men who met at
Philadelphia," wrote one legal scholar, "and first
among their arguments for Union." ''' John Jay's four
papers on foreign affairs come first in the Federalist
and more than half of the papers in one way or
another involve national security or foreign policy. In
fact, one of the main differences between Federalists
and Anti-Federalists during the whole ratification
period turned on the Federalists' insistence that a
strong national government was needed to meet for-
eign threats.'® So the issues were aired at some
length.

If we begin with the discussions about governmen-
tal institutions that were not specifically focused on
foreign policy, we can see that there were some prin-
ciples underlying the way powers were allocated to
the various branches of government. There was some
overlap, to be sure. "Unless these departments be so
far connected and blended, as to give each a constitu-
tional controul over the others," Madison wrote in
Federalist No. 48, no checking or balancing could
occur. '8 But the core of each branch's power cen-
tered upon tasks it was supposed to be best suited to
perform.^"

The primary concern the Framers had for the Con-
gress was to create a body whose members — naturally
concerned with the immediate concerns of their own
districts — would be encouraged to debate and deliber-
ate in the name of the national interest.^' If delibera-
tion was the key word for designing the legislature,
energy, the ability to act, was the central concept for
the Presidency. In describing the delegates' decision
to have a single Executive and a numerous legislature,
Alexander Hamilton wrote: "They have, with great
propriety, considered energy as the most necessary
qualification in the former, and have regarded this as
most applicable to power in a single hand; while they
have, with equal propriety, considered the latter as
best adapted to deliberation." ^^

The need for an effective foreign policy, it turned
out, was one of the main reasons the country needs an
"energetic government," according to Alexander
Hamilton in Federalist Nos. 22 and 23. Madison made
the same point in No. 37: "Energy in Government is
essential to that security against external and internal
danger, and to that prompt and salutary execution of
the laws, which enter into the very definition of good
Government." ^^ The relevance of these observations
about the government's power is that the Framers saw
energy as being primarily an executive branch charac-
teristic.

459

Chapter 2

Energy is the main theme of Federalist No. 70
("energy in the executive is a leading character in the
definition of good government.") It is said to be im-
portant primarily when "decision, activity, secrecy,
and dispatch" were needed. These features are "essen-
tial to the protection of the community against for-
eign attacks." "In the conduct of war ... the energy
of the executive is the bulwark of national securi-
ty." 24

But war was not the only aspect of foreign policy
described as being more appropriate for the executive
than legislative branch. "The actual conduct of for-
eign negotiations, . . . the arrangement of the army
and navy, the direction of the operations of war; these
and other matters of a like nature constitute what
seems to be most properly understood by the adminis-
tration of government." ^^ On negotiations, Hamilton
went further to say that the Executive is "the most fit
agent" for "foreign negotiations." ^®

In all of the quotations above, the Federalist was
not treating powers as if they were randomly distrib-
uted. "Separated powers are not separated arbitrar-
ily," writes one constitutional scholar.^'' "They are
divided on principle, and not according to the pru-
dential considerations of the moment," concludes an-
other. ^^ The responsibilities given each branch were
the ones most suited to its composition. Activities
requiring discussion and deliberation formed the heart
of the legislature's job; those calling for "decision,
activity, secrecy and dispatch" were the heart of the
Executive's. The distribution of these characteristics
among the branches would not by itself settle a dis-
pute over the separation of powers. One could not,
for example, challenge the existence of Congressional
intelligence committees by saying that the Federalist
called secrecy more of an Executive than a legislative
trait. The analysis does show, however, that the
Framers had solid reasons for placing the deployment
and use of force (but not declarations of war), togeth-
er with negotiations, intelligence gathering,^^ and
other diplomatic communications (but not treaty rati-
fication) at the center of the President's foreign policy

powers. The principles underlying this distribution of
powers should therefore be respected in constitutional
interpretation, except where there are compelling rea-
sons to suppose the Framers intended a different
result.

We would be remiss if we failed to note that Feder-
alist No. 70 gave two reasons for supporting unity in
the Executive. So far, our discussion has concentrated
on the first: the need for energy in the Executive. No
government, democratic or otherwise, could long sur-
vive unless its Executive could respond to the uncer-
tainties of international relations. But energy in the
Executive seemed frightening to some people. To
them, the Federalists made two responses. The first
was that the Executive could not maintain a standing
army, equip a navy, or engage in a large-scale use of
force, without spending appropriated funds provided
and controlled by the Congress.^"

The second was that an independent, single Execu-
tive— in addition to being more energetic — would also
be more responsible politically. It would be much
easier to hold one person accountable than a commit-
tee.^^ In other words, giving the President some inde-
pendent, inherent power was not seen as being un-
democratic. The President and Congress both were
considered to be representatives of the people. The
Congress produced a more fitting result when the
primary need was to moderate internal factional de-
mands through discussion and deliberation before pro-
ducing general rules. But foreign policy is dominated
by case-by-case decisions, not general rules, and the
aim is not to moderate internal pressures through de-
liberation, but to respond to external ones quickly and
decisively. For these kinds of situations, multiple
bodies — like Congress — are inherently unable to
accept blame or responsibility for mistakes. Thus, de-
spite the majority's contentions to the contrary, put-
ting such decisions in the hands of the Congress was
considered to be less democratic than giving them to
the President, because there would be no way for the
people to hold any one person accountable for a legis-
lative decision.

460

Chapter 2 (Minority)

Chapter 2

1. Edward S. Corwin, The President: Office and Powers
(1957), p. 171.

2. U.S. Senate, 92d Cong., 2d Sess., Committee on For-
eign Relations, War Powers, S. Rept. 92-606 to accompany
S. 2956, (1972), p. 16; and U.S. Senate, 94th Cong., 2d Sess.,
Select Committee to Study Governmental Operations With
Respect To Intelligence Activities, Final Report: Foreign
and Military Intelligence, S. Rept. 94-755 (1976), Book I, p.
3.

3. Myers v. United States 111 U.S. 52, 293 (1926).

4. See, for example, U.S. Senate, 94th Cong., 2d Sess.,
Select Committee to Study Governmental Operations With
Respect To Intelligence Activities, Final Report: Foreign
and Military Intelligence, S. Rept. 94-755 (1976), Book I, p.
31.

5. See, for example, Louis Fisher, President and Con-
gress: Power and Policy (1972) at 3: "I would not go so far
as to claim that the framers' search for administrative effi-
ciency, and their adoption of a separate executive for that
purpose, represents the whole truth. Still, it is at least half
the truth." See also L. Fisher, "The Efficiency Side of
Separated Powers," 5 Journal of American Studies 113
(1971).

6. Charles C. Thach Jr., The Creation of the Presidency,
1775-1789(1923), p. 77.

7. Alexander Hamilton, James Madison, and John Jay,
The Federalist (Jacob Cooke, ed., 1961), No. 48, p. 333.
Hereafter cited as Federalist.

8. Max Farrand, The Records of the Federal Convention
of 1787 (1937), 4 vols.. Vol. 1, p. 65. Hereafter cited as
Farrand.

9. Farrand, II, 185.

10. Farrand, II, 318.

11. U.S. Senate, 92d Cong., 2d Sess., Committee on For-
eign Relations, War Powers, S. Rept. 92-606 to accompany
8.2956(1972), p. 4.

12. Farrand, 11,318-19.

13. Farrand, II, 392-94.

14. Farrand, II, 498-99.

15. Farrand, II, 538.

16. Farrand, II, 541, 549.

17. Eugene V. Rostow, "Great Cases Make Bad Law:
The War Powers Act," 50 Texas L.Rev. 833, 845 (1972).

18. Nathan Tarcov, "The Federalists and Anti-Federalists
on Foreign Affairs," 14 Teaching PoHtical Science: Politics
in Perspective 38 (Fall, 1986).

19. Federalist No. 48 at 332. William R. Davie made the
same point in the North Carolina ratifying convention: "It is
true, the great Montesquieu, and several other writers, have
laid it down as a maxim not to be departed from, that the
legislative, executive, and judicial powers should be sepa-
rate and distinct. But the idea that these gentlemen had in
view has been misconceived or misrepresented. An absolute
and complete separation is not meant by them. It is impossi-
ble to form a government on these principles." Jonathan
Elliot, ed. The Debates in the Several States on the Adop-
tion of the Federal Constitution, 5 vols (1888), Vol. IV, p.
121.

20. See Ann Stuart Diamond, "The Zenith of Separation
of Powers Theory: The Federal Convention of 1787," Pub-
lius, (Summer 1978) at 51.

21. Michael J. Malbin, "Congress During the Convention
and Ratification," in L. Levy and D. Mahoney, eds., The
Constitution: A History of its Framing and Ratification
(1987); M. Malbin, "Factions and Incentives in Congress,"
86 The Public Interest 91 (1987).

22. Federalist No. 70 at 472.

23. Federalist No. 37 at 233.

24. Federalist No. 70 at 471-72, 476.

25. Federalist No. 72 at 486-87.

26. Federalist No. 75 at 505, emphasis added.

27. Gary J. Schmitt, "Separation of Powers: Introduction
to the Study of Executive Agreements," 27 The American
Journal of Jurisprudence 114, 115 (1982).

28. Glen E. Thurow, "Presidential Discretion in Foreign
Affairs," 7 Vanderbilt J. of Int'l. L. 71, 75 (1973).

29. Federalist No. 64 at 435.

30. Federalist No. 26 at 168; No. 41 at 273-74. We discuss
the Constitutional limits on the appropriations power as a
tool of foreign policy in the next chapter.

31. Federalist No. 70 at 476-77.

461

Chapter 3

The President's Foreign Policy Powers in
Early Constitutional History

Our review of the Constitutional Convention conclud-
ed that the original document left a great deal to be
worked out in practice. The Federalist does not
change this conclusion. It does give us a theoretical
basis, however, for seeing that the subsequent histori-
cal development of the President's foreign policy
powers was no aberration. This is evident in the early
development of diplomatic power, in presidential de-
ployments of force, and in the use of secret agents for
intelligence and covert activities.

Diplomacy

The major uncertainties affecting the President's abili-
ty to hold the initiative in negotiations and diplomatic
communications were settled early. The President's
role as the "sole organ" ^ of international communica-
tions was asserted unequivocally on October 9, 1789,
when George Washington answered a letter that the
King of France had addressed "to the President and
Members of the General Congress" by saying that the
task of receiving and answering such letters "has de-
volved upon me." Washington's interpretation was
not based on the explicit words of Article II. Con-
firming this assertion, the Senate twice rejected mo-
tions to request the President to communicate mes-
sages on behalf of the United States.^

The related issue of whether the President may be
required to give all requested information to Congress
arose in a variety of foreign policy contexts during
the Washington Administration. According to Abra-
ham Sofaer's definitive study of the first forty years'
practice under the Constitution, Washington repeated-
ly asserted, and Congress just as repeatedly accepted,
a presidential right to withhold information the Presi-
dent thought should be kept secret. In 1794, for exam-
ple, the Senate requested copies of the correspond-
ence between our ambassador to France and the
French Republic. Attorney General William Bradford
wrote that "it is the duty of the Executive to with-
hold such parts of the said correspondence as in the
judgment of the Executive shall be deemed unsafe
and improper to be disclosed." Washington's response
to the Senate clearly indicated that he was withhold-
ing some material, but the Senate took no further
action.^

A year later, the Senate asked President Washing-
ton for John Jay's negotiating instructions and dis-
patches relating to the controversial Jay Treaty, "the
first truly significant treaty completed under the new
Constitution." * The issue here had to do not with the
President's right to be the sole negotiator of treaties,
but with what information Congress could insist on,
after the fact, as a matter of right. Despite some
advice to the contrary within his cabinet, Washington
decided to give all requested information to the
Senate. Thomas Jefferson, Washington's Secretary of
State, made it clear later, however, that he considered
the decision to have been a matter of political pru-
dence rather than an acquiescence in a Senatorial
right of advance consultation.^

When it was time for the House to consider imple-
menting legislation for the Jay Treaty, Washington
refused the same information — an action that pro-
voked more than 300 pages of debate in the Annals of
Congress. The President said he was refusing the re-
quest because the House had no role in ratifying trea-
ties. The Cabinet, however, had also discussed a
second reason for refusing to answer: the President's
inherent power to decide what could, with safety, be
shared. In a subsequent House debate, James Madison
argued that the President should not be allowed to
judge what was in the House's power, but supported
the idea that the President could withhold papers if
"in his judgment, it might not be consistent with the
interest of the United States at this time to disclose."
In other words, Madison was saying that each branch
was the proper judge of its own constitutional
powers. According to Sofaer, the debate showed
"that members widely shared the view that the Presi-
dent had discretion to decline to furnish information
requested. . . . Only one member . . . claimed that
the House had an absolute right to obtain information it
sought." ®

In addition to negotiating treaties, and sharing in-
formation about them with Congress, there was a
major dispute during the Washington Administration
about subsequent interpretation and implementation.
After war broke out between France and England in
1793, Washington decided to issue his famous Procla-
mation of Neutrality. Public sentiment was in favor of
having the United States support France, a course

463

Chapter 3

that arguably would have been consistent with a 1778
Treaty of Alliance between the United States and
France. Washington was convinced, however, that
taking sides in the war would be disastrous. He took
the position that it was up to him, as President, to
interpret the country's treaty obligations when he felt
those obligations did not require him to ask Congress
for a declaration of war. For eight months, Washing-
ton implemented his policy without asking Congress
to convene for a special session.

One of the truly remarkable aspects of the decision
was that, in addition to its assertion of the President's
unilateral power to set policy, Washington claimed
that he could use military force, if necessary, to pre-
vent violations of the policy outside the United States
by privateers and by people who helped outfit them,
and that he could treat violations within the United
States as criminal acts under the common law. Al-
though unrelated concerns about common law crimes
and the difficulty of winning jury convictions led to
the first Congressional Neutrality Act, there was
never any doubt about Washington's authority to en-
force his policy of neutrality abroad.

Washington's proclamation also occasioned one of
the great public debates over executive power in the
Nation's history. About two and a half months after
the proclamation, Hamilton published the first of a
series of papers under the pseudonym of Pacificus.
The main constitutional issue of the day was whether
Congress' power to declare war carried with it the
power to declare peace, or to determine whether U.S.
treaty obligations with France required supporting
that country in its war with England. Hamilton
argued that these powers must "of necessity belong to
the Executive Department." ^ His reasoning was as
follows:

It appears to be connected to that department in
various capacities, as the organ of intercourse be-
tween the Nation and foreign Nations — as the
interpreter of the National Treaties in those cases
in which the Judiciary is not competent, that is
between Government and Government — as that
Power, which is charged with the Execution of
the Laws, of which treaties form a part — as that
Power which is charged with the application of
the Public Force.

That view of the subject is so natural and obvi-
ous— so analogous to general theory and prac-
tice— that no doubt can be entertained of its just-
ness, unless such doubt can be deduced from
particular provisions of the Constitution.^

At this point, Hamilton turned his attention to the
texts of Articles I and II, and particularly to the
general clauses introducing each of them.

The second Article of the Constitution of the
United States, section 1st, establishes this general

Proposition, That "The EXECUTIVE POWER

shall be vested in a President of the United States
of America."

The same article in a succeeding Section pro-
ceeds to designate particular cases of Executive
Power ....

It would not consist with the rules of sound
construction to consider this enumeration of par-
ticular authorities as derogating from the more
comprehensive grant contained in the general
clause, further than as it may be coupled with
express restrictions or qualifications .... Be-
cause the difficulty of a complete and perfect
specification of all the cases of Executive author-
ity would naturally dictate the use of general
terms — and would render it improbable that a
specification of particulars was designed as a sub-
stitute for those terms, when antecedently used.
The different mode of expression employed in the
constitution in regard to the two powers the Leg-
islative and the Executive serves to confirm this
inference. In the article which grants the legisla-
tive powers of the Governt. the expressions are —
"All Legislative powers herein granted shall be
vested in a Congress of the United States;" in that
which grants the Executive Power the expres-
sions are, as already quoted, "The EXECUTIVE
PO[WER] shall be vested in a President of the
United States of America". . . .

The general doctrine then of our constitution is
that the EXECUTIVE POWER of the Nation is
vested in the President; subject only to the excep-
tions and gu[a]lifications which are expressed in
the instrument ....

This mode of construing the Constitution has
indeed been recognized by Congress in formal
acts, upon full consideration and debate. The
power of removal from office is an important
instance.®

Thomas Jefferson, Washington's Secretary of State,
joined the other members of the Cabinet in supporting
the President's proclamation. He became upset, how-
ever, at Pacificus' arguments for executive power,
and urged his friend, James Madison, to write a reply.
The results were published under the pseudonym of
Helvidius.

To see the laws faithfully executed constitutes
the essence of the executive authority. But what
relation does it have to the power of making
treaties and war, that is, of determining what the
laws shall be with regard to other nations? ....

By whatever standard we try this doctrine, it
must be condemned as no less vicious in theory
than it would be dangerous in practice ....

464

Chapter 3

Whence can the writer have borrowed it?

There is but one answer to this question.

The power of making treaties and the power of
declaring war, are royal prerogatives in the British
government, and are accordingly treated as execu-
tive prerogatives by British commentators. '"

Interestingly, a letter Madison wrote to Jefferson
shows that he was extremely reluctant to take on the
task. ' ' On an earlier occasion when he was support-
ing the removal power, Madison had described the
executive power in terms much closer to Hamilton's.

The constitution affirms that the executive power
shall be vested in the president. Are there excep-
tions to this proposition? Yes, there are. The con-
stitution says that, in appointing to office, the
senate shall be associated with the president,
unless in the case of inferior officers, when the
law shall otherwise direct. Have we [in Congress]
a right to extend this exception? I believe not. If
the constitution has invested all the executive
power in the president, I venture to assert, that
the legislature has no right to diminish or modify
his executive authority.'^

Whatever one may want to say about Madison's
narrow construction of Presidential power in the role
of Helvidius. there can be little doubt that the history
of the years and decades immediately following
Washington's assertions of broad power, developed
more along lines envisioned by Pacificus. Sofaer's
review of the Washington administration ended by
observing that "the framework for executive-congres-
sional relations developed during the first eight years
differs more in degree than in kind from the present
framework." '^ At least as important as the first eight
years, however, was the fact that this framework was
maintained by Jefferson and his successors, despite
their public identification during the years the Feder-
alists held power with the Helvidius view of the Presi-
dency.

One constitutional dispute early in the Jefferson
Administration was over the Louisiana Purchase.
What would the party whose adherents had insisted
on a Senate role in negotiating the Jay Treaty say
about the President's power to negotiate the Pur-
chase? Jefferson's Secretary of State Albert Gallatin
supported the Louisiana Purchase by saying that the
purchase eventually would have to be ratified by
treaty and that its negotiation therefore belonged to
the President under the Constitution. Jefferson did not
embrace Gallatin's constitutional argument. Instead,
the President decided to go through with the Pur-
chase, without abandoning his view that the Constitu-
tion severely limited the President, by asserting an
inherent, ejcrraconstitutional prerogative power for the
Executive that was more sweeping than anything

Hamilton had ever put forward. Jefferson justified his
decision this way:

A strict observance of the written law is doubt-
less one of the high duties of a good citizen, but
it is not the highest. The laws of necessity, of
self-preservation, of saving our country when in
danger, are of higher obligation. To lose our
country by a scrupulous adherence to written
law, would be to lose the law itself . . . absurdly
sacrificing the end to the means.'*

One of the remarkable aspects of Jefferson's asser-
tion is the stark way in which it poses a fundamental
constitutional issue. Chief Executives are given the
responsibility for acting to respond to crises or emer-
gencies. To the extent that the Constitution and laws
are read narrowly, as Jefferson wished, the Chief Ex-
ecutive will on occasion feel duty bound to assert
monarchical notions of prerogative that will permit
him to exceed the law. Paradoxically, the broader
Hamiltonian ideas about executive power — by being
more attuned to the realistic dangers of foreign
policy — seem more likely to produce an Executive
who is able and willing to live within legal bound-
aries. Thus, the constitutional construction that on the
surface looks more dangerous seems on reflection to
be safer in the long run.

After Jefferson, the notion of executive prerogative
was put on the shelf Instead, Jeffersonian Presidents
began asserting Hamiltonian ideas about executive
power. Although we will discuss the use of force
separately below, Sofaer's comment on the post-Jef-
fersonians bears quotation here:

Although Presidents during this period claimed
no inherent authority to initiate military actions,
Madison [departing from the theory of the Helvi-
dius papers] and particularly Monroe secretly
used their powers in ways that could have been
justified only by some sweeping and vague
claim — such as the right to use the armed forces
to advance the interests of the United States.'^

The reason such inherent presidential power was
exercised in this period, and later, was not mysterious.
The exercise grew out of the character of foreign
policy and of the offices the Constitution had created.
As Gary Schmitt put it in an article about Jefferson:

To some extent, the enumerated powers found in
Article II are deceiving in that they appear un-
derstated. By themselves, they do not explain the
particular primacy the presidency has had in the
governmental system since 1789. What helps to
explain this fact is the presidency's radically dif-
ferent institutional characteristics, especially its
unity of office. Because of its unique features, it
enjoys — as the framers largely intended — the ca-
pacity of acting with the greatest expedition, se-

465

77-026 0

87 - 1 6

Chapter 3

crecy and effective knowledge. As a result, when
certain stresses, particularly in the area of foreign
affairs, are placed on the nation, it will "natural-
ly" rise to the forefront. ' ^

These stresses are particularly evident when it is time
to use force or engage in secret diplomacy or covert
actions.

We close this section on diplomacy by relating it to
some of the issues of the Iran-Contra investigation.
Some Members of these Committees seem to have
taken the positions (1) that Congress can require the
President to notify it whenever the President prepares
or begins to conduct secret negotiations or covert
operations, whatever the circumstances, and/or (2)
that Congress may constitutionally use its appropria-
tions power to prohibit certain forms of communica-
tion between the President (or the President's employ-
ees in the White House and State Department) and
other governments or private individuals. We consid-
er negotiations and communications with foreign gov-
ernments or individuals to be Presidential powers pro-
tected by the Constitution, without reservation. They
fall comfortably within precedents established during
the Washington Administration which have never
been successfully challenged since. The constitutional
validity of withholding information about sensitive,
covert operations involves additional considerations
that will be discussed separately later.

Use of Force

We do not intend to turn this report into an argument
about war powers. We have no doubt that we dis-
agree with some of our esteemed colleagues on this
issue, but there is no point in getting sidetracked.
Nevertheless, we consider it important to say some-
thing about the power Presidents traditionally have
exercised under the Constitution, to use force with
and without prior congressional authorization. This
history clearly supports our basic contention that the
Constitution expected the President to be much more
than a clerk. It will also provide a context for discuss-
ing the less drastic projections of U.S. power that fit
under the rubric of covert action.

In its 1973 hearings on the War Powers Resolution,
the House Foreign Affairs Subcommittee on National
Security Policy and Scientific Developments pub-
lished a list of 199 U.S. military hostilities which
occurred abroad without a declaration of war. ' ' (The
five declarations of war in the Nation's history were
for the War of 1812, Mexican War, Spanish- American
War, World War I, and World War II.) The list was
a revision of one published the year before in a law
review article by J.T. Emerson.'^ Of the 199 listed
actions, only 81 could be said under any stretch of the
imagination to have been initiated under prior legisla-
tive authority. The 81 included 51 undertaken under
treaties, many of which left substantial room for inter-

pretation. In addition, many of the remaining actions
were undertaken with only the vaguest statutory au-
thority. President Jefferson's five-year campaign
against the Barbary States, for example, was justified
by the claim that Congress' general decision to pro-
vide a navy carried with it the authority to deploy
the navy whereever the President wished, including a
theater in which the President had every reason to
expect hostilities.

The point here is not to quibble about the 81 occa-
sions the subcommittee described as having had prior
congressional authorization. Rather, it is to show that
the list made every effort to include all examples for
which some kind of prior congressional authorization
could arguably have been claimed. That leaves an
extremely conservative number of 1 1 8 other occasions
without prior legislative authorization. What follows
is a sampler of the 118 actions taken solely on execu-
tive authority. The descriptive language below is
paraphrased from the subcommittee exhibit cited
above.

— In 1810, Governor Claiborne of Louisiana, on the
sole order of the President, used troops to occupy
disputed territory east of the Mississippi.

—During the "First Seminole War," 1816-18, U.S.
forces invaded Spanish Florida on two occasions. In
the first action they destroyed a Spanish fort. In the
second they attacked hostile Seminole Indians, occu-
pying Spanish posts believed to have served as
havens. President Monroe assumed responsibility for
these acts.

—In 1818, the U.S.S. Ontario landed at the Colum-
bia River and took possession of Oregon, which was
also claimed by Russia and Spain.

— In 1844, President Tyler deployed forces to pro-
tect Texas against Mexico, anticipating Senate ap-
proval of a treaty of annexation. The treaty was later
rejected.

— In 1846, President Polk ordered General Scott to
occupy disputed territory months before a declaration
of war. The troops engaged in battle when Mexican
forces entered the area between the Nueces and Rio
Grande Rivers. The fighting occurred three days
before Congress acted.

— In 1853-54, Commodore Matthew C. Perry led
an expedition to Japan to negotiate a commercial
treaty. Four hundred armed men accompanied Perry
and landed with him at Edo Bay in July, 1853, where
he stayed ten days after being told to leave. He then
sailed south and took possession of the Bonin Islands.
In March 1854, he returned to Edo Bay with 10 ships
and 2,000 men. He landed with 500 men and signed a
treaty after a six-week campaign. The whole cam-
paign was on executive authority.

— In late 1865, General Sherman was sent to the
Mexican border with 50,000 troops to back up the
protest made by Secretary of State Seward to Napole-
on III that the presence of 25,000 French troops in

466

Chapter 3

Mexico "is a serious concern." The troops remained
until February 1866, when Seward demanded a defi-
nite date for French withdrawal and France com-
plied.

— In 1869-71, President Grant sent a naval force to
the Dominican Republic to protect it from invasion
while the Senate considered a treaty of annexation.
The Senate rejected the treaty, but the naval force
stayed in place for months afterwards.

— Between 1874 and 1915, U.S. forces were put
ashore on 29 different occasions to protect American
lives or interests in places as diverse as Hawaii,
Mexico, Egypt, Korea, Argentina, Chile, Nicaragua,
China, Colombia (Panama), Dominican Republic,
Syria, Abyssinia, Morocco, Honduras, Turkey and
Haiti.

— Between 1915 and 1934, the United States placed
Haiti under U.S. military and financial administration.
The occupation was sanctioned by a treaty ratified by
the Senate in February 1916, but the first months of
the occupation were on Executive authority.

— In February 1917, President Wilson asked Con-
gress for authority to arm U.S. merchant vessels.
Congress refused and Wilson acted on his own au-
thority to provide the ships with guns.

— In 1918-20, after signing the Armistice for World
War I, U.S. troops participated in Allied anti-Bolshe-
vik military actions in Russia.

—Between 1926 and 1933, 5,000 U.S. troops were
in Nicaragua at the request of the government during
the period of Sandino's attempted revolution. Con-
gressional Democrats opposed President Coolidge's
decisions but did not question his authority.

— On September 3, 1940, President Roosevelt in-
formed Congress that he had agreed to deliver a
flotilla of destroyers to Great Britain in return for a
series of military bases on British soil along the West-
ern Atlantic.

— In April 1941, after the German invasion of Den-
mark, the U.S. Army occupied Greenland under
agreement with local authorities. The action appears
to have been contrary to an express congressional
limitation.

— On July 7, 1941, U.S. troops occupied Iceland.
Congress was notified the same day but was not con-
sulted in advance. The Reserves Act of 1940 and the
Selective Service Act of 1940 both provided that U.S.
troops could not be used outside the Western Hemi-
sphere.

— By July 7, 1941, President Roosevelt had ordered
U.S. warships to convoy supplies sent to Europe to
protect military aid to Britain and Russia. By Septem-
ber, the ships were attacking German submarines.

— In July 1946, during an Italian-Yugoslav border
dispute in the Trieste area. President Truman ordered
U.S. Naval units to the scene. After the Yugoslavs
shot down U.S. transport planes in August, Truman
ordered U.S. troops and air forces to be augmented.

Five thousand U.S. troops remained in Trieste as late
as 1948.

— Between 1948 and 1960, U.S. forces were de-
ployed to evacuate, protect or be ready to protect
U.S. lives in or near Palestine, China, Egypt, Indone-
sia, Venezuela, and Cuba.

— In October 1962, President Kennedy ordered a
naval "quarantine" of Cuba during the Cuban Missile
Crisis.

— On April 24, 1965, a revolt broke out in the
Dominican Republic, and on April 28 President John-
son sent American troops. The announced purpose
was to protect American lives. At the peak of the
action, 21,500 U.S. troops were in the Dominican
Republic. An Inter-American Peace Force began ar-
riving on May 21 and stayed through the year.

— On September 17, 1970, King Hussein of Jordan
moved against the Palestine Liberation Organization.
Syria sent 300 tanks across the Jordanian border and
President Nixon ordered the United States Sixth Fleet
to deploy off the Lebanese-Israeli coast. The United
States apparently was prepared to intervene to pre-
vent Hussein's overthrow. Syrian tanks began with-
drawing on September 22 and Hussein and PLO
leader Yassir Arafat agreed to a cease-fire on Septem-
ber 25.

As should be obvious from all of these examples.
Presidents from the earliest history of the United
States have not limited themselves to a Roger Sher-
man-like limited conception of their job. Neither have
they felt, as they have deployed force without con-
gressional authorization, that their actions had to be
limited to hot pursuit, repelling attacks or protecting
American lives. Until recently, the Congress did not
even question the President's authority.

The relevance of these repeated examples of the
extensive use of armed force, therefore, is that they
indicate how far the President's inherent powers were
assumed to have reached when Congress was silent,
and even, in some cases, where Congress had prohib-
ited an action. We shall show later that most of the
Reagan Administration's actions in Central America
in fact were not covered by statute. They therefore
fall constitutionally under the heading of unauthor-
ized, but also unprohibited actions. As shown above.
Presidents historically have had not only the power
to negotiate and communicate, but also to deploy
force overtly — sometimes for major campaigns in-
volving significant losses of life — without Congres-
sional approval. The Reagan Administration did not
even come remotely close to this level of activity in
its support of the democratic resistance in Nicaragua.

Intelligence and Covert Actions

We end this review of historical precedent with a
brief overview of intelligence and covert actions au-
thorized by past Presidents. That history begins in the

467

Chapter 3

earliest days of the Nation. As Representative Hyde
mentioned during Admiral Poindexter's testimony on
July 17,'^ the Continental Congress — which did not
have a separate executive branch — set up a Commit-
tee of Secret Correspondence made up of Benjamin
Franklin, Robert Morris, Benjamin Harrison, John
Dickinson and John Jay. On October 1, 1776, Frank-
lin and Morris were told that France would be will-
ing to extend credit to the revolutionaries to help
them buy arms. They wrote:

Considering the nature and importance of [the
above intelligence,] we agree in opinion that it is
our indispensable duty to keep it a secret from
Congress. ... As the court of France has taken
measures to negotiate this loan in the most cau-
tious and secret manner, should we divulge it
immediately we may not only lose the present
benefit but also render the court cautious of any
further connection with such unguarded people
and prevent their granting other loans of assist-
ance that we stand in need of ^°

In a subsequent chapter on leaks, we shall discuss
the methods this committee used to protect secrets,
some of which should be revived today.

The Federalist also recognized the important role
intelligence might play under the new Constitution.
Federalist No. 64, about treaties, was written by Jay,
an experienced diplomat as well as a former member
of the Committee on Secret Correspondence. He said:

It seldom happens in the negotiation of treaties,
of whatever nature, but that perfect secrecy and
immediate dispatch are sometimes requisite. There
are cases when the most useful intelligence may
be obtained, if the person possessing it can be
relieved from apprehensions of discovery. Those
apprehensions will operate on those persons
whether they are actuated by mercenary or
friendly motives; and there are doubtless many of
both descriptions who would rely on the secrecy
of the President, but who would not confide in
that of the Senate, and still less in that of a large
popular assembly. The convention have done
well therefore in so disposing of the power of
making treaties, that although the President must
in forming them act by the advice and consent of
the senate, yet he will be able to manage the
business of intelligence in such manner as pru-
dence may suggest.^'

Beginning with George Washington, almost every
President has used "special agents" — people, often
private individuals, appointed for missions by the
President without Senate confirmation — to help gain
the intelligence about which Jay wrote, and to engage
in a broad range of other activities with or against
foreign countries. The first such agent was Gouver-
neur Morris, who was sent to Great Britain in 1789 to

explore the chances for opening normal diplomatic
communications.^^ At the same time, Britain sent a
"private agent" to the United States who communi-
cated outside normal channels through Secretary of
Treasury Alexander Hamilton instead of through the
Francophile Secretary of State, Thomas Jefferson. ^^
Washington's agents were paid from a "secret serv-
ice" fund he was allowed to use at his discretion,
without detailed accounting.^''

The early examples that are most interesting for
these investigations are ones in which the President
used his discretionary power to authorize covert ac-
tions. ("Covert action" is an inexact term generally
recognized to include covert political action, covert
propaganda, intelligence deception, and covert para-
military assistance.) In the period of 1810-12, for ex-
ample, Madison used agents to stimulate revolts in
East and West Florida that eventually led to an overt,
Congressionally unauthorized military force to gain
U.S. control over territories held by a country with
which the United States was at peace. Even more
telling, however, is the following example from the
Madison Administration.

Madison [in 1810] sent Joel R. Poinsett, secretly
and without Senate approval, to South America
as an agent for seamen and commerce. Poinsett
did some commercial work, but he broadly con-
strued instructions from Secretaries of State
Smith and Monroe, and worked intimately with
revolutionary leaders in Argentina and Chile,
suggesting commercial and military plans, helping
them obtain arms, and actually leading a division
of the Chilean army against Peruvian loyalists.
Nothing in Poinsett's instructions specifically au-
thorized these activities. But he had kept the ad-
ministration advised of most of his plans and re-
ceived virtually no directions for long periods of
time, and no orders to refrain in any way from
aiding the revolutionaries .... Poinsett was
given broad leeway to advance the republican
cause, without any commitment from the admin-
istration. He was told to write in code, and all his
important communications were withheld from
Congress. ^^

In other words, Poinsett made Oliver North look
like a piker.

In 1843, President Tyler secretly sent Duff Green
to Great Britain to engage in secret propaganda ac-
tivities relating to the U.S. desire to annex Texas. At
one point. Green had a letter published in a newspa-
per without using his own name. This raised a furor
among members of Congress, several of whom de-
manded to know his identity. Because Green was paid
out of the President's contingency fund. Congress
made the fund an issue during the subsequent adminis-
tration of President Polk. Polk refused to disclose his
expenditures in a statement that openly acknowledged

468

Chapter 3

they were being used for more than intelligence gath-
ering:

In no nation is the application of such funds to be
made public. In time of war or impending danger
the situation of the country will make it neces-
sary to employ individuals for the purpose of
obtaining information or rendering other important
services who could never be prevailed upon to act
if they entertained the least apprehension that
their names or their agency would in any contin-
gency be revealed. ^^

One early example of a covert action brought to an
end through a leak is described in Edward Sayle's
article on the history of U.S. intelligence:

President Pierce, as Polk, made extensive use of
agents and covert action. One of the most inno-
vative plans was to acquire Cuba from Spain.
Spain had refused to part with the troublesome
island, and a scheme was devised to force them
to sell. It called for cooperative European
money-lenders to call in their loans to the Span-
ish Crown, pressuring Madrid to sell Cuba to the
United States as a means to raise the needed cash.
The plan went well until leaked to the New York
Herald.^''

Examples like these are legion. During the coun-
try's first century. Presidents used literally hundreds
of secret agents at their own discretion. Congress did
give the President a contingency fund for these
agents, but never specifically approved, or was asked
to approve any particular agent or activity. In fact,
Congress never approved or was asked to approve
covert activity in general. The Presidents were simply
using their inherent executive powers under Article II
of the Constitution. For the Congresses that had ac-

cepted the overt presidential uses of military force
summarized in the previous section, the use of Execu-
tive power for these kinds of covert activities raised
no constitutional questions.

Conclusion

Presidents asserted their constitutional independ-
ence from Congress early. They engaged in secret
diplomacy and intelligence activities, and refused to
share the results with Congress if they saw fit. They
unilaterally established U.S. military and diplomatic
policy with respect to foreign belligerent states, in
quarrels involving the United States, and in quarrels
involving only third parties. They enforced this
policy abroad, using force if necessary. They engaged
U.S. troops abroad to serve American interests with-
out congressional approval, and in a number of cases
apparently against explicit directions from Congress.
They also had agents engage in what would common-
ly be referred to as covert actions, again without
Congressional approval. In short, Presidents exercised
a broad range of foreign policy powers for which
they neither sought nor received Congressional sanc-
tion through statute.

This history speaks volumes about the Constitu-
tion's allocation of powers between the branches. It
leaves little, if any, doubt that the President was ex-
pected to have the primary role of conducting the
foreign policy of the United States. Congressional ac-
tions to limit the President in this area therefore
should be reviewed with a considerable degree of
skepticism. If they interfere with core presidential for-
eign policy functions, they should be struck down.
Moreover, the lesson of our constitutional history is
that doubtful cases should be decided in favor of the
President. ^^

469

Chapter 3

Endnotes

1. This phrase, commonly used in contemporary debates
over the President's foreign policy powers, originated in
Alexander Hamilton's Pacificus papers, was used by John
Marshall in a House floor debate in 1800, and then reap-
peared in the Supreme Court case of U.S. v. Curliss-Wright.
See Alexander Hamilton, Papers, H. Syrett, ed.. Vol. XV,
pp. 37-38 (1969); 10 Annals of Congress 613 (1800); U.S. v.
Curtiss-Wright Export Corp. 299 U.S. 304, 319-20 (1936).

2. Abraham D. Sofaer, War, Foreign Affairs and Consti-
tutional Power (1976), p. 94.

3. Sofaer at 83-85.

4. Gary Schmitt, "Executive Privilege," in J. Bessette and
J. Tulis, eds. The Presidency in the Constitutional Order
(1981) 154, 187 n.38.

5. Thomas Jefferson, Writings, 10 vols., Paul L. Ford, ed.
(1892-99), Vol. 1, p. 294; cited in Gary Schmitt, "Jefferson
and Executive Power: Revisionism and the 'Revolution of
1800'", 17 Publius 7,15 (1987).

6. This debate is analyzed by Sofaer at 85-93. The Madi-
son quotation is at 87 and the Sofaer quotation is at 88.

7. Hamilton, Papers, XV at 38.
%.Id.

9. Id. at 38-40. Hamilton's reference is to the extensive
debate in the First Congress in the bill establishing the
Department of State that resulted in a close vote rejecting
the idea that Senate advice and consent should be needed to
remove people from office whose appointment had depend-
ed upon Senate confirmation.

10. James Madison, Writings, G. Hunt ed. (1906), VI,
149-50.

11. W. at 138-39.

12. As quoted in Edward S. Corwin, The President's
Control of Foreign Relations (1917) at 29.

13. Sofaer at 127.

14. Jefferson, Writings, Vol. 9, p. 279.

15. Sofaer at 378.

16. Schmitt, "Jefferson and Executive Power," at 23, n.
29.

17. U.S. House of Representatives, Committee on Foreign
Affairs, 93rd Cong., 1st Sess., War Powers, Hearings Before
the Subcommittee on National Security Policy and Scientif-
ic Developments, Exhibit II, pp. 328-376 (1973).

18. J.T. Emerson, "War Powers Legislation," 74
W.Va.L.Rev. 53, 88-119 (1972).

19. Hearings, July 17, pp. 205-07.

20. Revolutionary Diplomatic Correspondence of the
United States, October 1, 1776.

21. Federalist No. 64 at 434-35, emphasis in the original.

22. U.S. Senate, 94th Cong., 2d Sess., Select Committee
to Study Governmental Operations With Respect To Intelli-
gence Activities, Final Report: Foreign and Military Intelli-
gence, S.Rept. 94-755 (1976), Book I, p.34.

23. Leonard D. White, The Federalists; A Study in Ad-
ministrative History, 1789-1801 (1948), pp. 212-13.

24. 1 Stat. 128-29. See also, L. White, The Federalists at
343; Sayle, "Historical Underpinnings," at 9.

25. Sofaer, War, Foreign Affairs and the Constitution at
264-65.

26. As quoted by Sayle, "Historical Underpinnings," at
15.

27. Sayle, "Historical Underpinnings," at 16.

28. See letter from John Norton Moore to Brendan Sulli-
van, July 9, 1987, p. 2, reprinted at the end of the minority
report.

470

Chapter 4
Constitutional Principles In Court

The historical examples given in the preceding section
point the way toward a proper understanding of the
Executive's foreign policy powers as those powers
have evolved under the Constitution. The assertion by
Presidents, and the acceptance by Congress, of inher-
ent presidential powers in foreign policy were the
normal practice in American history before the 1970s,
not an aberration. The history therefore creates a
strong presumption against any new constitutional in-
terpretation that would run counter to the operative
understanding in the legislative and executive
branches that has endured from the beginning.

The Supreme Court has used history in just such a
presumptive way. In the Opinion of the Court in the
"flexible tariff delegation case of Field v. Clark, Jus-
tice Harlan wrote:

The practical construction of the Constitution, as
given by so many acts of Congress [involving
similar delegations], and embracing almost the
entire period of our national existence, should not
be overruled unless upon a conviction that such
legislation was clearly incompatible with the law
of the land.'

The point of this quotation is not that historical usage
must slavishly be followed. Rather, it is that historical
precedents — especially ones that began almost imme-
diately, with the support of many who participated in
the 1787 Convention — carry a great deal of weight in
any discussion about what the Constitution was sup-
posed to mean in the real world of government.

The historical examples clearly undermine the posi-
tion of the staunchest proponents of Congressional
power: that Presidents were intended to be ministerial
clerks, whose only authority (except for subjects ex-
plicitly mentioned in Article II) must come from Con-
gress. But that still leaves two other possibilities that
must be considered when judging the constitutional
validity of executive action. One is that a particular
exercise of presidential power may have been accepta-
ble in the past only because Congress had not yet
spoken on the subject. The other is that at least some
exercises of implied power (i.e., power not explicitly
stated in Article II) are so central to the office that
they remain beyond the constitutional reach of legisla-
tive prohibition. The Supreme Court precedents dis-

cussed below show that many of the major Iran-
Contra actions undertaken by President Reagan, his
staff, and other executive branch officials, fall into the
constitutionally protected category.

The Steel Seizure Case and
Inherent Presidential Power

Justice Robert Jackson's concurring opinion in the
Sleel Seizure Case (Youngstown Sheet and Tube Co. v.
Sawyer) is often used as a basis for outlining the logi-
cally possible constitutional relationships between leg-
islative and executive power. In the case's most
famous dictum, Jackson wrote:

We may well begin by a somewhat over-simpli-
fied grouping of practical situations in which a
President may doubt, or others may challenge,
his powers, and by distinguishing roughly the
legal consequences of this factor of relativity.

1. When the President acts pursuant to an ex-
press or implied authorization of Congress, his
authority is at its maximum, for it includes all
that he possesses in his own right plus all Con-
gress can delegate ....

2. When the President acts in absence of either
a congressional grant or denial of authority, he
can only rely upon his own independent powers,
but there is a twilight in which he and Congress
may have concurrent authority, or in which its
distribution is uncertain ....

3. When the President takes measures incom-
patible with the express or implied will of Con-
gress, his power is at its lowest ebb, for then he
can rely only upon his own constitutional powers
minus any constitutional powers of Congress
over the matter. Courts can sustain exclusive
presidential control in such a case only by dis-
abling the Congress from acting upon the sub-
ject.^

The major issues in the Iran-Contra investigation
have to do with incidents about which Congress os-
tensibly has spoken. In other words, putting aside

471

Chapter 4

issues of statutory construction to be argued in later
chapters, they all fall into Jackson's third category,
the one where presidential power is supposedly at its
weakest. Even in this category, however, Jackson
conceded that Congress is "disabled" from interfering
with some matters.

Later in the same opinion, Jackson distinguished
between situations in which an exercise of power is
turned outward, as it is in most pure foreign policy
matters, and those on which it is turned inward, as it
was in the labor-management dispute involved in the
Steel Seizure Case:

I should indulge the widest latitude of interpreta-
tion to sustain his [the President's] exclusive func-
tion to command the instruments of national
force, at least when turned against the outside
world for the security of our society. But, when
it is turned inward, not because of rebellion but
because of a lawful economic dispute between
industry and labor, it should have no such indul-
gence.^

Jackson's opinion was cited with approval by a
unanimous court in Dames & Moore v. Regan, a case
that grew out of a claim against Iranian assets frozen
by President Carter during the hostage crisis of 1979-
81.* In the same Dames & Moore opinion, however,
Justice Rehnquist was careful to say: "We attempt to
lay down no general 'guidelines' covering other situa-
tions not involved here."^ Immediately after this
statement, and just before the reference to Jackson,
Rehnquist also quoted with approval a famous pas-
sage from the 1936 case of U.S. v. Curtiss-Wright
Export Corp.:

[W]e are dealing here not alone with an authority
vested in the President by an exertion of legisla-
tive power, but with such an authority plus the
very delicate, plenary and exclusive power of the
President as the sole organ of the federal govern-
ment in the field of international relations — a
power which does not require as a basis for its
exercise an act of Congress, but which, of course,
like every other governmental power, must be
exercised in subordination to the applicable pro-
visions of the Constitution.^

Taken together, therefore, the Steel Seizure Case.
Dames & Moore v. Regan and U.S. v. Curtiss-Wright
stand for the following propositions; The President
does not have plenary power to do whatever he
wants in foreign policy; Congress does have some
legislative powers in the field. However, there are
some foreign policy matters over which the President
is the "sole organ" of government and Congress may
not impinge upon them.

The Holding of the Curtiss-Wright
Decision

Before we apply these general constitutional princi-
ples to the events in these investigations, we should
first expand upon the authority of U.S. v. Curtiss-
Wright. That case involved a challenge to a congres-
sional resolution that specified criminal penalties to be
invoked against arms merchants if the President
should determine and proclaim that prohibiting arms
sales would promote peace in a conflict in the Chaco
in Bolivia. Because Congress had passed a resolution
specifying what would happen if, and only if, the
President issued a proclamation, the case is sometimes
dismissed as if its statements confirming inherent pres-
idential power in foreign affairs were obiter dicta
having no value as precedent.

This misreading of Curtiss- Wright is based on a mis-
understanding of the importance of the main issue of
the case in the legal history of the New Deal. The
Curtiss-Wright Corporation had challenged the law as
permitting criminal penalties to be based on an execu-
tive action, a proclamation, that was not guided by
clear standards specifying the conditions under which
the proclamation should or should not be issued. The
challenge, in other words, was that the law involved
an excessively broad, standardless delegation by Con-
gress of its own legislative power.*

Delegation was very much of a live issue at the
time of Curtiss-Wright. In the two years before this
case, the Supreme Court in three separate decisions —
and for the only three times in the country's history
before or since — used the concept of excessive, stan-
dardless delegation to declare some of the main pieces
of New Deal legislation to be unconstitutional.' Be-
cause the joint resolution concerning Bolivia con-
tained no more precise standards than the ones in the
statutes the Court had just overturned, there was no
way for the Court to uphold the Bolivian resolution
without either abandoning its recently adopted tough
stance on delegation, or somehow distinguishing this
case from the others. The Court's statements about
the President's inherent foreign policy powers there-
fore were crucial to its final decision.

The differences between the President's and Con-
gress's powers over domestic and foreign policy made
up the bulk of Justice Sutherland's opinion for the
Court in Curtiss-Wright. When it came time to show
the relevance of these differences for the delegation
issue, Sutherland used a quotation from Chief Justice
Hughes's Opinion of the Court in the first of the three

•Because it has been fifty years since the Supreme Court over-
turned an act of Congress solely because of excessive delegation,
people today tend to overlook the issue's past importance. The
doctrine remains on the books, but in the words of administrative
law specialist Kenneth Culp Davis, it has become a collection of
words "without practical effect," See Kenneth Culp Davis. .Admin-
istrative Law and Government (2d ed., 1975) at 39.

472

Chapter 4

preceding delegation decisions, Panama Refining Co.
V. Ryan. In the Panama Refining case, the Court in-
vahdated a major New Deal law. the National Indus-
trial Recovery Act, by saying that the NIRA in-
volved an excessively broad delegation. In order to
support the decision, however, the Court felt that it
had to distinguish the NIRA from a string of earlier
statutes, beginning with the Neutrality Act of 1794,
that had been upheld despite seeming to contain simi-
larly broad delegations. What the Court said in
Panama Refining was that the Neutrality Act and the
other previously upheld statutes had "confided to the
President, for the purposes and under the conditions
stated, an authority which was cognate to the conduct
by him of the foreign relations of the government."®
By saying this, the Court was indicating that the lack
of inherent and "cognate" constitutional powers in
the sphere of domestic policy meant that the Court
should apply a more rigorous delegation standard that
it had for foreign policy.

In Curtiss- Wright, the Court was saying that Presi-
dent Roosevelt had his own, inherent power to issue a
statement of neutrality in the Bolivian conflict, and
even use force to implement it abroad, just as Wash-
ington had in 1794. If the President wanted to go
beyond proclamations to impose criminal law sanc-
tions on U.S. citizens for domestic acts, however,
congressional authority would be needed.*

The need for legislation before criminal sanctions
could be imposed for domestic activity in turn brought
the delegation issue into play. In Curtiss-Wright, the
court held that solely because the President is the sole
organ of the country's foreign relations, Congress
does not have to spell out the conditions under which
a Presidential proclamation may invoke criminal sanc-
tions with the same precision as it must to meet con-
stitutional standards in a case of domestic policy. The
underlying premises about the President's foreign
policy powers thus were essential to the holding in
Curtiss-Wright, and have never been challenged or
abandoned by subsequent Supreme Courts. Justice
Jackson's recognition in The Steel Seizure Case that
some areas of Presidential authority are beyond Con-
gress's reach, and the 1981 Supreme Court invocation
of both Curtiss-Wright and Jackson in the previously
mentioned Dames & Moore case make this abundantly
clear.

•The Supreme Court in an unrelated matter in 1812 had held that
federal courts could no longer impose criminal penalties based
simply on the common law. U.S. v. Hudson &. Goodwin II U.S. (7
Cranch) 32 (1812). For contrast, see Chief Justice Jay's charge to
the jury in Henfield's Case, in which Jay stated his reasons why the
government could impose a common law criminal sanctions to
support President Washington's Neutrality Proclamation. 11 Fed.
Cas. 1099 (C.C.D.Pa., 1793) (No. 6,360).

The President as the "Sole Organ"
for Diplomacy

We have shown that the Constitution gives the Presi-
dent some power to act on his own in foreign affairs.
What kinds of activities are set aside for him? The
most obvious — other than the Commander-in-Chief
power and others explicitly listed in Article II — is the
one named in Curtiss-Wright: the President is the "sole
organ" of the government in foreign affairs. That is,
the President and his agents are the country's eyes
and ears in negotiation, intelligence sharing and other
forms of communication with the rest of the world.

This view has a long and until recently unchal-
lenged history. As was mentioned in the earlier histor-
ical section, the phrase originated in Alexander Ham-
ilton's Pacificus papers of 1793 and was used by John
Marshall in a House floor debate in 1800. The 1860
lower court decision of Durand v. Hollins described
the President as "the only legitimate organ of the
government, to open and carry on correspondence or
negotiations with foreign nations, in matters concern-
ing the interests of the country or of its citizens."^

Justice Jackson also referred to the concept in an
opinion written just four years before the Steel Seizure
Case. In C & S. Air Lines v. Waterman Corp., a case
involving a Civilian Aeronautics Board decision to
deny an airline a license to serve foreign countries,
Jackson said:

Congress may of course delegate very large
grants of its power over foreign commerce to the
President. [Citation omitted.] The President also
possesses in his own right certain powers con-
ferred by the Constitution on him as Command-
er-in-Chief and as the Nation's organ in foreign
affairs. For present purposes, the order draws
vitality from either or both sources.'"

Finally, to complete this brief history, the passage
from Curtiss-Wright with the "sole organ" reference
was quoted and reaffirmed in Dame & Moore v.
Regan in 1981.

The "Sole Organ" and the Boland
Amendments

What are the implications for the Iran-Contra investi-
gation of characterizing the President as the "sole
organ" of foreign policy? For one thing, it is beyond
question that Congress did not have the constitutional
power to prohibit the President from sharing informa-
tion, asking other governments to contribute to the
Nicaraguan resistance, or entering into secret negotia-
tions with factions inside Iran. Such conversations are
paradigms of what Chief Justice John Marshall said in
Marbury v. Madison: "The President is invested [by
the Constitution] with important political powers in
the exercise of which he is to use his own discre-

473

Chapter 4

tion."" In addition, as Marbury made clear, these
powers do not stop with the President. To make them
effective, the President may exercise his own discre-
tion through agents of his own choice.

To aid him in the performance of these duties, he
is authorized to appoint certain officers who act
by his authority and in conformity with his
orders. In such cases, their acts are his acts; and
whatever opinion may be entertained of the manner
in which executive discretion may be used, still there
exists, and can exist, no power to control that discre-
tion. . . .

The conclusion from this reasoning is, that
where the heads of departments are the political
or confidential agents of the executive, merely to
execute the will of the president, or rather to act
in cases in which the executive possesses a consti-
tutional or legal discretion, nothing can be more
perfectly clear than that their acts are only politi-
cally examinable.'^

What follows from Chief Justice Marshall's opinion
in Marbury is that if Congress cannot prevent the
President from exercising discretion over a particular
matter, neither may it prevent the President's personal
staff on the National Security Council, the Depart-
ments of State and Defense, the Intelligence Commu-
nity, or the President's ad hoc personal representa-
tives, from performing the same tasks on the Presi-
dent's orders and in his own name.

Many, if not all, of the actions by representatives of
the U.S. government that have been alleged to run
counter to the Boland amendments were essentially
forms of information sharing and diplomatic commu-
nication. To the extent that such activities by the
NSC staff, CIA, State Department or Defense De-
partment were covered by the amendments — and we
shall argue that many were not — we believe the ac-
tivities were constitutionally protected against limita-
tion by Congress. The executive was not bound to
follow an unconstitutional effort to limit the Presi-
dent's powers.

Protecting American Citizens
Abroad

One inherent presidential power particularly relevant
to the Iranian side of this investigation is the power to
protect the lives and interests of American citizens
abroad. Our earlier summary of presidential uses of
force without prior congressional authorization
showed the many occasions for which this was the
justification. One example was left off the earlier list
to be used here.

In July 1854, U.S. Navy Commander George S.
HoUins demanded reparations from Nicaragua after a
U.S. official was injured during a riot. When he failed

to receive satisfaction, Hollins ordered his ships to
bombard San Juan del Norte, otherwise known as
Greytown. Calvin Durand then sued Hollins in the
Circuit Court for the Southern District of New York
for damages the bombardment had caused to his prop-
erty. In its opinion denying Durand's claim, the court
said:

As the executive head of the nation, the president
is made the only legitimate organ of the general
government, to open and carry on correspond-
ence or negotiations with foreign nations, in mat-
ters concerning the interest of the country or of
its citizens. It is to him, also, the citizens abroad
must look for protection of person and of proper-
ty, and for the faithful execution of the laws
existing and intended for their protection. For
this purpose, the whole executive power of the
country is placed in his hands, under the constitu-
tion, and the laws passed in pursuance thereof

Now, as it respects the interposition of the
executive abroad, for the protection of the lives
or property of the citizen, the duty must, of ne-
cessity, rest in the discretion of the president.
Acts of lawless violence, or of threatened vio-
lence to the citizen or his property, cannot be
anticipated and provided for; and the protection,
to be effectual or of any avail, may, not infre-
quently, require the most prompt and decided
action. . . .

The interposition of the president abroad, for
the protection of the citizen, must necessarily rest
in his discretion; and it is quite clear that, in all
cases where a public act or order rests in execu-
tive discretion neither he nor his authorized agent
is personally civilly responsible for the conse-
quences. ' ^

Several times during the public hearing of these
Committees, Republican Members referred to the
1868 Hostage Act. This act, which says that a Presi-
dent should take all steps necessary to secure the
release of Americans held illegally by a foreign
power, is discussed later, in the section of our Iran
chapter about the Americans held hostage in Leba-
non. Interestingly, the Durand v. Hollins decision af-
firming the President's discretionary power came
eight years before the Hostage Act changed a discre-
tionary power into an obligation. Even without that
act, the Durand case stands for the proposition that
the President has the discretion to take whatever steps
may be necessary, short of a full scale war, to protect
American citizens. The Supreme Court reiterated this
point in its analysis of the privileges and immunities of
U.S. citizens in The Slaughter-House Cases:

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Chapter 4

Another privilege of a citizen of the United
States is to demand the care and protection of the
Federal government over his life, liberty, and
property when on the high seas or within the
jurisdiction of a foreign government. Of this
there can be no doubt. ^*

This privilege of citizenship was specifically en-
dorsed again by the Supreme Court in the 1890 case
of In re Neagle. Referring to the President's obligation
to "take care that the laws be faithfully executed," the
Court said:

In the view we take of the Constitution of the
United States, any obligation fairly and properly
inferrible from that instrument, or any duty . . .
to be derived from the general scope of his duties
under the laws of the United States, is "a law"
within the meaning of this phrase. . . .

Is this duty limited to the enforcement of acts
of Congress or of treaties of the United States
according to their express terms, or does it in-
clude the rights, duties and obligations growing
out of the Constitution itself, our international
relations, and all the protection implied by the
nature of the government under the Constitu-
tion? ^^

In answering its own question, the Court referred
the 1853 Austrian seizure of Martin Koszta, a Hungar-
ian native who had declared his intention to become a
U.S. citizen. Captain Ingraham trained his ship's guns
on an Austrian ship to gain Koszta's release to France
during diplomatic negotiations. The action "met the
approval of the country and of Congress, who voted
a gold medal to Captain Ingraham for his conduct in
the affair," the Court noted. "Upon what act of Con-
gress then existing can any one lay his finger in sup-
port of the action of our government in this
matter?" '6

After reviewing these cases, Borchard's 1915 trea-
tise on protecting citizens abroad concluded:

Inasmuch as the Constitution vests in Congress
the authority to 'declare war' and does not em-
power Congress to direct the President to per-
form his constitutional duties of protecting Amer-
ican citizens on foreign soil, it is believed that the
Executive has unlimited authority to use the
armed forces of the United States for the protec-
tive purposes abroad in any manner and on any
occasion he considers expedient. ' '

Quincy Wright's classic 1922 treatise on the control of
U.S. foreign relations quoted this passage from Bor-
chard and endorsed it "with the sole qualification that
'the manner' may not amount to a making of war."'*
Underlying Borchard's, Wright's and the 19th century
Supreme Court's interpretation of the President's dis-
cretionary power is the Hamiltonian notions in the

Pacificus papers. We noted earlier that Hamilton had
rested part of his argument on the difference in lan-
guage between Article I and II. Article I gives Con-
gress "all legislative powers herein granted," but Arti-
cle II gave the President all of "the executive power"
without qualification. What the 19th century decisions
did, in pure Hamiltonian fashion, was to look at the
inherent character of the executive power and then
look to Article I only to see if there were explicit
exceptions carved out for Congress. When no such
exceptions were found, the Presidential actions were
upheld.

The Constitutional Limits to
Congressional Restrictions

All of these court decisions demonstrate that the
President was meant to have a substantial degree of
discretionary power to do many of the kinds of things
President Reagan did in Iran and Central America.
They do not suggest that a President can do anything
he wants. Congress and President were given differ-
ent resources and different modes of influencing the
same policy arenas. Both President and Congress can
sway the U.S. posture toward Nicaragua or Iran, for
example, but each have their own characteristic tools
to bring to bear on the subject. What the Constitu-
tional separation of powers protects is not the Presi-
dent's or Congress's precise sway over particular
events. That is for the individual occupants of each
branch to earn. But the Constitution does prevent
either branch from using its own powers, or modes of
activity, to deprive the other branch of its central
functions.

The Iranian arms sales, for example, involved sales
of U.S. assets. As such, the sales were governed either
by the Arms Export Control Act, or by the Economy
Act and National Security Act. These laws clearly
affect one method a President may wish to use to
protect American lives abroad. Nevertheless, the con-
stitutionality of the legislation seems assured both by
Congress's power to regulate foreign commerce (Arti-
cle I, Sec. 8) and, perhaps, by Congress's power to set
rules for disposing of U.S. property. '^ More impor-
tantly, the legislation would withstand constitutional
challenge because Congress acted to pursue an explic-
it grant of legislative power without undermining or
negating the President's equally important inherent
power to protect American lives and safety.

Similarly, we grant without argument that Congress
may use its power over appropriations, and its power
to set rules for statutorily created agencies, to place
significant limits on the methods a President may use
to pursue objectives the Constitution put squarely
within the executive's discretionary power. For exam-
ple— although we shall show later that the Boland
amendments, as actually written, permitted the NSC
staff to continue providing certain types of military

475

Chapter 4

and operational advice to the Nicaraguan Democratic
Resistance — we have no doubt that Congress has the
constitutional power to enact a statute that would cut
off all military and financial aid to the Resistance,
except those that fall under the constitutionally pro-
tected rubric of information-sharing and diplomatic
communication.

The question thus is not whether Congress has any
power overlapping the President's, but what bound-
aries the Constitution places on congressional at-
tempts to limit the President. The most obvious limit
is that just as Congress cannot tell the President to do
something unconstitutional, neither can it impose an
unconstitutional requirement as a condition for grant-
ing a privilege. ^° It therefore may not insist that the
President forego some of his constitutionally protect-
ed power to get appropriations. The most recent
major case on this point is the "legislative veto" deci-
sion of /A'5 v. Chadha, in which the Supreme Court
held that Congress cannot demand that the President
give up his power to sign, or refuse to sign, legislative
decisions — even if the President agreed to the original
bill that set up the procedure to bypass the so-called
"presentment" requirement.^^

Power of the Purse

These basic rules apply to appropriations as much as
to any other kinds of laws. As Louis Fisher wrote in
a 1979 study for the Congressional Research Service,
the Constitution "does not distinguish between appro-
priation and authorization."^ 2 One recent court case
on this point involved an amendment on a Health,
Education and Welfare (HEW) Department appro-
priation bill prohibiting the department from using
any of its funds, including salaries, to impose manda-
tory school busing plans on local communities to pro-
mote racial desegregation. The U.S. Court of Appeals
for the District of Columbia ruled in 1980 that in
order to preserve the statute's constitutionality, it
would be construed to prohibit HEW from cutting off
federal funds to a school district that refused to imple-
ment a busing plan. The statute could not, however,
constitutionally prohibit HEW from seeking other
ways to promote desegregation. In addition, if HEW
believed a particular school district needed busing to
enforce the requirements of the Constitution, the law
could not be read to prohibit HEW from recommend-
ing that the Justice Department bring a suit in the
federal courts. ^^

In other words. Congress may not use its control
over appropriations, including salaries, to prevent the
executive or judiciary from fulfilling Constitutionally
mandated obligations. The implication for the Boland
amendments is obvious. If any part of the amend-
ments would have used Congress's control over sala-
ries to prevent executive actions that Congress may
not prohibit directly, the amendments would be just

as unconstitutional as if they had dealt with the sub-
ject directly.

There is one other important way the Constitution
circumscribes legislative limitations on the executive.
To explain the way it works, it is easiest to begin with
a quotation from the 1893 case of Swaim v. U.S.:

Congress may increase the Army, or reduce the
Army, or abolish it altogether; but so long as we
have a military force Congress cannot take away
from the President the supreme command. . . .
Congress can not in the disguise of 'rules for the
government' of the Army impair the authority of
the President as commander in chief. ^*

The same argument extends by analogy to all of the
President's inherent powers under Article II. Con-
gress does not have to create a State Department or
an intelligence agency. Once such departments are
created, however, the Congress may not prevent the
President from using his executive branch employees
from serving as the country's "eyes and ears" in for-
eign policy. Even if Congress refuses to fund such
departments, it may not prevent the President from
doing what he can without funds to act as the nation's
"sole organ" in foreign affairs. Even the final report
of the Church committee acknowledged this point. ^^

In the same vein. Congress does not have to appro-
priate any funds for covert operations. Or, it may
decide to give funds only for specified operations one
at a time. Since 1789, however, Congress has chosen
to give the President a contingency reserve fund for
secret agents and operations. The existence of such a
fund is obviously crucial, because without it Congress
would have to make individual appropriations for
each action and thereby harm the country's ability to
respond to breaking events during a fiscal year with-
out compromising the secrecy of the operation. Nev-
ertheless, even though a contingency fund is an essen-
tial tool for foreign policy, there is nothing in the
Constitution requiring Congress to set one up. Once
Congress makes the decision to establish such a fund,
therefore, it may as a quid pro quo set rules for its
use.

However, there are some limits to the rules Con-
gress may thereby impose. For example. Congress
may not insist, and has never insisted upon giving
advance approval to covert operations because such a
requirement would be the functional equivalent of a
legislative veto. Similarly, Congress may not condi-
tion an authorization or appropriation upon any other
procedural requirements that would negate powers
granted to the President by the Constitution. What
Congress grants by statute may be taken away by
statute. But Congress may not ask the President to
give up a power he gets from the Constitution, as
opposed to one he gets from Congress, as a condition
for getting something, whether money or some other
good or power from Congress.

476

Chapter 4

Notifying Congress

This observation bears directly on the legal require-
ments for notifying Congress. Before we explain how,
another "implied powers" analogy is in order. In the
1821 case of Anderson v. Dunn, the Supreme Court
upheld Congress's contempt power by finding that
even though the power was not explicitly mentioned
in the Constitution, it was clearly necessary to imple-
ment other powers that were.

There is not in the whole of that admirable in-
strument, a grant of powers which does not draw
after it others, not expressed, but vital to their
exercise; not substantive and independent, indeed,
but auxiliary and subordinate.

The idea is Utopian that government can exist
without leaving the exercise of discretion some-
where. Public security against the abuse of such
discretion must rest on responsibility, and stated
appeals to public approbation. . . .

If there is one maxim which necessarily rides
over all others, it is, that the public functionaries
must be left at liberty to exercise the powers
which the people have entrusted to them. The
interests and dignity of those who created them,
require the exertion of the powers indispensable
to the attainment of the ends of their creation.

Using this line of reasoning, the Court argued that
even though courts were vested with the contempt
power by statute, they would have been able to exer-
cise that power without the aid of a statute. For the
same reason, the court held. Congress must have in-
herent authority to exercise a similar power. ^^ Later
cases tried to circumscribe Congress's contempt
power, but the power itself was always held to be a
necessary adjunct to Congress's legislative functions
and therefore to rest on an implied constitutional
foundation. 2 8

The argument that a power must be implied by the
Constitution because it is essential to some other con-
stitutional power, is what lay behind the claims of
President Carter's and President Reagan's Justice De-
partments that Congress may not constitutionally re-
quire the President to give advance notification, or
even notification to a limited number of members
within 48 hours, of all covert operations. Some oper-
ations, by their very nature, may make notification
within 48 hours impossible. The situations are rare,
but they clearly exist.

According to Admiral Stansfield Turner, who was
the Director of Central Intelligence at the time, there
were three occasions, all involving Iran, in which the
Carter Administration withheld notification during an
ongoing operation. By contrast, the CIA's general
counsel has told the House Intelligence Committee

that the Iran arms sales were the only time President
Reagan withheld notice during his two terms. ^* In
the Carter examples, notification was withheld for
about three months until six Americans could be
smuggled out of the Canadian Embassy in Teheran.
As Representative Norman Mineta pointed out in tes-
timony following Turner's, the Canadian government
made withholding notification a condition of their
participation. ^° Notification was also withheld for
about six months in two other Iranian operations
during the hostage crisis. Said Turner: "I would have
found it very difficult to look ... a person in the eye
and tell him or her that I was going to discuss this life
threatening mission with even half a dozen people in
the CIA who did not absolutely have to know".^' In
these situations. President Carter thought his constitu-
tional obligation to protect American lives could not
have been fulfilled if he had been required to notify
Congress within 48 hours. As the Canadian example
makes clear, the choice is sometimes put on us by
people outside U.S. control between not notifying or
not going ahead at all.

These examples show that the situations under
which notification may have to be withheld depends
not on how much time has elapsed, but on the charac-
ter of the operation itself In the very rare situation in
which a President believes he must delay notification
as a necessary adjunct to fulfilling his constitutional
mandate that decision must by its nature rest with the
President. As the Supreme Court has said: "In the
performance of assigned constitutional duties, each
branch of the government must initially interpret the
Constitution, and the interpretation of its powers by
any branch is due great respect from the others. "^^
The President obviously cannot consult with Con-
gress about whether to consult. Any other conclusion
would be logically absurd.

In some respects, requiring notification within a
specific time period might look like other Congres-
sional report-and-wait requirements imposed on the
executive branch that the Supreme Court has explicit-
ly endorsed. ^^ There is one important difference,
however. The report and wait requirements the Court
has upheld have all been in domestic policy matters
over which the President has no inherent power to
act without statutory authorization. In foreign rela-
tions. Congress can use statutes to deprive Presidents
of the means necessary to conduct an effective policy,
but it cannot use its control over the means to deprive
the President of his underlying authority or its essen-
tial adjuncts.

Some people in Congress worry that the power to
withhold notification may be abused, as we think it
was in 1985-86 in the Iran arms sales. To avoid abuse.
Representatives Stokes and Boland have introduced a
bill that would require advance notification in most
cases, and notification within 48 hours for all of the
rest. We are convinced this approach would be un-

477

Chapter 4

constitutional. Equally importantly, we think it is not
needed. The constitutional basis for withholding noti-
fication can only be invoked credibly, by its own
terms, in very rare circumstances. A generalized fear
that Congress might leak would not by itself suffice,
because the same fear could be invoked equally for all
covert actions and therefore would not be credible.
The members who think they need new legislation
underestimate the political leverage they now have to
insure that a President will not abuse his inherent
power. The oversight rules already in place assure
that Congress eventually will find out about any oper-
ation. Once that happens. Congress's control over the
purse, and its power to investigate, give it ample
means to exact a severe political price on a President
whom it feels has overstepped proper bounds. The
Iran-Contra investigations have made this abundantly
clear to President Reagan. We cannot believe any
future President will miss the point.

Conclusion

The Constitution gives important foreign policy
powers both to Congress and to the President. Nei-

ther can accomplish very much over the long term by
trying to go it alone. The President cannot use the
country's resources to carry out policy without con-
gressional appropriations. At the same time. Congress
can prohibit some actions, and it can influence others,
but it cannot act by itself, and it is not institutionally
designed to accept political responsibility for specific
actions. Action or implementation is a peculiarly ex-
ecutive branch function.

The Constitution's requirement for cooperation
does not negate the separation of powers. Neither
branch can be permitted to usurp functions that
belong to the other. As we have argued throughout,
and as the Supreme Court reaffirmed in 1983, "the
powers delegated to the three branches are functional-
ly identifiable."^"* The executive branch's functions
are the ones most closely related to the need for
secrecy, efficiency, dispatch, and the acceptance by
one person, the President, of political responsibility
for the result. This basic framework must be pre-
served if the country is to have an effective foreign
policy in the future.

478

Endnotes

Chapter 4

1. Field V. Clark 143 U.S. 649,691 (1892).

2. Youngstown Sheet and Tube Co. v. Sawyer 343 U.S.
579, 635-38 (1952).

3. Id. at 645.

4. Dames & Moore v. Regan 453 U.S. 654, 661-62 (1981)

5. Id. at 661.

6. Id. at 661, citing U.S. v. Curtiss-Wright Export Corp.
299 U.S. 304 (1936).

7. Panama Refming Co. v. Ryan 293 U.S. 388 (1935);
Schechter Poultry Corp. v. U.S. 2295 U.S. 495 (1935);
Carter v. Carter Coal Co. 298 U.S. 238 (1936).

8. 293 U.S. at 422. Emphasis added.

9. Durand v. Hollins 8 Fed. Cas. Ill, 112 (C.C.S.D.N.Y.,
1860) (No.4, 186).

10. C. & S. Air Lines v. Waterman Corp. 333 U.S. 103,
109-10 (1948). emphasis added

11. Marbury v. Madison, 11 Cranch 137, 165-66 (1803).

12. Id. at 166.

13. 8 Fed. Cas. at 112.

14. Slaughter-House Cases, 16 Wall. 36, 79 (1872).

15. In re Neagle 135 U.S. 1, 59, 64 (1890).

16. Id. at 64.

17. Borchard, The Diplomatic Protection of Citizens
Abroad (1915) at 452.

18. Quincy Wright, The Control of American Foreign
Relations (1922) at 307.

19. Article IV, Sec. 3. In this clause, the phrase "territory
or other property" suggests an original meaning having
more to do with land than money or other material assets,
but subsequent cases have extended it to include mineral
leases, U.S. v. Gratiot 39 U.S. (14 Pet.) 526 (1840), and
electricity, Ashwander v. Tennessee Valley Authority 297
U.S. 288, 335-40 (1936).

20. Frost Trucking Co. v. Railroad Commission 271 U.S.
583, 598 (1925)

21. INS V. Chadha 462 U.S. 919 (1983).

22. Louis Fisher, "The Authorization-Appropriations
Process: Formal Rules and Informal Practices," Congres-
sional Research Service, Report No. 79-161 GOV, Aug. 1,
1979, p. 3.

23. Brown v. Califano 627 F. 2d 1221 (1980).

24. Swaim v. U.S. 28 Ct. CI. 173, 221 (1893).

25. U.S. Senate, Select Committee To Study Governmen-
tal Operations, Final Report at 39.

26. Anderson v. Dunn 6 Wheat. 204, 225-26 (1821).

27. Id at 628-29.

28. Kilbourn v. Thompson 103 U.S. 168 (1881) read the
power narrowly, but McGrain v. Dougherty 273 U.S. 135
(1927) and Sinclair v. U.S. ll') U.S. 263 (1929) in turn read
Kilbourn narrowly. Later cases have tended to involve con-
flicts between the contempt power and the First Amend-
ment, Watkins v. U.S. 354 U.S. 178 (1957) and Barenblati v.
U.S. 360 U.S. 109 (1959).

29. U.S. House of Representatives, Permanent Select
Committee on Intelligence, Subcommittee on Legislation,
100th Cong., Isl Sess., Hearings on H.R. 1013. H.R. 1371.
and Other Proposals Which Address the Issue of Affording
Prior Notice of Covert Actions to the Congress, April 1 and 8,
June 10, 1987, p. 176.

30. Id at 158.

31. Ibid at 45. See also 46. 49. 58. 61.

32. U.S. V. Nixon 418 U.S. 683, 703 (1974).

33. See Sibbach v. Wilson 312 U.S. 1 (1941) and INS v.
Chadha 462 U.S. at 935, n. 9.

34. INS V. Chadha. 462 U.S. at 951 (1983).

479

Part
Nicaragua

Chapter 5
Nicaragua: The Context

It is impossible to understand the motivations for the
Administration's actions without first understanding
the strategic and political context within which it was
operating. In describing these circumstances, it is nec-
essary to begin with the fact that the Sandinista Gov-
ernment in Nicaragua is a Communist regime that
openly espouses the expansionist, Leninist doctrine of
"revolution without borders." Because of this, and
because the Sandinistas have behaved in a manner
consistent with the doctrine by supporting Commu-
nist insurgencies elsewhere in Central America,
Nicaragua has become a direct threat to the stability
of the governments of its neighbors and to U.S. secu-
rity interests.

In 1979, in the belief that it was supporting a turn
toward a more pluralistic, more democratic path in
Nicaragua, the United States decided, with bipartisan
support, to cut off all military aid to the corrupt
predecessor dictatorship of Anastasio Somoza, sup-
ported its removal, and provided $118 million in eco-
nomic aid to the new regime in its first 18 months.
That bipartisan support included some of us who are
among the more conservative Members of these Com-
mittees. Indeed, a clear majority in Congress accepted
the Carter Administration's arguments that the Sandi-
nista-led revolution should be judged by its actions. In
short, the U.S. Government wanted to believe that
the incoming revolutionary government would honor
its mid- 1979 pledge to the Organization of American
States of implementing democratic reforms.

It was not too long, however, before it became
apparent that once again the United States had been
fooled by Marxists masquerading as democrats, much
as the Sandinistas' mentor, Fidel Castro, had done 20
years before. By April of 1980, the Nicaraguan Coun-
cil of State was packed with Sandinista adherents
who were more attuned to policies of internal repres-
sion than to fulfilling the dashed promises that had led
Social Democrats to join the revolutionary cause.
That turn of events prompted the resignation of Al-
fonso Robelo and led him ultimately to join the lead-
ership of the Nicaraguan resistance. Nevertheless,
United States assistance continued.

But Sandinista repression goes beyond packing the
key governmental forums. Consider these remarks by
Resistance leader Adolfo Calero in our hearings:

The Sandinistas are systematic breakers of human
rights. There is no habeas corpus in Nicaragua. If
people are not brought over to tribunals they are
kept in jails at Sands, the secret jails. Their secret
jails are spread throughout the country. There is
torture going on. While I was living in Nicaragua
I was personally told of experiences of one of my
drivers, driver salesman of the Coca Cola. I re-
member he was put into a freezer and when he
was about to die, and started to — I don't know
what you call — the last reaction that people have
when they are about to die — somebody heard
him and took him out. '

What ultimately turned the course on aid to Nicara-
gua was not only the change in the Sandinista's be-
havior inside Nicaragua, however, but its growing
importance in the global competition between the
U.S. and the Soviet Union. The 1979 Foreign Assist-
ance Act giving aid to the Sandinistas contained a
provision, authored by Rep. C.W. "Bill" Young of
Florida, that required the aid to be terminated if the
President could not certify that Nicaragua was not
exporting or supporting violence and terror in neigh-
boring Central American nations. By September 1980,
some Members of Congress began to question Presi-
dent Carter's certification on this point.

Representative Young, then a Member of the House
Intelligence Committee, was disturbed by President
Carter's certification of Sandinista compliance with
democratic procedures and with its pledges to the
OAS. As a Member of the intelligence panel. Young
was privy to information that contradicted what the
President was saying. On September 30, 1980, he de-
cided to voice his concerns in public testimony before
the House Foreign Affairs Committee's Subcommittee
on Inter-American Affairs. Young had this to say
about the main substantive point at issue:

I am very concerned about the President making
the certification that the government of Nicara-
gua is not involved in the exporting of terrorism
or in supporting the overthrow of other duly
constituted governments in Central America,
since I have access to the intelligence information
of the Central Intelligence and Defense Intelli-
gence Agencies concerning this matter. While I

483

Chapter 5

cannot quote classified information in this open
session, I can tell you that the intelligence reports
confirm in overwhelming detail that the Sandi-
nista clique that rules Nicaragua is engaged in the
export of violence and terrorism.

Young's testimony did not stop at this point, how-
ever. It seems that the Democratic Administration
was less than forthcoming about giving the legislative
branch the information it needed to fulfill its policy
responsibilities. Young said:

I feel that you should also know about the diffi-
culties that we have recently had in obtaining the
classified information on this subject from the
Executive Branch.

As I previously noted, the staff of the Subcom-
mittee on Evaluation has had an ongoing study of
intelligence on Nicaragua which began in late
1978. As part of that responsibility the staff often
makes visits to the CIA to talk with analysts and
periodically requests studies produced by the
CIA and other intelligence agencies in Washing-
ton, and in general has paid attention to what is
going on.

On 12 August of this year, the staff made a rou-
tine request to talk with an analyst at CIA's Na-
tional Foreign Assessment Center about Nicara-
gua. The staff was told that they would not be
able to talk with the analyst at CIA since there
was "a Presidential Embargo" on talking about
Nicaragua. I was unaware of this at the time
since this took place during the recess, but the
staff was quite concerned. The Chairman of the
Committee, Mr. Boland, sent a letter to the Di-
rector of Central Intelligence on this matter, on
August 22. To date the CIA has not responded to
that letter.

I would further note that the staff was notified
via telephone on September 10 that the embargo
had been lifted and that discussions could be held
with CIA analysts. Two days later, the President
made his certification that Nicaragua is not ex-
porting terrorism and/or acting as a conduit for
arms or sanctuary for revolutionaries in other
Central American countries.

It is very disturbing that the Central Intelligence
Agency was directed to not provide an answer to
the Chairman of the House Permanent Select
Committee on Intelligence to the questions that
he asked in his letter of August 22.

The conclusion Young drew from this was very
serious. It mirrors one particular charge we have
heard in the Iran-Contra hearings, but from a much
firmer base.

What we have is a case of the intelligence com-
munity being manipulated by the Executive
Branch to protect a political sensitivity. What
dismays me is the political misuse of the intelli-
gence community, which rightfully has a reputa-
tion for objectivity. The intelligence community
must be free of political bias so that our decision
makers can use their reports to reach decisions
based on the facts of the matter, and not on
desired political outcomes.^

Following Young's testimony, the Carter Administra-
tion slowed down its aid to Nicaragua. It was not
until January, however, in the final days of his Presi-
dency, that President Carter decided to suspend aid.
The Reagan Administration quickly decided to con-
duct a careful review of available intelligence regard-
ing Nicaraguan subversive, extraterritorial activities.
In April 1981, the Administration determined that the
Sandinistas were furnishing logistical and political as-
sistance to the rebels in El Salvador. By November
1981, the Sandinista armed forces had grown from an
armed force of only 5,000 2 years before, to about
40,000 troops supported by Soviet tanks, artillery, and
armored personnel carriers.^ Some 2 years later, the
House Intelligence Committee, chaired by Represent-
ative Boland, corroborated this finding when it de-
clared that:

[T]his (Salvadoran) insurgency depends for its
life-blood, arms, ammunition, financing, logistics
and command-and-control facilities, upon outside
assistance from Nicaragua and Cuba. This Nica-
raguan-Cuban contribution to the Salvadoran in-
surgency is longstanding. It began shortly after
the overthrow of Somoza in July, 1979. It has
provided, by land, sea and air, the great bulk of the
military equipment and support received by the in-
surgents. *

During the period between January 1982 and Janu-
ary 1985, while Congress was vacillating and pinching
pennies, the Soviet Union and its allies provided
about $500 million in military aid alone to Nicaragua.
By early 1985, at the time of the cutoff of U.S. tax-
payer military assistance to the Resistance, the Sandi-
nista armed forces included 62,000 troops. Their arse-
nal also included nearly 150 tanks (of which more
than 1 10 were T-55 Soviet battle tanks that were
clearly superior to any other tank in the region), 200
other armored vehicles (mostly machine-gun-armed
BTR-60 and BTR-152 personnel carriers that can
carry an infantry squad), 300 missile launchers. 45
airplanes, and 20 helicopters, including the deadly
Soviet MI-24 HIND-D "flying tanks" that General
Singlaub described as "the most effective people kill-
ing machine[s] in the world." ^

During 1985, the already high level of aid acceler-
ated. According to publicly available material provid-

484

Chapter 5

ed by the State Department, the Soviet Union, Cuba,
and Eastern Bloc countries gave Nicaragua another
$150 million in military aid in 1985. (In addition to the
Soviet Union and Cuba, Nicaragua is receiving aid
from Czechoslovakia, North Korea, Libya, and the
Palestine Liberation Organization, among others.'')
That figure for military aid jumped to $580 million
for 1986 alone. Between December 1982 and October
1986, according to Defense Intelligence Agency esti-
mates discussed in these Committees' public hearings,
the same countries gave $1.34 billion in military aid
and another $1.8 billion in economic aid to the Nicara-
guan Government.'' The net result is that Nicaragua
has far and away the largest armed force in all of
Central America, and that does not even take into
account approximately 2,500 to 3,000 advisers from
the Soviet Union, Cuba, and other Soviet bloc coun-
tries.* In contrast, all U.S. humanitarian and military
aid to the Resistance during the entire 1980s amount-
ed to approximately $200 million, $100 million of
which came in the fiscal year from October 1, 1986 to
September 30, 1987.

These numbers only begin to give a picture, how-
ever, of the reasons for viewing Nicaragua as a threat
to the region. According to former National Security
Advisor Robert C. McFarlane:

The danger is not Nicaraguan soldiers taking on
the United States, it is that country serving as a
platform from which the Soviet Union or other
surrogates like Cuba can subvert neighboring re-
gimes and ultimately require the United States to
defend itself against a Soviet threat, whether by
spending more dollars on defense that we didn't
need to, to worry about our southern border,
whether we need to worry more about the
Panama Canal now that Russians are here,

whether we need to be concerned about the half
of our oil imports that come from refineries in
the Caribbean within MIG range of Nicaragua,
and we have not had to think about these things
for a long time.^

The danger, it should be obvious from what McFar-
lane said, is not simply that posed to other Central
American countries by Nicaragua's own armed forces.

According to information presented during General
Singlaub's testimony, the Nicaraguans are building a
10,000-foot-long airstrip at Punta Huete. As Repre-
sentative Hyde observed, the runway is "capable of
accommodating any Soviet aircraft in their inventory.-
That includes the Backfire bomber, the Bear-D recon-
naissance aircraft, and it's strictly a military facility
with antiaircraft guns deployed around the air-
field." '° Singlaub agreed, and said that what made
the airfield significant was that it would accommodate
intercontinental as well as short-range aircraft.

Nor is this all. The Soviet Union has an intelligence
collection facility at Lourdes near Havana, Cuba, that
is able to monitor maritime, military and space com-
munications as well as telephone conversations in the
Eastern portion of the United States. A similar base in
Nicaragua would mean a similar capability for the
Pacific and West Coast. '^ Finally, the Nicaraguans
are building the Corinto port facility that is being
made into a deep water port able to accommodate
submarines. ^^ The Soviet presence in Nicaragua, in
other words, when combined with its presence in
Cuba, could mean a Soviet base on both ends of the
Caribbean as well as the only Soviet port in the
Pacific outside the Soviet Union itself. The latter,
Singlaub said, "would give them for the first time a
base from which they could threaten the West Coast
of the United States." '='

485

Chapter 5

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Chapter 5

So there is plenty of reason for a President of the
United States to think the Nicaraguan Government is
not merely unfortunate for its own people, but a dis-
tinct threat to the security of the region and, ultimate-
ly, to the United States. This is no speculative threat.
In 1983, the Congress found that:

By providing military support (including arms,
training, and logistical, command and control,
and communications facilities) to groups seeking
to overthrow the government of El Salvador and
other Central American governments, the Gov-
ernment of National Reconstruction of Nicaragua
has violated article 18 of the Charter of the Orga-
nization of American States which declares that
no state has the right to intervene, directly or
indirectly, for any reason whatsoever, in the in-
ternal or external affairs of any other state.'*

This finding was not repealed by the Boland Amend-
ment the following year. In fact, in the International
Security and Development Cooperation Act of 1985,
the Congress found that Nicaragua:

Has committed and refuses to cease aggression in
the form of armed subversion against its neigh-
bors in violation of the Charter of the United
Nations, the Charter of the Organization of
American States, the Inter-American Treaty of
Reciprocal Assistance, and the 1965 United Na-
tions General Assembly Declaration on Interven-
tion. ' ^

The legal significance of these findings can be found
in the charter of the Organization of American States.
The specific clause of the treaty Congress charged
Nicaragua with violating was the one that said: "No
State or group of States has the right to intervene,
directly or indirectly, in the internal affairs of any
other State." '^ By defining Nicaragua's behavior as
aggression, the Congress also, knowingly, was bring-
ing another clause of the treaty into play:

Every act of aggression by a State against the
territorial integrity or the inviolability of the ter-
ritory or against the sovereignty or political inde-
pendence of an American State shall be consid-
ered an act of aggression against the other Amer-
ican States. '''

Finally, by invoking these clauses, Congress also was
involving a third that fundamentally distinguishes
U.S. actions from Nicaragua's: "Measures adopted for
the maintenance of peace and security in accordance
with existing treaties do not constitute a violation of
the principles as set forth in Articles 18 and 20." '*

What all of this means is that when President
Reagan sought to bring pressure on the Nicaraguan
Government by aiding the Resistance, he was doing
something more than merely furthering his own
policy goals. According to the findings of the Con-
gress of the United States and the terms of the OAS
charter, the President was obliged to do what he
could to act against Nicaragua's aggression against its
neighbors. The finding would not have permitted the
President to violate laws that explicitly prohibited the
use of appropriated funds for a particular purpose.
Beyond these explicit prohibitions, however, the
President was not only permitted by his inherent for-
eign policy powers under the Constitution, but was
positively obliged to do whatever he could, within
the law, to respond to Nicaragua's behavior.

Because of this obligation, it is not proper to assert
that the President should have gone out of his way to
avoid any actions that some of the Boland Amend-
ment's sponsors might arguably have wished to pro-
hibit. Although no President is required to so inter-
pret a law on any subject within his constitutional
authority, such a response might have made sense as
an act of prudence and comity // Congress had only
passed a prohibition. The fact, however, is that Con-
gress put two sets of obligations on the President, one
mandating action and the other restricting it. Under
the circumstances, the President had a duty to try to
satisfy both of the mandates, to whatever extent he
could possibly do so.

487

Chapter 5

Endnotes

1. Calero Test., Hearings, 100-3, 5/20/87, at 51.

2. All of the above quotations from Representative Young
are in U.S. House of Representatives, 96th Cong., 2d Sess.,
Committee on Foreign Affairs, Subcommittee on Inter-
American Affairs, Hearing: "Review of the Presidential
Certification of Nicaragua's Connection to Terrorism."
Sept. 30, 1980; Prepared Statement of C.W. Bill Young, pp.
16-17.

3. U.S. Departments of State and Defense, The Challenge
to Democracy in Central America (June 1986) at 20.

4. U.S. House of Representatives, 98th Cong., 1st Sess.,
Permanent Select Committee on Intelligence, H. Rept. 98-
122, Part I, Amendment to the Intelligence Authorization
Act for Fiscal Year 1983, p. 2, emphasis added.

5. The data are from Ex. OLN-212, Hearings, 100-7, Vol.
II and from U.S. Departments of State and Defense, The
Sandinista Military Buildup, An Update (Oct. 1987), at 5, 9.
The quotation is from Singlaub Test., Hearings, 100-3, 5/21/
87, at 178.

6. McFarlane Test., 5/13/87, Hearings, 100-1, at 79.

7. Calero Test., Hearings, 100-2, 5/20/87, at 111.

8. McFarlane Test., Hearings, 100-2, 5/13/87, at 76.

9. McFarlane Test., Hearings, 100-2, 5/14/87, at 64.

10. Singlaub Test., Hearings. 100-3, 5/21/87, at 217.

11. Ibid., at 218.

12. Ibid.

13. Ibid, at 184.

14. Section 109 of the Intelligence Authorization Act for
Fiscal Year 1984, Pub. L. No. 98-215, 97 Stat. 1475.

15. Section 722 (c)(2)(vi) of the International Security and
Development Cooperation Act of 1985, Pub. L. No. 99-83,
99 Stat. 149.

16. Article 18 of the Organization of American States, as
reprinted in the Congressional Record, June 7, 1985, p.
S7744.

17. Ibid, Article 27.

18. Ibid., Article 22.

488

Chapter 6
The Boland Amendments

People listening to the public hearings on the Iran-
Contra Affair heard many statements about the "spirit
of the Boland Amendments." Everyone knows, the
argument goes, that Congress wanted to cut off all
U.S. aid to the Nicaraguan resistance. Congress did
not anticipate that anyone on the National Security
Council staff would support private and third-country
fundraising or give advice to and help coordinate the
private resupply effort. Col. North's activities were a
clear attempt, the argument concludes, to circumvent
the law.

There are three basic problems with this line of
reasoning. First, as previously discussed, the Constitu-
tion does not permit Congress to prevent the Presi-
dent or his designated agents from communicating
with the Nicaraguan resistance or from encouraging
other countries and private citizens to support the
resistance. Second, as Justice Frankfurter said in Ad-
dison V. Holly Hill Co., "Congress expresses its mean-
ing by words .... It is no warrant for extending a
statute that experience may disclose that it should
have been made more comprehensive."' One of the
reasons there was so much discussion of the "spirit of
the law" at the hearings is, as we shall show, that it is
difficult to argue the letter of the law had been violat-
ed. Finally, even this last statement concedes too
much. The fact is that Congress was not animated by
a single "spirit" when it passed the Boland Amend-
ments. It is necessary, therefore, to take account of
the political history in the first part of this chapter as
well as the statutory history in the rest.

The "Spirit" of October 1984

We have already noted that at the same time Con-
gress was denying appropriations for the anti-Sandi-
nista resistance, it was also declaring the Sandinista
Government to be in violation of a provision of the
OAS Charter that calls for a response by the Presi-
dent. In addition. Congress has changed its collective
mind virtually every year over policy toward Nicara-
gua. The United States gave aid to the Sandinistas in
fiscal 1980, took aid away from the Sandinistas at the
end of 1980 for fiscal year 1981, and then gave covert
support to the democratic resistance in 1981 for fiscal
year 1982. For fiscal 1983, Congress denied aid "for

the purpose of overthrowing the government," a re-
striction that was all but meaningless and therefore
adopted by the House unanimously. For fiscal year
1984, Congress removed the language about purpose
but limited the amount of assistance to a level that it
knew would not last for the full year. Then, the
strictest version of the Boland Amendment was
adopted for fiscal 1985 — partly, it is often said, be-
cause Congress was upset at allegedly not having
been informed about the CIA's role in connection
with the mining of Nicaraguan harbors.*

•Much has been written about whether the late Director of
Central Intelligence, William Casey, adequately informed the
Senate Intelligence Committee about the mining of Nicaraguan
harbors in 1984. A review of the record indicates that while Casey
could have been more expansive, he did clearly tell the Committee
on March 8, and again on March 13, that mines were being placed
in the Nicaraguan harbors of Corinto and El Bluff, as well as at the
oil terminal at Puerto Sandino. See Bob Woodward, Veil: The
Secret Wars of the CIA 1981-1987 (1987), Chapter 16, 319-338; also
McMahon Dep., 9/2/87, at 32-41.

On the House side, the Intelligence Committee, chaired then by
Edward Boland, received a mining briefing on January 31, 1984,
more than two months before these activities became a public
controversy, and approximately three weeks after the first mines
were deployed. The CIA had been discussing the possibility of
mines being employed in Nicaragua with the House panel as far
back as the summer of 1983.

In essence, what appears to have happened in the Senate is that
following disclosures in the media in early April 1984 about these
operations, a number of Senators feigned ignorance of these activi-
ties. In fact, they had known about them for some time. Senator
Leahy was one who had known for some time and scolded his
colleagues for their hypocrisy. Reportedly, some Senators who
knew about the mining when they voted for additional assistance
for the Contras turned around after the media disclosures and voted
for a resolution condemning and prohibiting the mining. As Leahy
put it, "There were Senators who voted one way the week before
and a different way the following week who knew about the
mining in both instances and I think were influenced by public
opinion, and I think that's wrong and that is a lousy job of legisla-
tive action." (See Henry J. Hyde, Can Congress Keep a Secret?,
National Review, Aug. 24, 1984, pp. 46-61; also, Bernard Gwertz-
man, Moynihan to Quit Senate Post in Dispute on CIA. New York
Times, April 16, 1984; Joanne Omang & Charles Babcock, Moyni-
han Resigns Intelligence Panel Post, Assails CIA, Washington Post,
April 16, 1984; Sen. Moynihan's Point, Washington Post, editorial,
April 17, 1984; McFarlane Test.. Hearings, 100-2, 5/13/87, at 230-
32.)

During this period. Casey's deputy was John McMahon. His
recollection of this matter is consistent with Leahy's. He indicates

489

Chapter 6

The way the majority treats the mining incident is
symptomatic of its entire pre-history of the Boland
Amendment. The basic argument is that Congress had
an open mind about Nicaraguan poHcy, but that the
Administration offered shifting rationales for the
poUcy, misled Congress as to its intentions and ac-
tions, and finally justified a cutoff of funds by failing
to notify Congress adequately about the mining of the
harbors in Nicaragua. This is, of course, a totally
subjective, hence fundamentally misleading account of
the political history, to the limited extent that the
facts it cites are accurate. First, the majority thesis
utterly ignores what the Soviets and Sandinistas were

that on the March 12, 13 Appropriations Committee Senators were
briefed, and on the following day, "Casey was back to the Senate
Intelligence Committee" to remind Members of what he had told
them previously about the mining. After that session, McMahon
recalls:

[There was] still not a word. We then, on March 28, got a letter
from Senator Pell in Foreign Relations saying, "Tell me about this
mining." So we prepared a written response, sent it to Senator Pell
through Barry Goldwater, who was then Chairman of the Senate
Select Committee on Intelligence. Not much happened until the
latter part of the first week, in April, when there was a great deal
of furor in the press, which generated in Europe, about the mining
of the harbors, was picked up by the Post and Times here and a lot
of noise, and suddenly amnesia struck Capitol Hill, no one remem-
bered hearing about the mining . . . Barry Goldwater sent a letter
to Casey telling him he was "pissed." When I got this letter I went
in to Casey and said, "What the hell is he talking about, where has
he been for the last two months?" (See McMahon Dep. 9/2/87 at
35-37.)

Subsequently, according to McMahon, Casey confronted Gold-
water regarding the mining notification. McMahon recalls:

[Casey] showed him then the transcript from the hearings on the
8th and on the 13th of March, and Barry [Goldwater] said, "You
know. I don't know, I just don't remember." And it's my under-
standing that Barry wanted to send a letter of apology to the
agency but was urged not to do so — because the Senate apologizes
to no one.

McMahon added that as far as he was concerned, "there was no
intent by the agency to keep the mining of the harbors from the
committees. We did everything we possibly could to tell them
about it and tell them about it in a timely fashion." (McMahon
Dep., 9/2/87 at 36-38.)

Interestingly, Senator Goldwater, who excoriated Casey for al-
legedly not properly informing the Senate Intelligence Committee
on the mining, voted on April 10, 1984, against the resolution
condemning the mining. (See Congressional Record, April 10, 1984,
p. S4205.)

Ultimately, Casey fell the politically expedient thing to do was to
"apologize" to the Senate Intelligence Committee and get this
brouhaha behind him. When he finally did so, Senator Jake Garn
reportedly became enraged because he believed there had been
adequate notification. In his new book. Veil, Bob Woodward claims
Gam underscored his fury by screaming:

"You're all [expletive deletedjs— the whole Congress is full of
(expletive deleted]s, all five hundred thirty-five Members are
[expletive deleted]s" .... Members stood up, including Moyni-
han, who wanted to prevent a further confrontation. "Smile."
Moynihan said, "when you call me an [expletive deleted]." Garn
later wrote to Goldwater and apologized for disrupting the Com-
mittee. (See Woodward, Veil, at 33.)

Gam subsequently confirmed most of this story, saying only that
the incident occurred after the committee meeting was over and
that he did not apply the expletive to the full Senate. See Around
the Hill. Roll Call, October 25. 1987. p. 13.

doing during the same period to escalate the conflict
and consolidate the Marxist regime in Managua.*
Second, it ignores the fact that many Members of
Congress, almost all Democrats, opposed U.S. policy
in Nicaragua almost from the beginning, and that
most of the votes in both the House and the Senate
during the relevant periods, including the votes on
the various contested versions of the Boland Amend-
ments, were almost completely straight party-line
votes.

One key result of its remarkably distorted account
is that the majority often confuses cause and effect.
This is almost self-evident in its treatment of the
mining of Nicaraguan harbors. In October 1983, Con-
gress decided to limit funding for the Contras to $24
million for fiscal year 1984, an amount deliberately
calculated to fall considerably short of the Contras'
needs for that period. This was the handwriting on
the wall, that the Contras might well be cut off com-
pletely if there was a slight change in the climate of
opinion. The Contras knew it; the Sandinistas knew it;
and the U.S. Government knew it. The mining was
therefore an effort to bring the Sandinistas to the
table before Congress cut off support. In short, it was
an effect of the Congressional decision, not the cause
of a later decision. But this reversal of cause and
effect is typical of the majority's amateur psychohis-
tory. Unfortunately for them, in many other parts of
the world psychohistory is correctly not regarded as
a useful tool in foreign relations.

The strictest of the Boland Amendments was in
effect for only eight months when Congress decided
to allow some humanitarian aid to the resistance.
Then, a few months into the fiscal year. Congress also
permitted communications assistance and advice. Fi-
nally, for fiscal 1987, Congress resumed full funding
for the resistance at a level of $100 million. As
McFarlane said to Representative Courter during tes-
timony, "It is absolutely out of the question to have a
coherent policy with that kind of a change in the
legal framework." ^

Congress's ambivalence expressed itself not only
from year to year, but within years as well — including
the year of the strictest Boland prohibition. If all we
were talking about was a clear expression of Congres-
sional intent in the form of a strict prohibition, that
clear statement would have to govern for as long as it
stayed in effect. The fact, however, is that Congress
was of more than one mind — even within the statute
that contained the strictest Boland prohibition.

The most stringent Boland Amendment was part of
a continuing appropriations resolution that included 9
of the 13 appropriations bills needed to fund the Gov-

•It is one of the curious facts of the Majority Report that the
first acknowledgement of the communist nature of the regime
comes on page 1 1 of the Executive Summary while the first politi-
cal description of the Sandinistas comes on page 3.

490

Chapter 6

ernment for fiscal 1985.^ The fiscal year started on
October 1, 1984. President Reagan had already vetoed
one continuing resolution because of its spending
levels; Government workers even had to be fur-
loughed at one point. By the time a reworked funding
bill reached the floor on October 10 and 11, there was
a great sense of political urgency. Election Day was
only 3 weeks away, the resolution contained a large
number of contentious water and public works
projects important for individual districts, and mem-
bers of the House and Senate were all eager to get
home to campaign.

All year long, passage of the Intelligence Authori-
zation and Department of Defense Appropriations
Acts had been stalemated between the staunch oppo-
nents of aid for the resistance, who made up a majori-
ty in the House, and the equally staunch supporters of
aid, who formed a majority in the Senate. In the
compressed, highly politicized pre-election timetable
of October, the two groups were willing to work out
a compromise. The final defense appropriations bill
included the famous Boland prohibition quoted below,
together with a series of expedited procedures that
would let Congress vote on a new, $14-million aid
package for the Contras any time after February 28.

Some supporters of aid for the resistance, such as
Senator John East of North Carolina, criticized the
Senate Republican leadership for agreeing to the deal.
"What I think we have done in this conference report
is exchange the aid to the Contras and other impor-
tant defense-related items . . . for water projects,"
East said.* Senator Ted Stevens, who was the Assist-
ant Majority Leader and, as Chairman of the Appro-
priations Subcommittee on Defense, was the floor
manager of this portion of the conference report, was
the other main speaker on the Senate floor at the
same time as East. Stevens said that:

[East's position] is counterproductive to his point
of view. There is money in this bill for assistance
to the Contras. There is $14 million .... I can
tell the Senator that it would take less than 31
days to pursue that subject under this report, in
terms of fast-tracking both the House and Senate,
a resolution to approve the President's certifica-
tion.

That money is in the bill and it can be used.

The money that was provided the Contras ran
out in August. The Contras are still supporting
themselves with assistance they are getting from
elsewhere in the world. Having that assistance
out there to be made available on March 31 will
encourage that assistance from other sources to
the Contras during this period.^

Representative Roland's explanation of the conference
agreement took note of the same compromise lan-
guage, albeit in terms that emphasized the importance

of the prohibition he had been so strongly supporting.
Representative Boland did say:

This prohibition applies to all funds available in
fiscal year 1985 regardless of any accounting pro-
cedure at any agency.

It clearly prohibits any expenditure, including
those from accounts for salaries and all support
costs.

The prohibition is so strictly written that it also
prohibits transfers of equipment acquired at no
cost.®

In the same speech, however, Boland also said:

The compromise which we have worked out on
Nicaragua preserves the House position with one
important proviso.

No funds may be spent on the secret war in
Nicaragua until February 28, 1985 ....

Only if Congress affirmatively provides for a re-
newal of funding for the war could any funds be
used for that purpose.'

Representative Boland, in other words, essentially
was confirming Senator Stevens' interpretation of the
compromise. The Senate supporters of Contra aid
were willing to agree to the conference report, and
the President was willing to sign the bill, only be-
cause there was a general understanding that a second
vote would be forthcoming after the 1984 elections
were out of the way. Clearly, that understanding
would have made no sense unless the resistance con-
tinued to exist. Thus, President Reagan's instructions
to his staff to do whatever they could within the law
to keep the democratic resistance alive, and the ac-
tions he took that were consistent with Congress's
findings about the OAS charter, all were entirely in
keeping with the full spirit — the spirit expressed by all
of the participating Members of Congress — of even
the strictest Boland prohibition.

The Words of the Boland
Amendment

The real legal issue turns, therefore, on the exact
words of the Boland Amendment.* Before turning to

*The majority criticizes the only contemporaneous executive
branch legal opinion on the issue, from the President's Intelligence
Oversight Board, which concluded that the NSC was not covered
by the Boland Amendment. The majority asserts that the drafter
was not given all the facts needed for his opinion, but ignores the
fact that the drafter specifically testified at the hearings that having
the additional facts then before the Committees would not have
changed his key legal conclusions. (Sciaroni Test., Hearings, 100-5,
6/8/87, at 12.) The majority also criticizes the credentials of the

491

Chapter 6

those words, however, it is important to bear in mind
that they were a rider, or a Umitation amendment, to
an appropriations bill. The Boland Amendment was
not, for example, like the Hatch Act, which prohibits
specific (political) activities by civil servants whether
they are on the job or off.* Nor is it like the Neutrali-
ty Act, which also prohibits defined activities and
makes them criminal.^ An appropriations rider, even
if it reaches salaries, is nothing more than a limitation
on the way Federal funds may be used. It does not
reach a person's whole life and does not make activi-
ties criminal.

What were the precise "funds available," to use Mr.
Boland's words, whose use was prohibited? The rele-
vant language read as follows:

During fiscal year 1985, no funds available to the
Central Intelligence Agency, the Department of
Defense, or any other agency or entity of the
United States involved in intelligence activities
may be obligated or expended for the purpose or
which would have the effect of supporting, di-
rectly or indirectly, military or paramilitary oper-
ations in Nicaragua by any nation, group, organi-
zation, movement or individual.'"

The terms of this prohibition apply to funds made
available to specific arms of the executive branch.
The fiscal 1983 prohibition of aid "for the purpose of
overthrowing the government" applied only to funds
available to the Department of Defense and Central
Intelligence Agency. The fiscal 1985 law broadens the
prohibition to include "any other agency or entity of
the United States involved in intelligence activities."
The obvious question, given Col. North's activities in
behalf of the democratic resistance, is whether the
staff of the National Security Council (NSC) is an
"agency or entity" covered by the act.

Comparing the Boland Language With
Broader Prohibitions

The phrase "agency or entity involved in intelligence
activities" is surely an odd one that needs explaining.
Some Members of Congress may have thought they
were enacting an absolute prohibition in 1984, and
that feeling may help explain the vehemence of their
reaction to what the NSC staff did. But if that is the
result Congress wanted to achieve, it chose very bad
language for doing so — language that, as we shall
show soon, carried a legislative history that specifical-
ly excluded the NSC from its coverage.

If Congress had simply wanted to prohibit all U.S.
activity that might help the resistance, there were
plenty of easier ways available for it to have done so.

drafter, but ignores the fact that Committee testimony proves the
opinion was approved and issued after review by a Board which
Includes Charles Meyers, former Dean of the Stanford Law School,
as one of its three members. (Id.)

All it needed to do was look at another very well
known and similar law, the Clark Amendment, that
cut off support to the resistance fighters in Angola in
1976. That language read as follows:

Notwithstanding any other provision of law. no as-
sistance of any kind may be provided for the
purpose, or which would have the effect, of pro-
moting or augmenting, directly or indirectly, the
capacity of any nation, group, organization,
movement or individual to conduct military or
paramilitary operations in Angola. ' '

Congress obviously knows how to write an airtight
prohibition when it wants to. As in this example, it
does not write about agencies or entities, but simply
bars "assistance of any kind" from any source.

Virtually every year, appropriations bills contain
prohibitions worded more broadly than the Boland
Amendment. The continuing resolution for 1986, for
example, says that "none of the funds available in this
or any other Act shall be made available for the pro-
posed Woodward light rail line in the Detroit, Michi-
gan area" unless certain conditions are met.'^ If this
example seems too far-fetched, consider the Hughes-
Ryan Amendment to the Foreign Assistance Act of
1981, an amendment that anyone responsible for the
Boland Amendment would know in detail: "No funds
appropriated under the authority of this or any other
Act may be expended by or on behalf of the Central
Intelligence Agency" for foreign operations unless the
President finds the action to be important to the na-
tional security and reports a description of the oper-
ation to Congress in a timely fashion. ' ^

The absence of the phrase "any other Act" from
the Boland Amendment is important for considering
whether the NSC was covered by that act. The fiscal
1985 continuing resolution containing the Boland
Amendment stitched together nine appropriations bills
and a comprehensive crime control bill. The major
sections of the resolution followed the wording of the
original appropriations bills by designating each of the
original bills as a separate "act," each with its own
preamble and title. '"* That each "act" within the con-
tinuing resolution was treated as a separate legal
eritity is shown by the fact that several of them con-
tained prohibitions against using the money "in this
act" for lobbying, but each of the lobbying provisions
was worded differently, prohibiting different kinds of
behavior for different departments.'^ The Boland
Amendment was not contained in the same appropria-
tions bill that provides funds for the NSC. The De-
partment of Defense Appropriations, for example, in-
cludes traditional elements of the intelligence commu-
nity. The National Security Council, in contrast, is
and traditionally has been funded together with the
rest of the White House in an entirely separate appro-
priations bill for Treasury, Postal Service, and Gener-
al Government that is considered by a separate appro-

492

Chapter 6

priations subcommittee.'* If Congress had intended to
cover the funds made available to the NSC staff for
salaries, in other words, it could easily have followed
the broad language of the Clark Amendment, the
Arms Export Control Act, or words often used to
extend appropriation riders to funds made available in
"any other act."

The Boland Amendment's Language in
Other Intelligence Law

What accounts for the narrowness of the language
of the Boland Amendments? The phrase "agency or
entity involved in intelligence activities" did not origi-
nate with these particular prohibitions. The history of
its use in intelligence legislation begins with the at-
tempts during the late 1970s to pass a comprehensive
charter for the intelligence community.

On February 8, 1980, the last version of the broad
charter bill was introduced in the Senate. It contained
the following definition:

The terms "intelligence community" and "entity
of the intelligence community" mean

(A) the office of the Director of National Intelli-
gence [the bill's successor to the Director of Cen-
tral Intelligence];

(B) the Central Intelligence Agency;

(C) the Defense Intelligence Agency;

(D) the National Security Agency;

(E) the offices within the Department of Defense
for the collection of specialized national intelli-
gence through reconnaissance programs;

(F) the intelligence components of the military
services;

(G) the intelligence components of the Federal
Bureau of Investigation;

(H) the Bureau of Intelligence and Research in
the Department of State;

(I) the foreign intelligence components of the De-
partment of Treasury;

(J) the foreign intelligence components of the
Department of Energy;

(K) the successor to any of the agencies, offices,
components or bureaus named by the clauses (A)
through (J); and

(L) such other components of the departments
and agencies, to the extent determined by the
President, as may be engaged in intelligence ac-
tivities. ' '

Later, the same bill said that "the entities of the
intelligence community [defined above] are authorized
to conduct intelligence activities, under the direction
and review of the National Security Council, but only
in accordance with the provisions of this Act."'* The
bill, in other words, clearly and intentionally did not
treat the NSC as an "entity of the intelligence com-
munity."

At least one staff consultant to the Senate Select
Committee on Intelligence was concerned that the bill
would not require the NSC to report any covert
operations it might undertake. William R. Harris was
directly involved in the deliberations that led to the
statutory language we have been analyzing. Because
of his expertise on the subject. House Chairman Lee
Hamilton and Ranking Minority Member Dick
Cheney wrote a letter to the former Senate consultant
asking him "for any observations or recollections that
relate to the concept of an 'intelligence agency' or
'intelligence entity' as traditionally understood by
Congress or the Chief Executive." Harris responded
on September 25, 1987, with a 14-page statement that
is reprinted as Appendix A to this Minority Report.
In his position as consultant, Harris urged the Com-
mittee to write language that would include the NSC:

It was my position that, unless the mandatory
reporting duties included the NSC and its staff,
there was a foreseeable risk of the NSC manag-
ing covert operations through the NSC itself,
without a specific duty to report on such activi-
ties to the oversight committees of the Congress.
The Charter and Guidelines Subcommittee staff-
ers indicated that the President would not author-
ize this change in customary practice, precisely
because, upon discovery, the Congress would
enact legislation requiring mandatory reporting
by the National Security Council or the President
regarding its activities.

At this point (on a day in February 1980 that I
cannot ascertain from my records), I took the
issue to the staff director of the Senate Select
Committee, William G. Miller. Any change of
the nature I was proposing would reopen consti-
tutional issues of concern to the Attorney Gener-
al and the Counsel to the President. Mr. Miller
reminded me that both Vice President Mondale
and David Aaron, the Deputy Special Assistant
to the President for National Security Affairs,
served with the committee. The President would
not permit, I was advised, the conduct of covert
operations by the NSC staff itself. I reminded the
staff director that intelligence charters must be
designed to function under changed and partly
unforeseen circumstances, well beyond the serv-
ice of officials who knew the precise reasons for
legislative action. ' ^

493

Chapter 6

Harris' position was that if Congress wants to pro-
hibit or require the President and the NSC to do
something — as he thought it should — then Congress
should say so clearly and not rely on the political
sympathy of a current Vice-President and NSC staff-
er. We agree with this position wholeheartedly. As
Justice Frankfurter said in the quotation we used at
the beginning of this chapter, "Congress expresses its
meaning by words. "^^

One month later, the Committee staff produced a
draft that partly addressed Harris's concern, not by
expanding the definition of the intelligence communi-
ty, but by adding language that would have made it
more difficult for the NSC and other parts of the
Government to conduct covert operations.^' The
Congress did not enact this language, however, and
decided to concentrate strictly on the subject of over-
sight.

The Intelligence Oversight Act of 1980 started out
as one section of the charter bill. After some change,
it was enacted as an amendment to the National Secu-
rity Act of 1947. The shorter version omits the origi-
nal bill's long definition of the intelligence community
to require reports of intelligence activities to Congress
from:

The Director of Central Intelligence and the
heads of all departments, agencies, and other enti-
ties of the United States involved in intelligence
activities. ^^

In this version, the language is almost identical to the
jurisdictional language of the Boland Amendment.
Given the statutory history, the phrase appears simply
to be a shorthand substitute for items (C) through (L)
on the long itemized list in the proposed charter.

The fact that the Oversight Act was an amendment
to the National Security Act is instructive. The Na-
tional Security Act created the National Security
Council, which has only four statutory members: the
President, Vice President, Secretary of State, and Sec-
retary of Defense, with the President clearly put at
the head. In order to believe that the phrase "agencies
and other entities involved in intelligence activities"
applied to the NSC, one would have to accept the
entirely preposterous idea that the 1980 law contem-
plated the head of the NSC, that is, the President,
personally reporting any "significant anticipated intel-
ligence activity" — including any of a purely informa-
tion-gathering character — to the Intelligence Commit-
tees. Even if Congress had wanted to engage in the
constitutional confrontation such a reading would
imply, it is difficult to imagine Congress specifically
mentioning the Director of Intelligence in the Over-
sight Act, and then reaching the President by indirec-
tion without even bothering to say so.

The point that Congress did not intend to treat the
President as the head of an "intelligence agency or
entity" is strengthened when one realizes that the

Oversight Act also amended a sentence that appears
immediately after the one in the Hughes-Ryan Act,
which does require Presidential Findings for covert
CIA operations. There is no way the Members of
Congress could have amended one sentence without
considering its relation to the other. As the words of
Hughes-Ryan make clear, when Congress wants to
place a requirement on the President, it does so di-
rectly.

There is no way to avoid the conclusion that the
text of Oversight Act imposes. Even though many
people today seem to assume that this law imposes a
reporting requirement directly on the President, the
fact is that it does not. The Oversight Act's reporting
requirements cover the Director of Central Intelli-
gence and the heads of all other agencies or entities
involved in intelligence activities. It deliberately did
not cover the NSC or its head, the President. It
knowingly exempted the NSC, even though the NSC
staff had engaged in many activities during the 1970s
that were well known to Congress and would have
called for a required report under the 1980 act if the
NSC had been covered. In fact, no one even hinted in
1980 that the NSC or its staff should be covered by
the Oversight Act. It is fanciful to maintain that Con-
gress intended to break almost 40 years of complete
deference to the President's use of the NSC without
provoking some extended discussion or controver-
sy.^''

Harris concludes that Congress adopted language in
1980 that deliberately stepped back from earlier pro-
posals for Government-wide reporting requirements
to narrower language that excluded the NSC. He
wrote:

In the period 1975-1978, Congressional investiga-
tions of intelligence activities encompassed enti-
ties of the entire federal government, and propos-
als for mandatory reporting to the Congress mir-
rored that broad jurisdictional concern.

Commencing in 1978, the intelligence oversight
committees adopted the procedure of enacting
separate intelligence authorization acts for all en-
tities of the "intelligence community" engaged in
national intelligence or counterintelligence. Con-
currently, from 1978 onwards, draft legislation
proposing mandatory self-reporting by heads of
intelligence departments, agencies, or entities en-
compassed expressly specified departments and
agencies and other "entities" that performed clas-
sified missions within the "intelligence communi-
ty." Proposals in 1980 to extend the scope of
"entities" to include the National Security Coun-
cil and its staff were expressly rejected in the
course of streamlining what became the Intelli-
gence Oversight Act of 1980.2''

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Chapter 6

Once again, we agree completely with Harris' con-
clusions. His words, we should point out, gain credi-
bility from the fact that he wanted the NSC to be
covered, over the opposition of President Carter's
White House. Nevertheless, we acknowledge that a
statement from a former Senate staff aide has no com-
pelling legal weight as legislative history. What gives
the interpretation its real weight is that it is the only
one that can make sense of the words Congress used
in the various bills it considered and the final law it
enacted.

After the Oversight Act

To complete this line of analysis. President Reagan
issued Executive Order 12333 on December 4, 1981,
defining the intelligence community essentially along
the lines of the charter bill. This language was meant
to be a definition of the phrase "agencies or entities
involved in intelligence activities" that appeared in
the Oversight Act. The principal NSC staff coordina-
tor for the executive order was Kenneth DeGraffen-
reid, who had worked on the staff of the Senate
Select Committee on Intelligence at the time the
Oversight Act was enacted. ^^ The relevant section
read as follows:

The Intelligence Community and agencies within
the Intelligence Community refer to the following
agencies or organizations:

(1) The Central Intelligence Agency (CIA);

(2) The National Security Agency (NSA);

(3) The Defense Intelligence Agency (DIA);

(4) The offices within the Department of Defense
for the collection of specialized national foreign
intelligence through reconnaissance programs;

(5) The Bureau of Intelligence and Research of
the Department of State;

(6) The intelligence elements of the Army, Navy,
Air Force, and Marine Corps, the Federal
Bureau of Investigation (FBI), the Department of
the Treasury, and the Department of Energy,
and;

(7) the staff elements of the Department of
Energy.

It is worth noting that missing from this enumeration
is the charter bill's elastic provision, which could po-
tentially expand the list.

It is also worth noting that the enumeration is fol-
lowed in Intelligence Authorization Acts, including
the specific one for fiscal 1985 that contained the
same prohibitory Boland Amendment as the continu-
ing resolution. The previous year, the House had
adopted a version of the Boland Amendment that also

would have reached "any other agency or entity of
the United States involved in intelligence activi-
ties."^^ The Senate refused to agree and $24 million,
or enough to fund the resistance for about half a
year, was finally adopted as a compromise. During
the House's consideration of the bill, however. Repre-
sentative Boland offered the following description of
what the Authorization Act covered;

Mr. Chairman, H.R. 2968, the Intelligence Au-
thorization Act for fiscal year 1984 authorizes
funds for all the activities of the Central Intelli-
gence Agency; the Defense Intelligence Agency;
The National Security Agency; other intelligence
components of the Department of Defense and
the Departments of the Army, Navy and Air
Force; the Bureau of InteUigence and Research
at the Department of State; the Intelligence Divi-
sions of the Federal Bureau of Investigation; in-
telligence elements of the Departments of Treas-
ury and Energy, and of the Drug Enforcement
Administration; and the intelligence community
staff of the Director of Central Intelligence.

Generally, these activities are divided into two
categories. The first is intelligence activities — that
is to say, national intelligence activities — which
produce intelligence for important policy-makers
of the Government — the President, the Cabinet,
the National Security Council and the Joint
Chiefs of Staff."

Representative Boland, in other words, adopted the
traditional distinction of the Oversight Act and Exec-
utive Order 12333 between the intelligence communi-
ty, on the one hand, which produces intelligence, and
the National Security Council, which is not an agency
"involved in intelligence activities" but a consumer.
He made it clear that the authorization bill did not
apply to the NSC.

The authorization acts follow the jurisdiction, or
power to legislate, that the rules of the House and
Senate give to the Intelligence Committees. The
White House and NSC staff authorizations clearly and
exclusively fell within the jurisdictions of other com-
mittees at the time of the Boland Amendment, as they
do now. The importance of this fundamental fact of
legislative history may be lost unless one has a sense
of the jealousy with which committees traditionally
guard their own jurisdictions. If Congress had intend-
ed to cover staffs that fall within the jurisdictions of
two committees, the procedure virtually always
adopted would have been for the second committee
to ask for, and get, a multiple referral of the bill.
Committees normally insist on multiple referral even
when they are in complete agreement with what a bill
is trying to do, because they want to preserve their
own jurisdictional claims for the future.

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Chapter 6

To summarize, the Oversight Act, the Executive
Order, and the typical intelHgence authorization act
do not cover the President or the National Security
Council.* To quote Harris again, this history "estab-
lishes a presumption that only 'intelligence communi-
ty' entities are intended to be covered by other intelli-
gence-related legislation utilizing the phrasing. "Harris
does acknowledge that "the presumption may be re-
butted by evidence of actual legislative intent to the
contrary" and says that he does not know the specific
legislative history of the 1984 and subsequent Boland
Amendments.^* We have searched that history, how-
ever, and there is no evidence of an intention to
change a well-known term of art that excluded the
NSC into one that included it.**

The Spirit Redux

Some members of these Committees have tried to
argue, without addressing the legislative history just
presented, that the Boland Amendment should be
read not to cover a specific list of agencies, but any
agency or entity that might in the future become
involved with intelligence activities. Any other read-
ing, it is said, would render the law meaningless by
letting the President get around its provisions by put-
ting agents in any of the Government's departments
outside the intelligence community, including the De-
partment of Agriculture.^^

We consider this argument to be completely mistak-
en. For one thing, as we have just demonstrated, the
term "agency or entity involved in intelligence activi-
ties" was not made up by the Boland Amendment out
of whole cloth. If the phrase is to have any meaning,
it must be the same in the Boland Amendment and
Oversight Act. But the argument that an interpreta-
tion of Boland which excludes the NSC would be a
"slippery slope" is also wrong because the slope is not

•A technical question exists about whether North was covered
by the Boland Amendment as an individual because his salary
apparently was paid from the Department of Defense appropria-
tion. Because North's salary could just as easily have been paid or
reimbursed from the NSC appropriation, and because the functions
he performed on detail to the NSC were clearly NSC duties unre-
lated to his DOD assignment, our basic point is unaffected.

••We note that the Department of Justice has concluded that
language in section 403(b)(1) of the Intelligence Authorization Act
reaches the NSC because it covers "any agency or entity involved
in intelligence or intelligence-related activities." See U.S. Depart-
ment of Justice, Memorandum for the Attorney General, "Legal
Authority for Recent Covert Arms Transactions to Iran," Decem-
ber 17, 1986, p. 5, n. 10.

Given the history we have discussed, the accuracy of the Justice
Department's conclusion is clearly open to question. Even assuming
its correctness, arguendo. Attorney General Meese made the point
in his testimony that the underlined phrase does not appear in the
Boland Amendment and therefore makes this phrase broader than
the one in that amendment. Therefore, Meese said, this language is
clearly distinguishable from the defmitional language of the Boland
Amendment, which appears in a separate section of the same bill.
See Meese Test., Hearings, 100-9, 7/29/87, at 421-22.

in fact slippery. Arguments about the NSC staff do
not automatically apply to other departments and
agencies. The NSC staff is the President's personal
foreign policy staff; the Department of Agriculture is
not. The NSC is therefore authorized to conduct, and
historically has conducted, activities directly related
to the President's Contra policy that others may not
conduct without explicit statutory authority.

If the language of the Boland Amendment did not
cover the NSC, can the Administration fairly be said
to have evaded the law through Oliver North's ac-
tions to help the democratic resistance? On the most
obvious level, no one is evading the law if he or she
continues to do something the law permits, or fails to
prohibit. But to leave the matter there makes it look
as if the Administration was faced with a clear Con-
gressional mandate. In fact, as we have shown, the
mandate was two-sided.

Part of what Congress wanted in 1984 was to cut
off U.S. financial aid to the Contras. That objective
was fulfilled. During fiscal 1984, Congress appropri-
ated $24 million to support the resistance, and permit-
ted the full infrastructure of the CIA, Defense De-
partment, and other intelligence agencies to back up
the expenditure of the money. When the Boland
Amendment went into effect, the CIA's financial and
infrastructure support was eliminated. The entire Na-
tional Security Council appropriation, for all salaries
and all worldwide activities, was between $4 million
and $5 million during the mid-1980s. The most the
NSC staff could do would be to spend a part of a few
people's salaries to encourage activities that did not
spend U.S. funds. At its most ambitious, the NSC
staffs activity would therefore represent a minuscule
fraction of the U.S. Government's support for the
resistance before the prohibition.

This judgment is strongly reinforced by the facts
disclosed by the record of these Committees' public
hearings. During the period of the Boland Amend-
ment, a very small number of NSC staff officials had
responsibilities that related to the resistance. These
responsibilities included, among other things, main-
taining political contact with the resistance, exchang-
ing information with it, and providing it with guid-
ance and political advice. No one — especially not
anyone familiar with U.S. intelligence — would main-
tain that the Boland Amendment outlawed these ac-
tivities. At the same time, the NSC staff engaged in
more controversial activities, such as giving the resist-
ance expert assistance on arms procurement, helping
to coordinate the operational details of military resup-
ply, and persuading other countries to give financial
support to the resistance. If one tried to keep a diary
of the NSC stafTs time, however, it would quickly
become clear that any expenditure of NSC staff sala-
ries on activities that might have been outside the law
// the NSC were covered, was clearly incidental to
expenditures for activities that remained clearly legal

496

Chapter 6

during the time of the most stringent Boland Amend-
ment.

There were no other significant expenditures of ap-
propriated funds to support the resistance during the
period of the Boland Amendment — no " diverted"
tanks or planes, for example. In short, the appropria-
tions limitation purposes of the Boland Amendment in
fact were met. Even though the NSC staff did sup-
port the resistance in the ways just described, the
level of U.S. support dropped to just a trickle of
personal advice. In addition, we must reiterate that
Congress' full intention involved more than just the
limitation provision. Congress assumed there would
be a future vote on the resistance, and that the resist-
ance would continue to exist as a viable force until
that vote with funds from private and non-U. S.
sources. Satisfying Congress's full intention, therefore,
would almost seem to require some form of NSC staff
involvement.

Oliver North and John Poindexter testified that
they attempted to comply with the law.^° We have
seen that the NSC was not covered by the law's
language. But even if the NSC had been covered,
virtually all, if not all, of North's and Poindexter's
activities in behalf of the democratic resistance would
still have been lawful. This point can be best under-
stood by looking at the different interpretations
placed on the law from the beginning, and at the
changes Congress began making to the Boland prohi-
bitions within months of its adoption.

Sharing Information and
Intelligence Under the Boland
Amendment

A review of the legislative history of the Boland
Amendment and related subsequent amendments
makes clear that it was lawful for Col. North and
others to provide intelligence to the resistance leader-
ship. The legislative history also makes clear that it is
reasonable to view the Boland Amendment as allow-
ing the type of information transfer, advice, and co-
ordination that Col. North and others provided to the
Contra resupply effort.

On December 19, 1984, Director of Central Intelli-
gence William J. Casey wrote to Representative
Boland, Chairman of the House Permanent Select
Committee on Intelligence, to describe some activities
the CIA considered to be consistent with the prohibi-
tion bearing the Chairman's name. Casey's letter did
not discuss normal information and intelligence-shar-
ing because, as a still classified exhibit to Col. North's
testimony makes clear,'' Members of Congress al-
ready knew about, and approved, such communica-
tion between the resistance and CIA. Rather, Casey's
letter was about providing specific, detailed intelli-
gence that might be useful operationally. Casey
wrote:

We are contemplating providing defensive intelli-
gence to the FDN .... This intelligence would
be furnished exclusively for the purpose of pre-
cluding hostile actions against the FDN. We
would ensure that the information provided does
not contain the specific details requisite for the
planning/launching of offensive operations.

We are fully aware of the current restrictions
pertaining to Agency support for insurgent
forces. It is our belief, however, that provision of
this information is consistent with our long-estab-
lished practice of providing intelligence as appro-
priate to prevent loss of life.' ^

On January 14, 1985, Casey's letter was answered by
Boland and Representative Lee Hamilton, who was
soon to succeed Boland as chairman. According to
their response:

The thrust of the public debate [over the Boland
Amendment] . . . was clearly directed at the
complete severance of all intelligence community
connections with the Contras and the end of all
support for anti-Sandinista military activity.
Therefore, your stated intention to provide "de-
fensive intelligence" to the FDN is trou-
bling ....

It is our opinion that, at a minimum, section 8066
prohibits the provision of intelligence information
to the FDN on any systematic or continuing
basis, particularly if such information will enable
a FDN force to avoid tactical contact with the
enemy and thus be in a better position to contin-
ue military operations of its own.

On the other hand, the unplanned for, isolated
provision of incidentally acquired information to
a person threatened by imminent assassination
would seem reasonable.

In any event, on the basis of the imprecise infor-
mation given to us, we are unable to approve or
disapprove any contemplated CIA activity. Some
examples of intelligence you would provide to
the FDN could, in our view, violate the law, yet
not every example seemed illegal ....

If your decision is to proceed, we ask that you
provide the Committee with the guidelines under
which your General Counsel will approve or dis-
approve the furnishing of intelligence to the
FDN.''

In the first of the sentences quoted above, Hamilton
and Boland clearly went beyond both the letter and
spirit of the Boland Amendment by suggesting that its
purpose was to eliminate "all intelligence community
connections with the Contras." Those connections
were continuing throughout the period with the

77-026 0-87

1 7

497

Chapter 6

Chairmen's full knowledge and acquiescence, as we
indicated above. However, there remained a valid dis-
pute over exactly how detailed such intelligence shar-
ing could be. Hamilton and Boland took the view that
tactical information of a militarily useful sort was
prohibited, even if it were for defensive purposes.
Two months later, the CIA responded to the Chair-
men's request to provide Congress with detailed
guidelines. On March 18, 1985, Casey wrote to Ham-
ilton and to Senator David Durenberger, Chairman of
the Senate Select Committee on Intelligence:

This is in response to questions raised by the
Committee regarding the Agency's plans to pro-
vide certain defensive intelligence to opposition
groups in Nicaragua .... We do not intend to
provide intelligence on any systematic or con-
tinuing basis. Our goal is humanitarian in nature
and any intelligence we would pass would be
strictly limited, on a case-by-case basis, to infor-
mation which in general affects the lives of U.S.
persons or third country noncombatants or which
suggests that a holocaust-type situation involving
substantial loss of life may occur.**

Casey thus indulged Hamilton and Boland temporari-
ly on the specific issue, but presented the CIA's
guidelines as the Agency's statement about what it
would do, without conceding the House Chairmen's
interpretation of what the law required. Until the
CIA was able to get the law clarified, it behaved in a
manner consistent with its own guidelines, which
were drafted, as shown below, to be stricter than the
law itself

Five months later, on August 8, 1985, Congress
resolved the interpretation dispute in the CIA's favor.
In the Supplemental Appropriations Act for fiscal
1985, Congress said:

Nothing in this Act, section 8066(a) of the De-
partment of Defense Appropriations Act, 1985
(as contained in section 101 of Public Law 98-
473), or section 801 of the Intelligence Authoriza-
tion Act for Fiscal Year 1985 (Public Law 98-
618) shall be construed to prohibit the United
States from exchanging information with the Nic-
araguan democratic resistance.*^

Congress did not say it was creating new authority.
The phrase, "nothing in this act . . . shall be con-
strued to prohibit," is the kind of language Congress
uses when it is indicating its interpretation of what a
past law has always meant. The report of the House
conferees made this abundantly clear:

The conference committee discussed, and the In-
telligence Committees have clarified, that none of
the prohibitions on the provision of military or
paramilitary assistance to the democratic resist-

ance prohibits the sharing of intelligence informa-
tion with the democratic resistance.*^

This point was made again in December 1985,
when Congress again addressed the subject of intelli-
gence sharing. In the Intelligence Authorization and
Department of Defense Authorization Acts of 1986,*''
Congress permitted the intelligence community to
provide communications equipment and related train-
ing, and to exchange information with and provide
advice to the democratic resistance. The conference
report explained the provision this way:

The conferees note that under current law and the
restriction contained in Section 105 of this Con-
ference Report, the intelligence agencies may
provide advice, including intelligence and coun-
terintelligence information, to the Nicaraguan
democratic resistance. Section 105 does not
permit intelligence agencies to engage in activi-
ties, including training other than the communi-
cations training pursuant to Section 105, that
amount to participation in the planning or execu-
tion of military or paramilitary operations in
Nicaragua by the Nicaraguan democratic resist-
ance, or to participation in logistics activities inte-
gral to such operations.**

As with the August statute, the statutory history con-
tains a clear reference to words that interpret what
the law has been and not just what it will be. It is
clear, therefore, that the law allowed Col. North and
others to pass intelligence of military value to the
resistance.

Advice for and Coordination of ttie
Resupply Operation

The language and legislative history of the Boland
Amendment, as modified by the "communications"
and "advice" provisions, also make clear that Col.
North and other U.S. Government officials could le-
gally provide general advice, coordination, and infor-
mation with respect to the Contra resupply operation
that began in late 1985.

The Boland Amendment provides that:

No funds . . . may be obligated or expended for
the purpose or which would have the effect of
supporting, directly or indirectly, military or para-
military operations in Nicaragua. [Emphasis
added.]

This language does not prohibit all support, but only
support of a specific kind. The question that always
arose, however, was what kind of support would con-
stitute indirect support of a military operation inside
Nicaragua? After the "communications" and "advice"
provisions were enacted in 1985, the Chairmen of the
House and Senate Intelligence Committees disagreed

498

Chapter 6

about their meaning — particularly as they might apply
to a resupply operation, as opposed to specific mili-
tary or paramilitary operations in Nicaragua.

Rep. Hamilton, in a December 4, 1985, letter, took
the position that the law prohibited advice about "lo-
gistical operations upon which military or paramili-
tary operations depend." ^^ Senator Durenberger, in a
letter dated the next day, however, said that he be-
lieved the law meant to allow just such advice. Faced
with these conflicting interpretations, the CIA, after a
careful analysis of the legislative history, chose to
accept the position that most clearly represented a
harmonization of the points of difference between the
two Chambers:

The legislative history, therefore, seems to draw
distinctions between, on the one hand, participa-
tion, planning, and providing advice (which
would not be permitted in support of paramilitary
operations) and, on the other hand, information
sharing, including advice on the delivery of sup-
plies .... There is no clear indication that Con-
gress intended to prohibit the CIA from giving
advice on supply operations, and some indication
that it did intend to distinguish between mere
information-sharing and actual participation in
such operations. Furthermore, there would
appear to be a valid distinction between permissi-
ble, general military resupply operations and op-

erations in the context of speciflc military oper-
ations, which were not authorized ....

Merely passing intelligence on Sandinista gun or
radar placements, weather conditions, flight vec-
tors, and other information to assist in the deliv-
ery of supplies for general maintenance of the
forces in the field would not seem to be prohibit-
ed, both because this would not constitute "par-
ticipation," and because this would not be "inte-
gral" to a "paramilitary operation" as contem-
plated by Congress." '"'

We agree with the legal conclusions reached in this
memorandum. Based on these conclusions, we would
argue that virtually all, if not all, of Col. North's
activities in support of the democratic resistance
would have been legal even if the Boland Amend-
ment had applied to the NSC. By extension, we be-
lieve that virtually all, if not all, of the activities of
employees of other executive branch agencies and
entities that were covered were also legal. The worst
that can be said of all of these people is that they
adopted one side of a reasonable dispute over inter-
pretation. In that dispute, the opinions of the Senate
are every bit as much of a valid indicator of Con-
gress's intention as the House's. There is no way,
therefore, that behavior undertaken in reliance on the
Senate's legislative record can fairly be interpreted as
an intentional flouting of the law.

499

Chapter 6

Endnotes

\. Addison v. Holly Hill Co. 322 U.S. 607, 617 (1944).

2. McFarlane Test., Hearings, 100-2, 5/13/87, at 187.

3. Pub. L. No. 98-473; 98 Stat. 1837.

4. Congressional Record, Oct. 11, 1987, p. S14206.

5. Id at S 14205.

6. Id at HI 2206.
l.Id

8. 5 U.S.C. 7324(a)(2).

9. 18 U.S.C. 960.

10. Pub. L. No. 98-473; 98 Stat. 1837, 1937 (Oct. 12,
1984), Continuing Resolution, Department of Defense Ap-
propriations Act, Sec. 8066 (a).

11. 22 U.S.C. 2293, emphasis added.

12. Pub. L. No. 99-190, 99 Stat. 1287.

13. 22 U.S.C. 2422.

14. See, for example, P.L. 98-473, 98 Stat. 1877, 1885,
1905, 1923.

15. For example, compare Pub. L. No. 98-473, 98 Stat.
1923 with 1937-38.

16. See Pub. L. No. 98-441, 98 Stat. 1699 (Oct. 3, 1984).

17. 96th Congress, 2d Sess., S.2284, Sec. 103 (12).
n. Id, Sec. Ill (a).

19. William R. Harris, "Reporting Obligations and Fund-
ing Restrictions Affecting Intelligence Departments, Agen-
cies, and Entities of the United States," Prepared Statement
in reply to a request of the U.S. House Select Committee to
Investigate Covert Arms Transactions with Iran," Sept. 25,
1987, p. 7. Full statement reprinted as Appendix A to the
Minority Report.

20. Addison v. Holly Hill Co. 322 U.S. at 617.

21. Harris, "Reporting Requirements," prepared statement
at 8.

22. 50 U.S.C. 403.

23. See TVA v. Hill, 98 S. Ct. 2279, 2300 (1978).

24. Harris, "Reporting Obligations," prepared statement
at 14, emphasis added.

25. Id, p. 11.

26. Congressional Record, Oct. 20, 1983, p. H8413.

27. Id, p. H8389.

28. Harris, "Reporting Obligations," prepared statement
at 11-12.

29. See Senators Inouye and Mitchell, Meese Test. Hear-
ings, 7/29/87, at 428-29.

30. This point was corroborated by Generals Secord and
Singlaub. See Secord Test., Hearings, 100-1, 5/21, at 197;
Singlaub Test., Hearings, 100-3, 5/21/87 at 197.

31. OLN-91.

32. North testimony. Exhibit OLN-333A.

33. Id

34. Id

35. Pub. L. No. 99-88, Sec. 102 (b).

36. U.S. House of Representatives, 99th Cong., 1st Sess.,
H.Conf Rept. 99-237, International Security and Develop-
ment Cooperation Act of 1985, p. 144, emphasis added. The
provision first appeared in the ISDCA, but the conferees
agreed to drop the provision because the same language
was to appear in the supplemental appropriations act. Nev-
ertheless, this interpretation is the one that was offered to
the House by the committee of jurisdiction that had origi-
nated the language. The interpretation was not contradicted
in other reports or on the House or Senate floor.

37. Pub. L. No. 99-169; Pub. L. No. 99-190.

38. U.S. House of Representatives, 99th Cong. 1st Sess.,
H. Rept. 99-373, Conference Report to Accompany H.R.
2419, p. 16, emphasis added.

39. As quoted in March 2, 1987, memorandum from CIA
Associate General Counsel W. George Jameson to the Gen-
eral Counsel, p. 6; Ex. TC-13, Hearings, 100-4.

40. Id at 5, 7.

500

Chapter 7

Who Did What To Help The Democratic

Resistance?

The public hearings of these Committees presented a
confusing picture of U.S. assistance to the Nicaraguan
democratic Resistance during the period of the
Boland Amendments. The overall impression the
Committees' majority tried to create was that the
government was engaged in a massive effort to sub-
vert the law. A careful review shows, however, that
this simply was not the case. The NSC stafFs activi-
ties fell into two basic categories. Some were the
kinds of diplomatic communication and information
sharing that Congress may not constitutionally pro-
hibit, even if Congress had intended the Boland
Amendment to apply to the NSC. Others, with the
possible exception of the diversion, were in accord-
ance with the law, as we have analyzed it in the
preceding section.

Given the nature of the strategic threat in Central
America, we also believe President Reagan had more
than a legal right to pursue this course of assistance to
the Contras. We believe he was correct to have done
so. The mixed signals Congress was giving indicates
that many members agreed. Our only regret is that the
Administration was not open enough with Congress
about what it was doing.

We have no intention here of trying to present all
of the evidence the Committees received about what
each person did. If we did, our dissent would have to
be as long as the Committees' narrative. Frankly, we
believe the mind-numbing detail in that narrative ob-
scures as much as it reveals, leaving readers with
some fundamentally mistaken impressions. In the fol-
lowing few pages, therefore, we will limit our com-
ments to a broad factual overview to indicate why we
reach the conclusions we do.

The President

President Reagan gave his subordinates strong, clear
and consistent guidance about the basic thrust of the
policies he wanted them to pursue toward Nicaragua.
There is some question and dispute about precisely the
level at which he chose to follow the operational
details. There is no doubt, however, about the overall
management strategy he followed. The President set
the U.S. policy toward Nicaragua, with few if any

ambiguities, and then left subordinates more or less
free to implement it.

The first crucial step was the President's decision to
back a December 1981 Central Intelligence Agency
(CIA) proposal for covert action. Within a year, the
policy was covert in name only and Congress began
passing the first of the Boland Amendments. Never-
theless, when the Kissinger Commission recommend-
ed a more overt policy of support for the Resistance
in 1984, former National Security Adviser Robert C.
McFarlane testified that the recommendation was ig-
nored by the President and by Congress.'

The Administration was aware as early as mid-1984
that Congress would probably cut off funds to the
Resistance; the mining incident served as either a
reason or as a convenient pretext for the cutoff, de-
pending upon one's point of view. The President in-
structed the NSC staff, according to both McFarlane
and Col. North, as early as the spring of 1984 to keep
the "body and soul" of the Resistance together until
Congress could be persuaded to resume support for
them. 2 North testified that he understood this to mean
specifically, among other things, that he was to keep
the Contras together in the field as a fighting force. ^
Although McFarlane appears to have interpreted the
President's desires somewhat more narrowly, McFar-
lane said that the President repeatedly made his gen-
eral desire to support the Resistance known both pri-
vately and publicly.'*

McFarlane and his successor, Admiral John Poin-
dexter, both portrayed the President as having been
generally aware that the Resistance was receiving
funds from third countries and from private parties,
but not of the details of Contra expenditures.* There
is no evidence that the President authorized or direct-
ed McFarlane or the NSC staff to contact third coun-
tries in 1984 or 1985 to raise funds for the Resistance.
There also is no evidence that the President personal-
ly solicited such funds from foreign heads of state,
and the President has denied having done so.^ How-
ever, it is clear that the President knew such funds
had been given to the Resistance during 1984-85,'' and
that he did not tell the NSC staff not to encourage
such foreign political or financial support. In addition,
Poindexter said the President considered contributions
from third countries to be entirely acceptable and

501

Chapter 7

thought they should be encouraged.® But whatever
the President's precise knowledge or direction of the
NSC staffs role in encouraging contributions, we are
firmly convinced that the Constitution protects such di-
plomacy by the President or by any of his designated
agents — whether on the NSC staff, State Department or
anywhere else.

The President also knew that some private U.S.
citizens were giving money to help the democratic
Resistance — another activity that was perfectly legal. ^
In 1986, after Congress specifically stated that third
country solicitations by the State Department were
not precluded, the President did authorize such a so-
licitation in a National Security Planning Group meet-
ing. That decision that eventually led Secretary of
State George Shultz and Assistant Secretary Elliott
Abrams to solicit the Government of Brunei.

The President's exact knowledge of other aspects of
the NSC staffs support for the Resistance is less
clear. The President knew North was the main staff
officer acting as liaison to the Resistance. The Presi-
dent was briefed by Poindexter about the construction
of an emergency air field in a neighboring country
that was to be used for the private Southern Front
resupply operation,'" and, according to McFarlane,
he personally intervened with the head of state of a
Central American country to obtain release of an
arms shipment for the Resistance that had been seized
immediately after a vote in Congress to reject an
effort to resume Contra funding. ' ' On most other
aspects of the resupply operation and North's military
advice to the Resistance, the President seems not to
have been informed of what McFarlane and Poin-
dexter considered to be "details," many of which
McFarlane denied knowing himself Again, whatever
the President's precise level of information, it is clear
that matters about the President's knowledge of
which these Committees can be sure — including the
ones just cited — all fall within the sphere of constitu-
tionally protected diplomatic communication or the
equally protected speech and encouragement of legal ac-
tivity by U.S. citizens.

The Vice President

There is no evidence that Vice President George
Bush knew about either the Contra resupply effort or
the diversion of funds to the democratic Resistance.
The Vice President's staff does acknowledge having
learned about General Secord's resupply operation
from Felix Rodriguez in August 1986. The staff mem-
bers informed the relevant agencies, but said they did
not think the issue warranted informing Bush at the
time. The testimony all says the subject was not dis-
cussed with the Vice President. Two April scheduling
memoranda did use the word "resupply" in connec-
tion with one Rodriguez visit to the Vice President's
office, but there is no reason to infer from a single

phrase that the Vice President's staff had full knowl-
edge of a subject the NSC staff was deliberately keep-
ing from them.

Felix Rodriguez

The one point of connection between the Vice
President, his staff and the resupply effort, was Felix
Rodriguez (also known as Max Gomez) a retired CIA
officer and personal friend of Donald P. Gregg, the
Vice President's Assistant for National Security Af-
fairs. Rodriguez was a significant figure in North's
resupply operation as the facilitator/coordinator of
private benefactor flights. He had three short personal
meetings with the Vice President during this time
period. According to his testimony, all three related
to his counter-insurgency efforts in Central Amer-
ica.'^

The second of these meetings took place on May 1,
1986, some eight months after Rodriguez began work-
ing with North on the resupply effort and a few
months after that effort became active.* According to
his testimony, Rodriguez was fed up with the oper-
ation and was planning to quit.'^ Neither Watson nor
Gregg had been told about his role at this time, Ro-
driguez said.''' He had purposely kept that informa-
tion from all others at North's request,'^ and asserted
that he did not intend to inform the Vice President or

* The majority in Chapter 3 claims that North einployed the
assistance of other U.S. officials in order to obtain approval from a
Central American country to serve as the host for the resupply
operation air base. Thereafter, it strongly suggests that Col. James
Steele and Donald Gregg, the Vice President's National Security
Adviser, were those other officials and that very matter was dis-
cussed by the three of them at a meeting on September 10, 1985.

The reference to a meeting on September 10, 1985, is based
exclusively on ambiguous notes contained in Col. North's note-
books. Since Col. North was never asked about that meeting or
those notes, we cannot tell when they were made, let alone wheth-
er they uere accurate or refiect a meeting which actually occurred.

Moreover, despite being subject to lengthy depositions and being
totally cooperative with these Committees, neither Col. Steele nor
Mr. Gregg has been asked whether such a meeting ever took place
and if so, whether the quoted material s^as discussed. In short,
there is simply no credible evidence against which the meaning or
accuracy of these notes has been tested.

Indeed, the evidence before the Committees, to date, suggests the
contrary North recruited Rodriguez to perform the function of
obtaining support for the use of the Central American country's air
base, and that he did so, with permission to use North's name.
North directed Rodriguez not to inform Gregg and his office about
this (Rodriguez's) involvement, and he didn't. Moreover, the major-
ity's own account of events indicates that Rodriguez uas first
considered by North as a possible source of assistance when Col.
Steele suggested that idea on September 16. 1985; 6 days after this
supposed meeting between North. Steele, and Gregg. Therefore,
there is no evidence to suggest that North's private resupply oper-
ation was discussed on September 10. And finally, the reference
made in Chapter 3 to Gregg not knowing about a resupply oper-
ation prior to the summer of 1986 is not even accurate A close
reading of the \'ery pages cited by the majority to Gregg's deposi-
tion indicates that he admitted to knowing in early 1986 about an
informal, non-lethal, supply operation funded by .American citizens.
Gregg Dep., 6/18/87 at 26-28.

502

Chapter 7

his staff about the effort on May 1.'^ Nevertheless, a
scheduling proposal dated April 6, and a very short
April 30 briefing memorandum, described the purpose
of the meeting as being, in part, to provide a briefing
about "resupply of the Contras."" It is not clear how
this language got into these documents.* Whatever
the explanation, the people present at the meeting —
former Senator Nicholas Brady, Gregg, Colonel
Samuel J. Watson III (Gregg's deputy), and Rodri-
guez— all said they were certain resupply never was
discussed with the Vice President,'* and the Commit-
tees have no reason to doubt these statements. Neither
do the Committees have any reason to suspect that
Watson or Gregg knew about North's involvement at
this time.

Let us shift focus now to August 1986.** On
August 8, Rodriguez met with Gregg and Watson and
told them about North's involvement with the resup-
ply operation and possible profiteering by Secord and
his associates.*** Rodriguez's disclosures on the
eighth of August, and Gregg's ensuing conversations
with North's deputy, Robert Earl, prompted Gregg to
call a multi-agency meeting on August 12 to alert the
agencies of the problems Rodriguez felt deserved
their attention.'* In other words, when Bush's staff
became aware that some aspects of the resupply effort
might be harmful to the Resistance, the staff met with
the appropriate agencies (State, CIA and Defense)
and told them of the potential problem. Gregg did
not, however, bring the matter to the Vice President's
personal attention.

• Phyllis Byrne, the secretary in the Vice President's offices who
typed these memos, testified that after Rodriguez had requested the
appointment, she asked Colonel Watson about the visit's purpose.
She said that Watson gave her the language she used for the
"purpose" section of the scheduling proposal when she typed it on
April 14. Two weeks later she simply reused the same language for
the Vice President's scheduling memorandum. (Byrne deposition,
June 16, pp. 12-13 ) Colonel Watson has testified not only that he
has no recollection of providing Ms. Byrne with that information,
but reiterated that he would have had no reason at that time to
connect Rodriguez with resupply at all. Furthermore, Watson said
that he had no recollection of reviewing the scheduling memoran-
dum either alone or with Rodriguez before the meeting. (Watson
deposition, June 16, pp. 27-40.) Similarly, Gregg does not remem-
ber reading that language at either the proposal or memorandum
stages, and says he would never have phrased such a discussion in
that manner. (Gregg deposition. May 18, pp. 32-33.)

••Watson's notes, which were exhibits to his deposition, indicate
that three times during the first week of August 1986, either North
or Earl made resupply-related references to Watson regarding Ro-
driguez's activities in Central America. Each time, according to
Watson, he asked about the statements, only to be rebuffed.
(Watson Dep., 6/16/87, at 43-55.) Ironically, the apparent purpose
of these asides, according to Watson, was to get him (and Gregg)
to "admonish" Rodriguez about whatever it was he was supposedly
doing to harm the resupply effort.

•••According to all three, however. Rodriguez did not outline
his own resupply role until December 1986, weeks after North had
been reassigned. (Rodriguez Test., Hearings. 100-3 5/27/87, at 315;
Rodriguez Dep.. 5/1/87 at 43; Watson Dep., 6/16/87 at 34; Gregg
Dep., 5/18/87 at 81.

National Security Council Staff

Robert McFarlane and John Poindexter appear to
have had different views of what the President
wanted, and what the law would allow, the NSC staff
to do. It is important to be clear, however, that with
the possible exception of some small fraction of NSC
staff salaries, overhead, and small amounts of travel
expenses — all of which could legitimately have been
used in any event to maintain contact by the NSC
staff with the Resistance leadership and others — no
appropriated funds were devoted to the efforts dis-
cussed below.

Robert McFarlane testified that he believed (1) that
the NSC staff was covered by the Boland Amend-
ment, and (2) that one of the principal purposes of the
amendment was to prevent the government from rais-
ing funds in support of the Resistance.^" He testified
that he took this position for political reasons, not on
the basis of an analysis of the law. 2' It should be
noted, however, that although McFarlane says he was
quite vocal on the point of NSC coverage. Command-
er Paul Thompson, formerly the NSC's legal counsel,
has a different recollection. Thompson said that he
remembers a discussion in which he and McFarlane
considered whether the NSC might conceivably be
covered and then decided that the issue was moot
because nothing the NSC staff was doing would be a
violation even if it were covered. ^^ Thompson also
remembered a conversation with Bretton Sciaroni, the
counsel for the Intelligence Oversight Board.

I told him that we at NSC Staff had already
determined that the NSC Staff was not an intelli-
gence agency under that definition. But the real
message I left with him was that McFarlane had
already represented to the members of Congress
that whether or not we were subject to the
Boland Amendment, we considered ourselves
subject to it, or words to that effect. The reason
being that Mr. McFarlane had already made the
determination that we had not violated the
Boland Amendment, so it was almost a moot
argument to make.^^

Whatever McFarlane's contemporaneously ex-
pressed view of the Boland Amendment might have
been, he testified that his understanding of the role of
the NSC staff was that it was limited to providing
political support and direction for the Resistance
movement, and did not include fundraising.^* He also
specifically denied that the President intended him to
provide military assistance to the Contras.^^ Poin-
dexter testified, however, that he was familiar with,
and approved the details, of North's work as a
"switching point" for activities related to the demo-
cratic Resistance advice.^® Poindexter also said that
the President was generally aware of North's role.

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Chapter 7

and that he beheved the President had implicitly au-
thorized the NSC staffs efforts. ^^

Whatever the differences in their understandings,
McFarlane and Poindexter both chose North to carry
out their instructions. North claimed his activities
throughout were fully authorized. McFarlane claimed
that several of North's actions during his tenure were
not authorized, but Poindexter said that he had gener-
ally authorized North's actions.

During McFarlane's tenure as National Security
Adviser and after the previously appropriated funds
had been used up in or about June of 1984, the Na-
tional Security Council Staff engaged in a series of
activities described below.

Fundraising From Third Countries

Beginning in June of 1984, Country Two provided
what ultimately amounted to $32 million for support
of the Resistance; the support was provided at the
level of $1 million per month in 1984, and then in a
lump sum of $25 million in early 1985. It is clear from
the hearing record that the NSC staff was engaged in
an effort to encourage Country Two, and other third
countries, to support the Contra cause, both political-
ly and financially. Even though McFarlane and North
both claim not to have "solicited" funds, McFarlane
personally encouraged contributions, unsuccessfully
from Country One and successfully from Country
Two. North, occasionally using Gaston Sigur who
was then on the NSC staff. General Secord and Gen-
eral Singlaub, encouraged contributions from several
other countries as well. It is important to note, how-
ever, that there is no evidence of any kind in the
records of the Committees which suggests that any
quid pro quo was sought or received in return for any
third country contribution to the Resistance.

Raising Private Funds in Support of the
Resistance

Beginning in the spring of 1985, a group of private
individuals began to raise funds to support the Contra
cause. North met with the fundraisers and their poten-
tial contributors, alone and in small and larger groups,
and helped acquaint these groups with the
humanitarian and military needs as well as the politi-
cal and military situation of the Resistance. In addi-
tion, North helped to arrange White House briefings
for certain groups of contributors on a few occasions;
the President spoke at some of these briefings. The
President believed, and was consistently briefed, that
the private groups were using their funds to purchase
television advertising to promote the Contra cause
and to engage in other such public awareness pro-
grams on behalf of Administration policies. There is
no evidence that North was aware of people using the
promise of such meetings to obtain contributions of a
certain minimum amount. Generally, North did not
personally solicit funds from contributors, although

the record is clear that he was acting in general
concert with individuals who were soliciting funds
and that he did direct the disposition of some of the
funds so raised. From the record, it also appears that
the nature of North's presentations to groups was that
he tried to present the reasons behind the President's
policy of support for the democratic Resistance and
opposition to the Sandinistas. These presentations ap-
parently were similar, if not identical to ones he gave
to many other groups of noncontributors to persuade
them to support the President's policy.

Assisting in Arms Purchases and Humanitarian
Supplies

During McFarlane's tenure as NSC Adviser, North
asked General Secord, by then a private citizen, to
assist the Contras in their arms procurements. North
met with Secord and, on other occasions, with Gener-
al Singlaub to obtain their assistance as private citi-
zens. The arms were purchased with third country or
private funds. It seems clear that Colonel North dis-
cussed the proposed procurements with Resistance
leaders, and also made his own suggestions for appro-
priate procurements.

North appears to have had detailed knowledge
about what was being shipped, and the shipment de-
tails necessary to coordinate air drops with the Resist-
ance. In fact, there is evidence that North intervened
on at least one occasion with officials of a foreign
country to persuade them to allow a proposed ship-
ment of arms which had been purchased with private
funds to proceed.28 McFarlane testified during his
second appearance that he did not regard these activi-
ties as having been authorized by him.^^

Giving Military Advice to the Democratic
Resistance

In addition, during McFarlane's tenure and during
the period of the most restrictive Boland Amendment,
North appears to have given strategic military advice
to the democratic Resistance. Secord testified that
North actively participated in a "program review"
meeting in Miami in July 1985, a principal purpose of
which was to discuss the overall military situation of
the Resistance and to decide how their military effort
should be reoriented.^" North provided military
advice of a general nature to the Resistance on the
other occasion as well.=" McFarlane claimed he was
not informed of the Miami "program review" meeting
by North, or of other specific occasions on which
North gave military advice, although he also testified
that he did not regard such advice as central to the
Boland Amendment's restrictions. ^'^ North specifical-
ly denied having given tactical military advice on
specific military operations. ^^

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Chapter 7

Giving Intelligence to the Democratic Resistance

During the entire period of the Boland Amend-
ment's restrictions, both the CIA and the NSC were
expected to continue obtaining information about the
activities of the democratic Resistance as part of their
normally assigned duties. Obtaining detailed
knowledge about the Resistance by all normal intelli-
gence gathering methods, including direct conversa-
tions with Contra leaders, was clearly consistent with
the law at all times.

During McFarlane's tenure, North provided intelli-
gence to the Resistance by conveying information
provided to him by certain officials of the Central
Intelligence Agency who testified they did not know
North was passing it to the Contras. Some of the
information was principally of military significance,
and was provided for defensive purposes, while other
information could have been used for humanitarian
purposes as well. The CIA could not have passed the
information directly, under the agency's own cease
and desist order, which, as we indicated earlier, went
well beyond the requirements of the Boland Amend-
ment. North also developed an informal intelligence
source of his own in the person of Robert Owen,
whom he used as a secret courier and transfer agent
for cash and intelligence.

Private Air Resupply Network

In the fall of 1985 after the "program review"
meeting in Miami, North approached Secord to devel-
op a privately funded private air resupply network to
support the Resistance. General Secord proceeded to
establish this network during late 1985 and ran it
through early October 1986, when a resupply airplane
carrying Eugene Hasenfus was shot down over Nica-
ragua. This air resupply network delivered both lethal
and humanitarian cargo to Contra forces operating
within Nicaragua. The air resupply network was
funded by private contributions, the Iran arms sales
and some third country funds.

As part of the development of the resupply net-
work, North, through other U.S. officials in Central
America, such as CIA station chief "Tomas Castillo"
and Ambassador Lewis Tambs, sought the creation of
an emergency airstrip in a neighboring Central Amer-
ican country. It appears that this was done with Ad-
miral Poindexter's approval; McFarlane, who had es-
sentially left the NSC by then, claimed he did not
know about the airstrip or about instructions to Am-
bassador Tambs to open a "Southern Front."
^''McFarlane testified that North did not tell him
about Secord's involvement in this resupply network,
though he stated that North did indicate that "occa-
sionally" air deliveries were made to the Resistance.
McFarlane denied he had authorized North to direct
the air resupply of arms to the Contras. ^^ Poindexter
said he was aware of the air resupply network. He
regarded it as a byproduct of Colonel North's other

efforts for the Resistance, within the scope of the
President's direction to the NSC staff.^" In the course
of the resupply effort. North provided some people
with KL-43 encryption devices. This occurred after
the law was changed to permit intelligence agencies
to provide communication assistance and information
to the Resistance.

Conclusion

In sum, the NSC's activities, aside from its normal
duties, generally fell into two categories. One in-
volved information sharing with the democratic Re-
sistance and encouraging contributions that — with the
possible exception of the diversion — were perfectly
legal. Activities such as these could not constitutional-
ly have been prohibited by statute. The second cate-
gory involved North's military advice to the Resist-
ance and detailed coordination of the resupply effort.
Since the NSC was not covered by the Boland
Amendment, these activities were clearly legal. But
even if one assumes the NSC were covered, we
showed earlier that the amendment did not prohibit
general military advice and resupply coordination.
Some of these latter activities, however, perhaps
could have been reached by Congress without violat-
ing the Constitution. It was to protect these unpopu-
lar, but legal activities from possibly being made ille-
gal that we believe the NSC staff misled Congress.
There is no evidence that the President knew more
than general information about this side of North's
activities, or anything at all about the deceptions of
Congress.

State Department

Little or no evidence surfaced during these hearings
to suggest that the State Department was used wit-
tingly or unwittingly to circumvent the Boland
Amendment. Individuals such as Louis Tambs (Am-
bassador to Costa Rica) and Robert Owen (who had a
contract relationship with UNO under a grant agree-
ment with the Nicaraguan Humanitarian Assistance
Office, or NHAO) did assist North with the resupply
effort, but this was done without the knowledge and
blessing of their superiors at the Department. Owen's
assistance arguably took place during his "off" hours,
but Tambs' assistance with the establishment of the
Point West airfield was clearly done in the course of
his long, ambassadorial day. Even Tambs' activities,
however, fell within the normal, legal and constitution-
ally protected scope of activity for an ambassador. His
error was to bypass his superiors in the State Depart-
ment by reporting outside channels to North.* That

•Ambassador Tambs had been a friend of Col. North's going
back to 1982 when Tambs was a consultant to the NSC Later
when Tambs was the Ambassador to Colombia, North personally

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Chapter 7

is, the error — like that of a CIA station chief, "Tomas
Castillo" — was a matter of violating his own depart-
ment's policy rather than violating the law.

Robert Owen's activities received a great deal of
attention during the early days our public hearings.
The examination of his role during the period of his
NHAO contract seem to proceed upon two suspi-
cions: (1) that North had placed Owen in the NHAO
program to be his eyes and ears in Central America;
and (2) that North had also done this to gain access to
NHAO facilities to assist the covert resupply effort.
The major problem was how to reconcile his "off-
hours" assistance with lethal aid drops, with the hu-
manitarian purposes NHAO was designed to accom-
plish. The Boland Amendment clearly would have
prohibited the use of NHAO resources for lethal as-
sistance, and Owen did not step over that line. As a
limitation on appropriations, the Boland Amendment
does not cover a person's private time. However,
Owen's contract with NHAO reads as if it may well
have prohibited such off-hours activity, even if the
Boland Amendment did not.^' In any event, Owen
was not totally forthright with the State Department
about the assistance he gave North. In that respect, he
joins a long list of people whom North persuaded to
work outside normal channels.

Elliott Abrams

The main State Department focus of the Nicaragua
side of the Committees' investigation, however, was
Elliott Abrams, Assistant Secretary of State for Inter-
American Affairs. Abrams was the main spokesman
for the Contra program.^® As chairman of the Re-
stricted Interagency Group (RIG), Abrams therefore
was a natural object of suspicion for those opposed to
Contra aid.

The theory that seemed to structure the investiga-
tion of Abrams' role was that he either knowingly
assisted and advised North, or that he realized what
North was doing but ignored it to let North keep the
Resistance alive while the Administration fought for
renewed Congressional aid. There was a third possi-
bility testified to by Abrams, however: that North
effectively kept Abrams in the dark. The evidence
more clearly substantiates what Abrams said than
either of the other, more conspiratorial theories. In
this respect, Abrams was more of a victim than a co-
conspirator. He was deliberately kept uninformed by
North and Poindexter, just as were the President,
Secretaries Shultz and Weinberger, the Intelligence
Oversight Board's Bretton Sciaroni, and the United
States Congress.

Abrams was not engaged in any conduct that even
remotely qualified as a violation of the Boland prohi-

bitions or of any other law.* Indeed, on the one
occasion he was presented with information about the
activities of the CIA's Tomas Castillo, he immediately
went to the Secretary of State^*. This happened
about three weeks after Hasenfus's airplane had been
shot down. During this period, Abrams appears to
have been misled by North and by CIA officials. As a
result, he repeatedly informed Congress, the press and
the Secretary, to his later chagrin, that there was no
Government involvement with the resupply effort.*"
As he himself said during our hearings, his statements
were "completely honest and completely wrong'"".
So convincing was Abram's testimony on this point in
our hearings that Senators Rudman and Mitchell, and
House Vice Chairman Fascell, characterized Abrams
as having been hung out to dry.**

An even better barometer of the extent to which
Abrams had been kept in the dark by North was his
testimony regarding his knowledge of critical key
players and their involvement in the resupply effort
and in the Southern Front. With regard to the resup-
ply, Abrams testified that he did not know General
Secord, Robert Dutton, Richard Gadd, Rafael Quin-
tero or Felix Rodriguez, let alone what role they
were playing in the resupply effort.*^ He stated cate-
gorically that neither he nor anyone else at State
knew that Owen, in his "off-hours", was assisting
North in coordinating lethal drops to the Resistance.
He asserted that if he or anyone at State had known
this, Owen would have been fired immediately.*^
There is no evidence to challenge those assertions,
nor were they challenged by the Committees.

Some on these Committees questioned whether
Abrams lived up to the instructions Secretary Shultz
gave him to "Monitor Ollie".** Underlying the ques-
tions seems to have been an assumption that Abrams
knowingly averted his glance. To reach this conclu-
sion, however, one has to believe that everyone in
government always should act on the assumption that
his or her colleagues are potential liars. Business
would then be conducted through investigative tech-

saw to it that troops were sent to the embassy in Colombia to
protect Tambs when his life was threatened by drug dealers. Tambs
Test., Hearings, 100-3. 5/28/87. at 366-67.

• A clear indication of the extent to which the State Department
attempted to comply with the Boland Amendment is the level of
debate within the NHAO program over what constituted humani-
tarian aid. As Elliott Abrams testified:

"This was not something we did carelessly. I remember . . .
Ambassador Deumling coming to a RIG meeting and saying
the Contras have asked for wrist watches, can I pay for wrist
watches. . , . This was deadly serious because of the legal
restrictions. We actually debated. Of course, wrist watches
weren't lethal aid. but were they humanitarian aid? . . . We
ultimately decided wrist watches were okay " Abrams

Test.. Hearings. 100-5. 6/2/87. at 35-36.

"Abrams Test., Hearings. 100-5. 6/2/87. at 131. 142. 154. In
chapter 7 of the Majority Report. Assistant Secretary Abrams is
quoted as having admmitted to these Committees that certain state-
ments that had been made by him were "completely wrong." For
some reason, the majority failed to point out that Abrams preceded
that admission by noting that while the statements were completely
wrong, they were "completely honest " Id. at 65.

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Chapter 7

niques rather than through normal comity. Congress
does not apply this standard when it looks at Admin-
istration presentations to Congressional Committees,
nor should it apply it to relationships inside the Ad-
ministration. Abrams — like Secretaries Shultz and
Weinberger on the Iran initiative, and like several
Committees of Congress that asked about North's
Contra assistance — proceeded on the assumption that
his colleagues were telling him the truth. If they were
not, the blame surely belongs more to the deceiver
than the deceived.

The other major area of inquiry regarding Abrams
was his November 25, 1986 testimony before the
Senate Select Committee on Intelligence on the clear-
ly lawful solicitation of funds from Brunei. With
regard to the solicitation itself, the only problem that
seemed to raise any concern during the hearings was
the fact that Abrams gave the Brunei representative a
mistyped Swiss bank account number that was pro-
vided by Colonel North instead of using another
number supplied by the Chief of the CIA's Central
American Task Force. The account number North
intended to give Abrams was one controlled by Gen-
eral Secord and Albert Hakim. However, despite
theories and suspicions to the contrary, Abrams' se-
lection of that account, on the advice and with the
blessing of his superiors at State, was based on his
belief that it was an account controlled by the Resist-
ance. His selection of that account was not part of a
clandestine venture calculated to assist Lake Re-
sources and the Secord-Hakim enterprise.*^

There is no question that Abrams exercised very
poor judgment in his SSCI testimony by attempting
to answer questions regarding third country fundrais-
ing in a technically correct, but misleading, manner to
protect the confidence of Brunei. Abrams himself de-
scribed it as an indefensible and foolish act that he
greatly regretted.*® He surely could have asked the
Senators to let him refrain from answering the ques-
tion until he had a chance to discuss the matter with
the Secretary. Ultimately, Abrams apologized to the
Senate Intelligence Committee for his error, six
months before these hearings began.*'

The CIA's Role

The Central Intelligence Agency was not a major
player in the Administration's efforts to help the Nic-
araguan Resistance during the period of the prohibito-
ry Boland Amendments. That was partly because the
amendments explicitly limited the CIA and other in-
telligence agencies. In addition, the CIA, as an
agency, wanted to avoid even coming close to the
edge of the law. As Admiral Poindexter said in our
public hearings, "They wanted to be careful and Di-
rector Casey was very sensitive to this, they wanted
to keep hands-off as much as they could." **

Of course, the agency could not simply keep hands
off For one thing, it was expected throughout this
period to continue intelligence gathering and political
support for the Resistance. At the same time, the CIA
felt it had to be responsive both to Congress's man-
date and to the Administration's strong support for
the Contras. The result was an extremely difficult
situation for career professionals who had to imple-
ment policy at the operational level. The Chief of the
Central American Task Force described his feelings
this way:

I knew almost from the beginning that I was
caught between the dynamics of a giant nutcrack-
er of the Legislative on the one hand and the
Executive on the other, and I was in the center
of a very exposed position.*^

The agency had been traumatized during the post-
Vietnam Congressional investigations of the 1970s.
The Latin American division was traumatized once
again when five reprimands were issued as a result of
the agency's role in helping to prepare a manual for
the Resistance that some interpreted as talking about
assassination, 5° a technique the U.S. was explicitly
prohibited from using. As a result, the CIA was very
concerned throughout this period with protecting
itself, and the government's future intelligence capa-
bility, from political retaliation.^' Two different ef-
fects flowed from this. First, as a matter of internal
policy, the CIA regularly issued extremely conserva-
tive guidelines that avoided taking legally defensible
actions for political reasons. Second, we believe this
posture, and Director Casey's own protective feelings
toward the agency, contributed to Casey's decision to
work closely with Col. North.

Because of their efforts to avoid both sides of the
nutcracker, four of the CIA's career civil servants
find themselves the subject of persistent reports sug-
gesting that their careers may now be on the line. The
four include (l)"Tomas Castillo" (a pseudonym), who
was chief of station in a Central American country,
(2)the Chief of the Central American Task Force,
C'C/CATF") (3)Duane (Dewey) Clarridge and
(4)Clair George, the deputy director for operations
(DDO). Castillo is now on duty pending a final deter-
mination of his status. The others have been the sub-
ject of press reports. We discuss the major allegation
about Clarridge in our section on the legal issues
raised by the Iran initiative. For the others, the main
questions all grow out of the CIA's relationship with
the Nicaraguan democratic Resistance during the time
of the Boland Amendments.

There is substantial conflict in the testimony we
have received, particularly between Castillo and Task
Force Chief It is impossible for us to resolve all of
these conflicts in our own minds. Our bottom line
judgments, however, are as follows:

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Chapter 7

— The CIA tried as an organization to work within
the Boland Amendment, and succeeded.

— The essential dispute between Task Force Chief
and Castillo is whether Task Force Chiefs policy
guidelines were clearly articulated, whether Castillo
overstepped those guidelines, and whether Castillo
properly informed his superiors of what he was doing.

— The policy guidelines themselves, which should
have been written more clearly, were issued for politi-
cal reasons, and not because Task Force Chief
thought Castillo had overstepped the CIA's legal au-
thority.^^

— Finally, we do not believe these individuals de-
serve to pay with their own careers for the political
guerrilla warfare that was going on over Nicaragua
between the President and a vacillating Congress.

We will not dwell on the legal issues here. At the
end of the Boland Amendment chapter, we discussed
an internal CIA legal memorandum with which we
agree. That memorandum, it will be remembered,
argued that it was legal for the CIA to:

provide information involving safe delivery sites,
weather conditions, hostile risk assessments and
the like to assist the Nicaraguan Resistance in
their resupply activities where the CIA's role did
not amount to participating in the actual delivery
of material or in planning, directing, or otherwise
coordinating deliveries during the course of or in
the context of specific military engagement.^''

This legal opinion should have been written in early
1986, instead of a year later. ^^ But it was not, and
people had to make judgments on the ground. We
believe their judgments were legally correct. Never-
theless, a few of them have been controversial.

In judging the agency's activities to support the
Resistance, it is important to keep the level of assist-
ance in perspective. Tomas Castillo was the CIA offi-
cial who worked most directly with the Resistance's
private resupply network. He apparently was far
more active in this respect, for example, than the
passive stance of the CIA elsewhere in Central Amer-
ica. Despite this, he has testified that he spent only
about one-tenth of one percent of his time in 1986
facilitating the resupply effort. ^^

The Task Force Chief was a member of the Re-
stricted Interagency Group, or RIG, along with
Abrams and North. In this capacity, he had plenty of
opportunity to see how North had become the "point
man" for the Administration's Contra policy. Accord-
ing to the Task Force Chief constant feuding among
RIG members before Abrams became Assistant Secre-
tary, eventually led to a situation in which power
gravitated toward North. ^^ In addition. North man-
aged to develop a relationship with Castillo,* in

* As with Tambs, North developed a personal friendship with
Castillo. The North and Castillo families vacationed together in
February 1986. See Castillo Test., Hearings. 100-4, 5/29/87, at 8.

which Castillo — like Ambassador Tambs — was willing
to work with North outside of normal channels. Cas-
tillo said he disagreed with the Task Force Chief on
various policy matters and hoped he could get his
voice heard through North. ^' North claimed that
Casey knew Castillo reported to North. ^*

The relationships between Castillo, North and the
Task Force Chief obviously led to some misunder-
standings and missed communications. The main
issues on which these Committees focused were the
development of an emergency airfield and Castillo's
role in passing useful overflight intelligence to the
private suppliers. The last issue also has led to a
dispute over the Task Force Chiefs instructions to
Castillo and Castillo's response.

Southern Front Air Strip

Castillo and the Task Force Chief corroborate each
other, and the other evidence we have seen, on the
absence of a significant CIA role in conjunction with
the construction of a privately owned, emergency
landing strip to help the Southern Front resupply
effort. Castillo did admit that he was "probably" the
first to have the idea that the air strip should be
built. ^^ Castillo testified that a resupply operation was
a logistical necessity to supply the insurgents he
wanted to see moved out of a neighboring country
into Nicaragua. He considered the move to be impor-
tant politically, because the Resistance's presence in
the other country was causing resentment in that
other country.^" The airstrip was in turn required for
the success of the resupply operation.

Castillo himself upon specific instructions from the
CIA,^* took no concrete steps to assist in the plan to
construct an airstrip, other than to visit potential sites
on one occasion, on his own decision, as an observer
with Robert Owen.®^ Castillo specifically denied that
he instructed Ambassador Tambs to seek authoriza-
tion for the airstrip from local officials. ^^ He testified
that Ambassador Tambs' goals with respect to cre-
ation of a Southern Front were based on instructions
Tambs received from Oliver North, but Castillo
denied North asked for the airstrip.^* Castillo felt his
role was "passively [to] monitor" the activities of the
private benefactors with respect to the airstrip; he
knew those activities were being coordinated by
North, s 5

The Task Force Chiefs testimony parallels Castil-
lo's on these points. There is no evidence to indicate
that the Task Force Chief on his own or on behalf of
the Agency, instructed or suggested to anyone, that
Castillo should establish a Southern Front for the
Contras. He categorically denied (as did Elliott
Abrams) ever knowing about, let alone agreeing to.
North's alleged discussion with Tambs and Castillo
about the necessity for opening a Southern Front.®®
Indeed, the first time he can recall learning about the
airstrip was in a brief conversation with Castillo at a

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Chapter 7

meeting on December 9, 1985. The Task Force
Chiefs best recollection was that he was "worried
and concerned" when Castillo indicated that it was
being built and that Castillo did not mention who was
doing the building. He simply assumed that it was
being built by the private benefactors and the Task
Force Chief cautioned Castillo to make sure that
whatever he was doing was legal.®'

Several months afterward, when North started
showing pictures of the work being done on the air-
strip at the conclusion of a meeting of Administration
officials, the Task Force Chief had to pull him aside
to caution him about the wisdom of showing such
pictures. It was at that point that the Task Force
Chief became concerned that North might not only
be exceeding the boundaries of the politically accepta-
ble in his dealings with this highly controversial pro-
gram, but flaunting it before others. He realized he
did not have the power to control North. "I was
going to keep the agency and myself within the
bounds of propriety and legality," but "there were
things that were beyond my powers." **

Providing Intelligence for Air Resupply

In February 1986, General Secord complained to Di-
rector Casey that the air resupply effort was not get-
ting any help from the Central American Task
Force. ®^ At about this same time, in February, North
distributed KL-43 communications encryption de-
vices that he had obtained from the National Security
Agency to Secord, five people in Secord's resupply
network and Castillo. North also kept one for him-
self" It should be noted that these devices were
distributed after Congress, in December 1985, passed
a law specifically authorizing intelligence agencies to
share intelligence with the Resistance, and to spend
money to help the Resistance with communications.
Castillo testified that he received a KL-43 machine
from North, through Rafael Quintero, in order to
relay drop zone information between the Southern
Front Commanders to the private benefactors.''*
From this point forward, Castillo was described by
both General Secord and Robert Dutton as having
been very helpful — Dutton used the word "critical" —
to the resupply effort. '^ Castillo's facilitation of the
efforts of the resupply operation involved the passing
of information such as the location of proposed drop
zones and times back and forth from the southern
front commanders to the private benefactors.''^
During the Spring, Castillo also requested intelligence
such as hostile risk assessments and flight vectors
from the CIA to support the flight activities, and filed
intelligence reports concerning the results of these
activities.'''' Castillo specifically denied that he was
involved in the planning of any of the resupply
nights.''^ He also denied, in response to a point made
by Dutton, that there was any United States Govern-
ment involvement in obtaining permission for the re-

fueling of two resupply flights at a Central American
country airport.''®

Castillo testified that the Chief of the Latin Ameri-
can Division ("Division Chief) and the Task Force
Chief knew of his activities,'''' and the above cited
cable traffic from the Spring would bear him out. The
first successful lethal air drop was in April, and was
supported by cabled intelligence from headquarters.
No one in the operations directorate knew, however,
about the KL-43 until the Division Chief designate's
maiden visit to the country in April 1986.''* Castillo
testified that he asked the new Division Chief for
assurance that relaying information with the KL-43
between the private benefactors and the Resistance
was legal under the Boland Amendments. He said
that the Division Chief designate assured him he
would look into it upon returning to Washington.''*

The Task Force Chief testified that his superior, the
Division Chief, never informed him of this discussion
with Castillo.*" The Task Force Chief also said that
he did not know about Castillo's direct contact with
the private benefactors until a May 1986 CIA offi-
cials' meeting that he, Castillo and the Division Chief
attended. He said he was surprised to learn at that
meeting how closely Castillo had been dealing with
the private benefactors.*' At the meeting, Castillo
said that he let it be known that he thought the fact
that he was the communications link between head-
quarters, the Resistance and the supply operation, pre-
sented a "problem." He suggested, therefore, that the
agency train someone from the Resistance to take
over that role.*^

On May 28, the Task Force Chief sent Castillo the
following message:

[Headquarters] wishes to reaffirm with . . .
guidelines that no repeat no . . . materiel or
monetary support can be provided to UNO/FDN
or UNO/South representatives. . . . can provide
advice and commo [communication] equipment
as approved by hqs. and can engage in intelli-
gence exchange as approved by hqs.*^

After this cable, the agency worked to find and
train an UNO communicator. At this point, the Presi-
dent's $100 million aid package was going through
the Congress. On June 24, a Resolution of Inquiry
into North's support of the Resistance was filed in the
House, in a move whose timing was obviously meant
to influence floor votes. The next day the House, in a
major reversal, voted an aid package for the Contras.

On July 12, just 17 days after the House vote, the
Task Force Chief sent a vaguely worded, confusing
cable that read, in part, as follows:

Headquarters has reviewed our commitment to
provide secure communications. . . . We have
taken a second look at the commo link. To date
we have maintained our distance from the private

509

Chapter 7

benefactors (PB) who are providing assistance to
the Resistance and have repeatedly briefed Con-
gress that we do not have any relationship with
the PB's. The proposed program of assistance
would change our policy. . . . There have been
numerous allegations of violations of law by
PB's. We do not have a firm handle on whether
all of the allegations floating around are
false. . . . We have come too far at this time to
let the solid operations that [deleted] has built to
be jeopardized by elements which we are unable
to control.**

The Task Force Chief and Castillo have very dif-
ferent interpretations of this cable. The Task Force
Chief says it was a "cease and desist" order, especial-
ly in light of the one he had sent in the end of May.*^
It is interesting to note, however, what it was he was
supposed to cease and desist doing. The Task Force
Chief describes the cable as telling Castillo, in effect,
to break all contact with the private benefactors.*^
Based on his own testimony, the Task Force Chief
assumed Castillo would still continue to get informa-
tion to the resupply operation, but would work di-
rectly with the Resistance rather than the private
benefactors.*'

Castillo, in contrast, saw it as saying that what he
was doing "to date" was acceptable. The outstanding
feature of the cable, from his point of view, was that
headquarters was telling him he was not going to get
a communicator, but seemed to expect him to contin-
ue to be ready to get intelligence information to the
resuppliers. "They were satisfying their situation, but
not mine," Castillo said.**

As we read the cable, in context, the following
points seem to stand out: (1) Headquarters was con-
cerned primarily about the current legislative situation
in Congress, and with representations that had been
made to Congress. The concern, in other words, was
political rather than legal. (2) Castillo had to address
a tough set of problems on the ground. (3) The cable
was not written clearly, if the intent was "cease and
desist." Cease and desist orders can be, and often are,
written simply without all of this cable's ambiguities.
(4) If the Task Force Chief was trying to tell Castillo
to use an UNO "cutout" to pass information to the
resuppliers, he should have said so clearly. Of course,
there would have been no legal difference between
working directly with the suppliers or indirectly,
through the Resistance. The difference, as seen by the
Task Force Chief, was a domestic U.S. political one.

We want to make clear, as we interpret the cable,
that we are not disputing the Task Force Chiefs
statements about his intentions. If we assume both the
Task Force Chief and Castillo are telling the truth, as
seems likely to us, it would mean that the Chief sent a
poorly worded cable that let the sender and receiver
reach different conclusions, with each reading his
own problems and preferences into its meaning. The

problem, in other words, appears to us to have been
one of missed communications. That would not be the
first time this has happened, nor will it be the last.
Administrative errors such as these should not force
the end of a career.

Congressional Testimony of October
1986

In September, when the Task Force Chief learned of
the final airdrops coordinated by Castillo, he assumed
that Castillo must have somehow found a way to
assist without being in the middle of the operation
and thereby placing the Agency at political risk.*^
The political problem came to a head in mid-October,
after Eugene Hasenfus' airplane was shot down, when
one of the Agency's people learned that Castillo had
used a KL-43. Upon relaying that information to the
Task Force Chief and Division Chief, an internal in-
vestigation was instituted.

Assistant Secretary of State Abrams was informed,
on October 23, of this potential U.S. Government
involvement in this network.^" Abrams immediately
informed the Secretary of State about this surprise
turn of events which potentially undercut his prior
Congressional testimony and media statements that
there was no United States Government involvement
with Hasenfus or with the resupply effort. This may
have been particularly surprising to Abrams, because
the Task Force Chief and the Deputy Director for
Operations, Clair George, had been sitting next to
him when he gave that unqualified testimony. Ques-
tions about George's statements, and the Task Force
Chiefs silence in the face of the Assistant Secretary's
blanket denials, became a third major focus of the
Committees' inquiry into the CIA's role.

George had advised the House Intelligence Com-
mittee on October 14, 1986, that the CIA was not
involved in "arranging, directing, or facilitating" the
private resupply missions.^' Significantly, George
stated that he could not speak for the rest of the U.S.
Government. ^^ Abrams spoke after George and ex-
panded the claim, without knowing its falsity, to
cover the whole government. The Task Force Chief
stayed silent. The Task Force Chief knew Castillo
had been "facilitating" the resupply effort in the
spring, but may have thought Castillo had not done
so in September.

In testimony before these Committees, George
stated that his denial was based on incomplete infor-
mation, that the CIA did not organize or conduct the
resupply operations, and that he wanted to protect the
CIA. He apologized for the problems caused by his
testimony. ^^ The Task Force Chief also said that he
regretted his silence in response to Clair George's
unqualified denial of any CIA involvement, and Sec-
retary Abram's denial of any U.S. Government in-
volvement in the Hasenfus fiight.^''

510

Chapter 7

One should not underestimate our concern over
misleading testimony. We are satisfied, however, that
this was not a byproduct of an orchestrated conspira-
cy to keep Congress in the dark.

Conclusion

The CIA had to work under difficult, politically
charged circumstances. To protect the agency, its
personnel steered a wide berth around the prohibi-
tions of the law. This was particularly difficult to do
in an environment in which people were dying for a
cause the Administration and the agency supported.
There were misunderstandings in management, and
errors in judgment, particularly in Congressional testi-
mony. But the blame for this situation must rest upon
unclear laws, and a vacillating Congressional policy,
at least as much as it does upon the career profession-
als who were faced with the Herculean task of imple-
menting the law.

Private Fundraising

The private fundraising activities in support of the
Contras conducted by Carl R. (Spitz) Channell and
Richard Miller received considerable attention in the
news reports surrounding the Iran-Contra affair. The
fundraising efforts were also the focus of early crimi-
nal prosecutions by the Independent Counsel, and
were explored somewhat during our public hearings.
They have also received significant attention in the
Majority's Report, where it is portrayed in a lengthy
chapter as a project devoid of proper purposes.

We cannot agree with the analysis and conclusions
of the Majority Report. We agree that a private fund-
raising effort organized and conducted by Mr. Chan-
nell raised funds for the Nicaraguan democratic Re-
sistance; and we agree that the manner in which the
fundraising activities were carried out can be criti-
cized. We are in particular concerned that a rather
sizable portion of the donated funds appears not to
have actually gone to the Contras. But we disagree
with the majority's theme that the fundraising activi-
ties represented an illegal conspiracy imbued through-
out with criminal intent and improper motivations.
Based on the evidence, we see the private contribu-
tors as being worthy of praise rather than scorn. For
the most part, their actions represented good faith
activities of well-intentioned American citizens moti-
vated by a genuine — and completely legal — desire to
do what they could to help the Contras in a time of
need. The private actions, especially those of the
donors, were patriotic responses in harmony with the
policies of the President that were designed to rebut
the growing spread of Soviet communism in North
America. Our basic conclusions are as follows:

— Channell developed the private fundraising orga-
nizations and controlled their solicitations. Colonel
North did not solicit money. He did not conspire with

Channell to commit tax fraud. Any suggestion that
North deliberately created or nurtured the fundraising
network to provide tax write-offs, tax expenditures, or
backdoor Federal financing for the Contras, is wholly
without support from the evidence.

— President Reagan had no specific knowledge of
the private fundraising efforts. He generally believed
the persons he met with had donated to a media
campaign designed to generate support for further
Contra funding by Congress.

— President Reagan met with individuals in the
White House to thank them for their long term sup-
port for his policies, not for a particular contribution
to Channell's organization.

— This investigation unfairly chastised conservative
fundraising efforts that supported foreign policy goals
inconsistent with those of the majority of Congres-
sional Democrats. However, the Committees failed to
investigate parallel fundraising efforts by organiza-
tions that support the Communist forces in Central
America, and use Members of Congress in their fund-
raising.

— Finally, the private fundraising investigation of
our Committees needlessly harassed private citizens
whose poUtical views happen to be contrary to the
views held by the majority, by asking them questions
that intruded on their privacy and were irrelevant to
the Committees' investigation.

The Channell-Miller Network

The Channell-Miller fundraising network developed
as a result of common interests and chance occur-
rences. The Committees have not uncovered evidence
that Colonel North sought to establish a private fund-
raising group or that he motivated any individuals
such as Channell and Miller to operate the necessary
organizations. The evidence demonstrates that Chan-
nell was the primary force behind the private fund-
raising organizations. Colonel North was a relatively
minor participant.^^

When Channell left the National Conservative Po-
litical Action Committee (NCPAC) in 1982 he pos-
sessed a valuable asset — a relationship with contribu-
tors willing to donate large sums of money to political
causes. He formed a network of organizations, one of
which was the National Endowment for the Preserva-
tion of Liberty (NEPL), incorporated in 1984 as a
501(c)3 tax exempt corporation. According to section
501(c)3 of the Internal Revenue Code, a tax exempt
organization must be "organized and operated exclu-
sively for religious, charitable, scientific, testing for
public safety, literary or educational purposes." *

• Channel! also formed several non-charitable organizations
around this time period. He formed the American Conservative
Trust (ACT) in 1984 as a Federal election political action commit-
tee. He also formed the American Conservative Trust State Elec-

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Chapter 7

NEPL was the major organization Channell used for
his fundraising in support of the Resistance, and it is
the one whose tax exempt status later became of inter-
est to the Independent Counsel.

Raising Funds for the Resistance

The idea of raising money for the Resistance was
Channell's. He identified the Nicaraguan Refugee
Fund Dinner held in Washington, D.C. on April 15,
1985 as the event that inspired him.^^ Following
President Reagan's speech at this dinner, Channell
recognized that his contributors were enthusiastic sup-
porters of the Administration's Central American pro-
gram. Channell initially intended to raise money for
an educational media program designed to win Con-
gressional support for U.S. aid to the freedom fight-
ers. He deviated from his original idea, however,
when he realized that his contributors would be inter-
ested in donating directly to the freedom fighters in-
stead of to a media campaign. Individuals working
closely with Channell believed he chose the content
of his fundraising themes for the purpose of drawing
out the resources of his wealthy contributors.^''

There has been an impression created that Channell
was working at North's behest. But Channell solicited
money for the freedom fighters (from John Ramsey of
Wichita Falls, Texas) two months before he even met
Colonel North. ^^ Colonel North attempted to dis-
courage Channell from raising money for lethal mate-
riel for the Contras on at least two occasions. ^^ Chan-
nell ignored this advice and directly approached
Adolfo Calero, leader of the FDN. It was after learn-
ing of the Channell-Calero discussions that Colonel
North directed the funds to their most efficient pur-
pose.'°°

Channell's Control

Another sign of Channell's control over his fund-
raising operation was his relationship with his many
consultants. Channell surrounded himself with con-
sultants who had substantive expertise and access to
influential political leaders. In March or April of
1985, he retained Richard Miller and his consulting
firm. International Business Communications (IBC).
Miller and his partner had a contract with the State
Department in which they worked closely with the
leaders of the Nicaraguan Resistance and with mem-
bers of the Reagan Administration. Channell used

tion Fund (ACT-SEF) as a state political action committee to take
advantage of state laws allowing corporate contributions to such
entities. In 1983. he formed Sentinel to lobby Congress under the
terms of Section 501(c) 4 of the Federal tax code. In the Spring of
1986, Channell formed the Anti-Terrorist American Committee as a
federal political action committee to focus on Congressional atti-
tudes towards terrorism. During this time period (1984-1986) Chan-
nell also formed other, less active organizations, including the
Channell Corporation which was his original for-profit consulting
corporation. See Channell Dep., 9/1/87, at 62-65.

IBC to work on practically every aspect of fundrais-
ing efforts for many issues. Channell also retained the
services of David Fischer,* Dan Kuykendall, Penn
Kemble, Bruce Cameron, Miner and Fraser, the
Robert Goodman Agency, Martin Artiano, Eric
Olson and others.

Channell perceived a division of responsibility
among his associates in the fundraising organization.
Channell was the creative force and developed the
fundraising concepts for his various projects, not all
of which related to the Nicaraguan Resistance. Daniel
Conrad handled the administrative matters. Miller,
Kuykendall, Fischer and the other consultants provid-
ed advice. '°' The clear indication from the record is
that Channell — not North or anyone else — was thor-
oughly in charge of the Channell network of organi-
zations.

White House Role

Although Channell was in charge of his network, two
kinds of questions have been raised about his relation-
ship with the Administration. One is whether the
President was using the power of his office to help
Channell raise funds for the Resistance. The other
deals with the level and legality of North's role.

President Reagan

Channell used White House briefings and photo
opportunities with the President as a way to thank
contributors for their support of Administration
policy.'"^ The individuals who had a photo opportu-
nity with the President, however, were not being
thanked for a single contribution to Channell's organi-
zations. Rather, the President thanked them for their
long-term support of his policies. As Channell said, "I
don't know of anybody who was thanked by the
President solely because of a single act." '"^ Channell
denies ever telling contributors they could meet with
the President if they made a large contribution to his
organization.** He did not believe he had any control

* David Fischer, a former special assistant to President Reagan,
was instrumental in arranging several meetings at the White House
for Channell's contributors. The Majority Report suggests that
Fischer and his colleagues, Martin Artiano and Richard Miller,
were involved in selling meetings with the President for a set fee.
While the evidence suggests that Channell viewed his consulting
payments to IBC. Fischer and Artiano as fees for White House
meetings, it appears that Fischer himself is as unaware of Channell's
view. Fischer's retainer agreement with IBC was based on
Fischer's understanding that he would provide consulting advice on
a large variety of Channell's public education projects, including
most notably a project regarding the strategic defense initiative,
and a series of messages celebrating the bicentennial of the U.S.
Constitution. Fischer's efforts to arrange meetings at the While
House represented a small percentage of his work for IBC.

••During the public hearings, one contributor. William B.
O'Boyle said that Channell told him he could meet with the Presi-
dent if he contributed $300,000. See Coors. Garwood and O'Boyle
Test.. Hearings. 100-3. 5/21/8'7. at 119. During the same day's

512

Chapter 7

over photo opportunities with the President and in
fact several requested meetings were not agreed to by
the White House.'"*

Colonel North

North briefed Channell's potential contributors and
directed the disposition of funds after Miller received
them. He did not solicit money from contributors and
made it his practice not to be present when money
was solicited by others. He made speeches to and met
with people from whom Channell was trying to raise
money.'"* North would brief potential contributors
on the weapons needs of the Contras and Channell
often would followup by asking for funds directly
related to Colonel North's briefing. At times. North
also prepared lists of humanitarian and military needs
of the freedom fighters that he turned over to Chan-
nell. We have not received any evidence to suggest
that the items North briefed contributors about were
actually purchased. Channell never knew if weapons
were ever purchased with the money he sent to
IBC.'os

Conclusions

It is fully legal for private individuals to raise
money for weapons, and then send that money to
bank accounts controlled by the Nicaraguan demo-
cratic Resistance. The information to which Channell
pled guilty was not about raising money for lethal aid
for the Contras per se, but about using a tax exempt
corporation, NEPL, to do so. Channell formed sever-
al entities in his fundraising network to respond to the

hearing. Joseph Coors said he had given money to what he thought
was a Swiss bank account controlled by the Contras to buy an
airplane for them. The account actually was owned by Lake Re-
sources, a Secord-Hakim company. In addition, m the same hear-
ing, Ellen C. Garwood said that Channell produced a list of weap-
ons, in North's presence, that could be purchased with a contribu-
tion from her. We have no reason to believe these kinds of requests
were typical. During the hearing. Rep. McCollum made the follow-
ing statement, which was not challenged by anybody:

It might appear to the casual observer that the three who
are here with us . . . are typical contributors to the Spitz
Channell organizations or. in the case of Mr. Coors, more
directly to the Contras. But from my understanding of the
depositions and various taking of testimony that went on and
efforts to get statements from folks before, many many contrib-
utors were interviewed and deposed and not asked to testify
because they did not have a list like was involved with Mrs.
Garwood or they didn't have an occasion where they were
suggested to them that they might see the President if they
gave money and they didn't give to the Lake Resources ac-
count.

I just simply want to make that clear to everybody who is
involved — and I think it needs to be — that these three wit-
nesses are not the typical contributors, and in fact, many others
gave more money to Mr. Channell's organization.

No list was found in those cases. Nobody else was told that
they had to see the President or could see the President if they
gave money and no other private contributor, at least that we
discovered, received or sent his money to Lake Resources, See
Id. at 146

complicated tax laws covering charitable and political
activities. There is no evidence that indicates North
knew about the tax problem, much less conspired
with Channell and Miller. This conclusion is support-
ed by the fact that Channell did not know of any
contributors who donated money because NEPL was
tax exempt who would not have donated if NEPL
were not tax exempt."" As for Colonel North's other
activities, there is no evidence that North instructed
Channell to use NEPL to raise money for the Con-
tras.'"* In addition, he did not solicit money from
contributors.'"^ There can be no question that North
knowingly conveyed the impression that he favored
what Channell was trying to do, but there is nothing
wrong with the White House openly endorsing pri-
vate activities in support of Administration policy.

Left Wing Private Fundraising

Conservative fundraising organizations have been
criticized during this investigation because they have
raised money to support policy goals that a majority
of the Democratic Members of Congress did not sup-
port. Clearly, it is permissible under current law to
raise money for foreign political movements, includ-
ing military activities. If there were any question
about this, the Committees should — for the sake of a
balanced, fair record — have devoted similar resources
investigating organizations that support left-wing
forces in Central America opposed to United States
foreign policy that use Members of Congress in their
fundraising.

Several organizations have opposed United States
policy in Central America by sending money and
supplies to El Salvador. The most notable is the Com-
mittee in Solidarity with the People of El Salvador
(CISPES) which Assistant Secretary Abrams de-
scribed as an organization that "essentially serves as a
front for the FMLN guerrillas in El Salvador".""
According to a 31 page set of State Department
cables about these groups that was introduced by
Rep. Bill McCollum as a Committee exhibit, CISPES
was founded in 1980 by the leader of the Salvadoran
Communist Party, Shafik Handal. ' ' ' This Washing-
ton, D.C. based organization coordinates efforts of a
major U.S. support network. CISPES activities are
said to include, among other things, a program to
send material aid to Central American struggles and
"creative harassment" at public appearances and
speaking engagements of individuals who support
U.S. policy. "2

New El Salvador Today (NEST) is an organization
that has worked closely with CISPES on fundraising,
volunteer training, and other activities."^ NEST has
raised funds for projects in areas of El Salvador con-
trolled by the Communist insurgents."'*

There have been allegations, included in the State
Department cables, to the effect that much of the
money received by organizations such as these ends

513

Chapter 7

up in the coffers of guerrilla groups, or being used to
provide welfare services that help the FMLN's politi-
cal program in areas the FMLN controls. According
to a State Department interview with former Salva-
doran leftist guerrilla leader, Miguel Castellanos, the
Western Democracies became the largest source of
cash for the guerrillas during the 1980s. Castellanos
served on the finance committee of the Popular
Forces of Liberation (PFL) in 1978 and defected in
1985. He stated that the guerrilla groups set up insti-
tutions to collect donations from leftist humanitarian
organizations and use that money without concern for
its original purpose. Approximately 70% of the
money which purported to go for humanitarian assist-
ance actually went for the purchase of arms.

Senator McClure introduced an exhibit which is a
fundraising letter for CISPES purportedly written
over the signature of a Member of Congress. ' ' ^ An-
other exhibit is purportedly from another Member
which states that "NEST is a non-profit, tax-exempt
foundation which is sending humanitarian aid to those
whose lives are most affected by the violence of the
U.S. supported war." "^ The same two Members
also hosted a reception for NEST in Washington D.
Con July 10, 1986. 'i''

By repeating Castellanos' general statement and
mentioning the fundraising role played by two Mem-
bers of Congress, we do not mean to suggest that we
have evidence to prove (1) that Castellanos' general
allegation applies specifically to CISPES or NEST or
(2) if it applies, that the two Members of Congress
knew about the allegation. The point is that we can
neither confirm nor deny the allegation because the
Committees did not review the subject in its investi-
gation.

The similarities between the conservative and liber-
al fundraising efforts for Central American groups are
striking: both used politicians to support their respec-
tive causes, both used tax-exempt organizations, both
may have donated money which was ultimately used
to buy weapons, both supported foreign policy goals
inconsistent with the declared Congressional policy.
The primary difference between these two fundraising
efforts is that the Committees have publicized the
conservative fundraising efforts in an attempt to em-
barrass the President. If one set of groups was worthy
of investigation, then so surely was the other.

Overstepping the Bounds

With the time it saved not investigating groups on the
left, the private fundraising investigation has needless-
ly harassed private citizens who happen to hold con-
servative foreign policy views. Witnesses were forced
to travel long distances and testify concerning money
which they legitimately gave to political organiza-
tions."* Committee attorneys questioned witnesses
about their political activity,"** religious affili-
ations,'2° educational backgrounds,'^' employment

history, '22 political lineage, '^3 roommate's political
contributions, '2* social associations, '^^ and more.
The subpoenas issued to many of Channell's contribu-
tors required tax returns, correspondence related to
Nicaragua, documents concerning political contribu-
tions and other broad categories of personal papers,
without any apparent effort being made to limit the
material to items that fell within the Committees' le-
gitimate mandate to investigate governmental activi-
ties.

The Committee used its subpoena powers, and the
wedge of a reasonable inquiry into private fundrais-
ing, to go on a wide-ranging fishing expedition into
irrelevant political issues. For example, counsel asked
Martin Artiano if he knew who stole the 1980 Carter
debate manuals. '^^ David Fischer, who was responsi-
ble for Corazon Aquino's very successful American
tour, was asked several questions to determine wheth-
er he prevented Aquino from meeting with liberal
groups at the Kennedy Library in Boston. '^'^ Counsel
inquired of several witnesses whether they had any
knowledge of Ambassador Faith Whittlesey's dinner
to honor Sir James Goldsmith. '^^ Counsel also asked
about Roy Godson's efforts to counter Soviet disin-
formation in Europe. '29 Finally, Carl Channell was
asked about President Reagan's Strategic Defense Ini-
tiative.'3°

Many other examples could be cited, but these are
enough to make the point.* These Committees had

•Unfortunately, even the non-partisan reputation of the General
Accounting Office (GAO) has been tarnished during this phase of
the investigation. The incident does not quite fit in with this list of
outrageous questions asked of witnesses, but is too important to
Congress for us to let it pass without comment. The Comptroller
General of the United States sent a letter on September 30, 1987 to
Reps. Jack Brooks and Dante Fascell which concluded that the
State Department violated a restriction on the use of appropriated
funds for publicity. Unlike its normal procedure with a final opin-
ion or report, the GAO issued this letter in time to be used in this
report, before its audit was complete and without giving the head
of the relevant office or his deputy a chance to hear and reply to
the allegations. The opinion fails even to mention, let alone respond
to, documentary evidence that conflicts with the conclusions it
presents as "facts." We are in no position to say whether the
pressure for "timely" publication was generated inside GAO or
externally. In any case, the preliminary opinion was then given to
the press by counsel in a release with an October 5 embargo date in
the name of the two House Democrats who had asked for the
audit. See GAO Letter of September 30, 1987 to Reps. Brooks and
Fascell, B-229069.

In a letter to Representatives Lee Hamilton and Dick Cheney.
Lawrence L. Tracy. Colonel. U.S. Army (Ret.), disputes the factual
basis for the GAO Report Tracy worked for the Office of Public
Diplomacy for Latin America and the Caribbean from 1984-1986.
Col. Tracy believes that Jonathan Miller's memo discussing "white
propaganda" was probably an exaggeration intended to curry favor
with the White House. In a thoughtful analysis, Col. Tracy com-
pares the Office of Public Diplomacy for Latin America and the
Caribbean to the public diplomacy campaign conducted by the
Carter Administration on the Panama Canal Treaty "Although
many in this country disagreed with the Carter policy, I do not
recall anyone in Congress calling on the GAO to investigate a

514

Chapter 7

legitimate reasons to ask about private fundraising. If
Congress wants to be worthy of trust as an institution,
however, it has to restrain itself. Just as the President
ultimately has to accept responsibility for the actions
of any one subordinate who zealously steps over the
line, so too must these Committees bear the responsi-
bility for the actions of one of its own staff, even if —
or especially because — they were not typical of the
Committees' work as a whole.

Conclusion

Our analysis of the past two chapters has largely been
about legal questions. It has shown the Administration
did stay within the law. By giving the Administration
a clean bill of legal health, however, we do not intend
to be endorsing the wisdom of everything it was
doing. Notwithstanding our legal opinions, we think it
was a fundamental mistake for the NSC staff to have
been secretive and deceptive about its actions. The
requirement for building long term political support
means that the Administration would have been better
off if it had conducted its activities in the open. Thus,
the President should simply have vetoed the strict
Boland Amendment m mid-October 1984, even
though the amendment was only a few paragraphs in
an approximately 1,200 page long continuing appro-

'propaganda' effort. The public was well-served by the national
debate that ensued, for the American people came to understand
both the costs and the benefits of the Treaty, and were better able
to advise their representatives in Congress of their position on the
issue. That is the essence of democracy." (See Appendix D to the
Minority Report for Col. Tracy's letter.)

Endnotes

1. McFarlane Test., Hearings, 100-2, 5/11/87, at 9.

2. Id. at 5; North Test., Hearings, 100-7, Part I, 7/9/87. at
264-65.

3. Id. at 264-65.

4. McFarlane Test., Hearings. 100-2, 5/11/87, at 5-6, 21.

5. Id. at 17, 23. 27-28; Poindexter Test., Hearings, 100-8,
7/15/87. at 54-55. See also Poindexter Test., Hearings. 100-
8, 7/16/87. at 89. 101.

6. Compilation of Presidential Documents, May 13, 1987,
pp. 526-27; "Excerpts From President's Meeting With Edi-
tors," The New York Times. May 16, 1987, p. 6.

7. McFarlane Test., Hearings. 100-2, 5/11/87, at 17 and
22-24.

8. Poindexter Test., Hearings, 100-8, 7/15/87, at 54-55; 7/
16/87, at 89.

9. Id. 7/15/87, at 54-55; Garwood Test., Hearings, 100-3.
5/21/87. at 131, 132.

10. Poindexter Test., Hearings. 100-8, l/lO/il. at 3.

11. McFarlane Test., Hearings. 100-2, 5/11/87, at 28.

12. Rodriguez Test., Hearings. 100-3. inim. at 300-02,
312. That testimony is corroborated by Donald Gregg and
his deputy. Colonel Samuel J. Watson III. See Gregg Dep.,
5/18/87 at 46; Watson Dep., 6/16/87 at 21-24.

13. Rodriguez Test., Hearings, 100-3, 5/27/87, at 299-300.

priations resolution, and a veto therefore would have
brought the Government to a standstill within three
weeks of a national election. Once the President de-
cided against a veto, it was self-defeating for anyone
to think a program this important could be sustained
by deceiving Congress. Whether technically illegal or
not, it was politically foolish and counterproductive
to mislead Congress, even if misleading took the form
of artful evasion or silence instead of overt misstate-
ment.

We do believe firmly that the NSC staffs deceits
were not meant to hide illegalities. Every witness we
have heard told us his concern was not over legality,
but with the fear that Congress would respond to
complete disclosure with political reprisals, principal-
ly by tightening the Boland Amendments. That risk
should have been taken.

We are convinced that the Constitution protects
much of what the NSC staff was doing — particularly
those aspects that had to do with encouraging contri-
butions and sharing information. The President's in-
herent constitutional powers are only as strong, how-
ever, as the President's willingness to defend them. As
for the NSC actions Congress could constitutionally
have prohibited, it would have been better for the
White House to have tackled that danger head on.
Some day. Congress's decision to withhold resources
may tragically require U.S. citizens to make an even
heavier commitment to Central America, perhaps one
measured in blood and not dollars. The commitment
that might eliminate such an awful future will not be
forthcoming unless the public is exposed to and per-
suaded by a clear, sustained, and principled debate on
the merits.

14. Id. at 315.

15. Gregg Dep., 5/18/87 at 44.

16. Rodriguez Test.. Hearings. 100-3. 5/27/87, at 301.

17. Gregg Dep., 5/18/87, Ex. 4.

18. Brady Dep., 10/1/87, at 7-9; Gregg Dep., 5/18/87, at
59; Watson Dep., 6/16/87, at 22-24; Rodriguez Test., Hear-
ings, 100-3, 5/28/87, at 324.

19.Gregg Dep.. 5/18/87 at 24, 74.

20. McFarlane Test., Hearings. 100-2, 5/1 1/87, at 20, 21-22.

21. Id. 5/12/87. at 128-30.

22. Thompson Dep.. 7/24/87 at 11-12. See also 21-25.

23. Id at 14.

24. McFarlane Test., Hearings, 100-2, 5/11/87, at 21-22.

25. McFarlane Test., Hearings, 100-7, Part II, 7/\4/S7. at
221.

26. Poindexter Test., Hearings, 100-8, 7/15/87, at 73-75.

27. Poindexter Test., Hearings, 100-8, 7/15/87. at 89. 100-
01.

28. Memorandum from North to McFarlane, Dec. 4.
1984. Ex. 32, Hearings, 100-2, at 466.

29. McFarlane Test., Hearings, 100-7, Part II, 7/14/87. at
222.

30. Secord Test.. Hearings, 100-1. 5/5/87. at 57-60.

31. North Test.. Hearings. 100-7. Part I. 7/8/87. at 167.

32. McFarlane Test.. Hearings, 100-2. 5/11/87. at 75;
Hearings, 100-7, Part II, 7/14/87, at 211.

515

Chapter 7

33. North Test.. Hearings. 100-7, Part I, 7/8/87, at 167.

34. McFarlane Test., Hearings. 100-7, Part II, l/\4/Sl, at
210, 222.

35. McFarlane Test., Hearings. 100-7, Part II, 7/14/87, at
248,

36. Poindexter Test., Hearings. 100-8, 7/15/87, at 73-75;
7/16/87, at 100-01. See also, 7/20/87, at 2, 5.

37. Ex. RWO-17, Attachment 1, Sec. 4(4), Hearings. 100-
2, at p. 835.

38. Abrams Test., Hearings, 100-5, 6/3/87, at 131.

39. Id.. 6/2/87, at 69-70, 98.
40.1d. at 64-65.

41. W. at 65.

42. Id.. 6/2/87 at 97-98, 102.

43. Id. at 102.

44. Id. 6/2/87 at 14 and 6/3/87 at 124-25.

45. Id. 6/2/87 at 45-47.

46. Id.. 6/3/87 at 117-18. See also Shultz Test., Hearings,
100-9, 7/23/87, at p. 274.

47. Abrams Test., Hearings. 100-5, 6/3/87 at 117-18.

• 48. Poindexter Test., Hearings, 100-8, 7/15/87, at 76. See
also North Test., Hearings. 100-7, vol. II, 7/13/87, at 114.

49. Task Force Chief Test., 8/4/87, at 83.

50. C/CATF Test., 8/5/87, at 108.

51. For expressions of this concern, see C/CATF Test.,
8/4/87 at 93 and 8/5/87, at 130; George Test., Hearings,
100-11, 8/6/87, at 210-212.

52. Task Force Chief Test., Hearings, 100-11, 8/5/87, at
128.

53. Ex. TC-13, Hearings, 100-4 at 130.

54. C/CATF Test., Hearings, 100-11, 8/5/87, at 126.

55. Castillo Test., Hearings. 100-4, 5/29/87, at 51.

56. C/CATF Test., Hearings. 100-11, 8/4/87, at 89.

57. Castillo Test., Hearings, 100-4, 5/29/87, at 79.

58. North Test., Hearings, 100-7, Vol. II, 7/13/87, at 116.

59. Castillo Test., Hearings, 100-4, 5/29/87, at 52.

60. Id. at 8.

61. Id at 13.

62. Id at 17.

63. Id at 11-12.

64. Id at 13.

65. Id at 17-18.

66. C/CATF Test., Hearings, 100-11, 8/4/87 at 98.

67. Id at 95-97.

68. Task Force Chief Test., Hearings. 100-11, 8/4/87, at
97-98.

69. Secord Test., Hearings. 100-1, 5/5/87, at 71.

70. Secord Test., Hearings, 100-1, 5/5/87, at 65-66.

71. Castillo Test., Hearings, 100-4, 5/29/87, at 19.

72. Secord Test., Hearings. 100-1, 5/5/87, at 62; Dutton
Test., Hearings, 100-3, 5/27/87, at 233-34.

73. Id at 24.

74. Ex. TC-4, Hearings, 100-4.

75. Castillo Test., Hearings. 100-4, 5/29/87, at 22.

76. Id. at 28-30; Dutton Test., Hearings. 100-3, 5/27/87, at
218.

77. Id at 54.

78. Id at 20, 24-26.

79. Id at 25.

80. Task Force Chief Test., Hearings, 100-11, 8/5/87, at
28.

81. Task Force Chief Test., Hearings, 100-11, 8/5/87, at
110-11.

82. Castillo Test., Hearings, 100-4, 5/29/87, at 26.

83. Cable, May 28, 1986, Ex. [C/CATF]-31, Hearings,
100-11.

84. Ex. TC-14, Hearings. 100-4, 5/29/87.

85. Task Force Chief Test., Hearings, 100-11, 8/5/87. at
111-12.

86. Id. at 111-12. See also Ex. 3, Hearings, 100-1, at 426.

87. Task Force Chief Test., Hearings, 100-11, 8/5/87, at
109-11.

88. Castillo Test., Hearings, 100-4, 5/29/87, at 47. See also
27, 41, 44-47.

89. C/CATF Test., Hearings. 100-11, 8/5/87, at 113.

90. Abrams Test., Hearings. 100-5, 6/2/87, at 70.

91. Ex. C/CATF-39, p. 4, Hearings, 100-11.

92. Id, p. 17.

93. George Test., Hearings. 100-11, 8/6/87, at 164, 165,
168.

94. C/CATF Test., Hearings, 100-11, 8/5/87, at 120

95. Channel! Dep., 9/17/87, at 49.

96. Channell Dep., 9/1/87 at 167.

97. Miller Dep., 7/3/87 at 61.

98. Id

99. Id

100. Id.M 62.

101. Channell Dep., 9/17/87, at 66.

102. Channell Dep., 9/17/87, at 60.

103. Channell Dep., 9/17/87. at 61.

104. Channell Dep., 9/17/87, at 66.

105. Miller Dep., 7/3/87, at 49.

106. Channell Dep., 9/17/87, at 70.

107. Channell Dep., 9/17/87 at 82.

108. Channell Dep., 9/17/87 at 71, 76.

109. Miller Dep., 7/3/87 at 49.

110. Abrams Test., Hearings. 100-5, 6/3/87, at 159.

111. State Department Cable, December 4, 1986, p. 4, Ex.
EA-49, Hearings. 100-5.

112. Ex. 38, Miller Dep., 9/16/87.

113. State Department Cable, December 4. 1986, p. 3, Ex.
EA-49, Hearings. 100-5.

1 14. Id at 2.

115. Ex. EA-48, Hearings. 100-5.

116. Ex. EA-47, Hearings. 100-5.

117. State Dept. cable, p. 3, Ex. EA-49, Hearings. 100-5.

118. Garwood Test., Hearings. 100-3, 5/21/87, at 110-12.

119. Fischer Dep., 8/11/87 at 6.

120. Godson Dep., 9/9/87 at 58.

121. Fischer Dep.. 8/11/87.

122. Henry Miller Dep., 8/6/87, at 1-2.

123. Garwood Test., Hearings. 100-3, 5/21/87, at 112.

124. Channell Dep., 9/17/87 at 27.

125. Henry Miller Dep., 8/6/87 at 40.

126. Artiano Dep., 7/31/87, at 180.

127. Fischer Dep., 8/11/87, at 216-17.

128. Henry Miller Dep., 8/6/87, at 40.

129. Id at 43.

130. Channell Dep., 9/2/87, at 96, 165.

516

Part IV
Iran

Chapter 8
The Iran Initiative

Simple plots make for stirring fiction. Sometimes,
amateur historians fall into the temptation of present-
ing events as if all lines inevitably and always pointed
toward the already known conclusion. That is not the
way events happen in the real world. The Iran chap-
ters of the majority report create the impression that
its authors have fallen into the amateur historian's
trap. The narrative tries to simplify events and moti-
vations for the sake of a story line. That does a
disservice to history. The record ought to reflect the
complex motives of the participants in these oper-
ations. The motives may be difficult to determine, but
papering the difficulties over will not help future gen-
erations learn from what happened.

The majority report seems alternately to be torn
between two theses about the Iran Initiative: that it
was strictly an arms-for-hostages deal or that, starting
in December 1985 or January 1986, it was driven by a
desire to provide funds for the Contras. Additionally,
the Iran sections of the report continue the majority's
portrayal of the Administration as a gang of law-
breakers who would do virtually anything to achieve
their objectives, while invoking an exaggerated fear
of leaks to keep the truth about activities from Con-
gress.

This portrayal is patently absurd. The hostages
were important to President Reagan. He probably did
fall victim to his own compassion, and let their per-
sonal safety weigh too heavily on him. But it is clear
from all the evidence we have that the initiative was
pursued primarily for strategic reasons. We may dis-
agree with the underlying assumptions, or with the
decision to sell arms, but any honest review of the
evidence must acknowledge these intentions, and with
the fact that strategic considerations played an impor-
tant part in the discussions conducted through the so-
called Second Channel.

Similarly, the use of residuals to benefit the Contras
was certainly seen as a plus — a "neat idea" — by North
and Poindexter. But Contras funding never drove the
Iran initiative. A sober look at the amount of money
involved would make that clear to anyone. At most,
the residuals were seen as a peripheral benefit from a
policy whose justification lay elsewhere.

We shall show in this section of our report that the
Administration did, in fact, substantially comply with

the legal requirements. Moreover, the decision not to
notify Congress was not based on an anti-democratic
obsession with secrecy, but was based on the same
sound reasoning that led the Carter Administration to
the identical decision not to report operations during
the Iranian hostage crisis of 1979 and 1980.

Summary Overview

The United States was taken by surprise when the
Shah fell in 1979, because it had not developed an
adequate human intelligence capability in Iran. Our
hearings have established that little had been done to
remedy the situation by the mid-1980's. The United
States was still without adequate intelligence when, in
1985, it was approached by Israel with a proposal that
the United States acquiesce in Israeli sales of U.S.-
origin arms to Iran. This proposal came at a time
when the NSC was already circulating a recommen-
dation that the United States consider the advisability
of such sales to Iran. Long term strategic consider-
ations dictated that the United States try to improve
relations with at least some of the important factions
in Iran. The lack of adequate intelligence about the
situation inside Iran made it imperative to pursue any
potentially fruitful opportunity; it also made those
pursuits inherently risky. United States decisions of
necessity had to be based on the thinnest of independ-
ently verifiable information. Lacking such independ-
ent intelligence, the United States was forced to rely
on sources known to be biased and unreliable. Well
aware of the risk, the Administration nonetheless de-
cided that the opportunity was worth pursuing.

To explore the chance for an opening, the President
decided to sell arms to Iran.* Some suggest that this
decision stemmed from little more than the President's
ignorance, the NSC staffs foolhardiness, and private

*It is important at the outset to note the small amounts involved.
The total arms sold mcluded 2004 TOW anti-tank missiles, 18
Hawk antiaircraft missiles, and some 200 or so types of spare parts
for Hawk batteries. Some of the missiles were sold from Israeli
stocks with U.S. approval. The remaining materiel came from U.S.
stocks. A small amount of perishable intelligence information was
also transferred to the Iranians The amounts involved were trivial,
compared to the world arms trade with Iran, which Secretary
Weinberger estimated at $10 billion. For the last point, see Wein-
berger Test.. Hearings. 100-10, 7/31/87, at 166

519

Chapter 8

greed. We completely reject this interpretation. The
initiative was controversial. We disagree with the de-
cision to sell arms, and we wish that the whole initia-
tive had proceeded with more caution. But despite
these reservations, we remain convinced that the deci-
sion to pursue some such initiative was not an
inherently unreasonable one.

The major participants in the Iran arms affair obvi-
ously had some common and some conflicting inter-
ests. The key question the United States had to ex-
plore was whether the U.S. and Iranian leadership
actually felt enough of a common interest to establish
a strategic dialogue. No one can deny the common
U.S. and Iranian interest in opposing Soviet expan-
sion. But how much would that community of interest
be felt, acknowledged and acted upon? Iran and the
United States have compatible goals in Afghanistan.
The question was whether such isolated examples
could be broadened into something more substantial.

The initial dealings with the Iranian government
were undermined by the unreliability of the interme-
diary, Manucher Ghorbanifar. Nevertheless, Ghorban-
ifar did help obtain the release of two U.S. hostages
(Rev. Benjamin Weir and Father Lawrence Jenco)
and he did also produce high Iranian officials for the
first face to face meetings between our governments
in five years. At those meetings, U.S. officials sought
consistently to make clear that we were interested in
a long-term strategic relationship with Iran to oppose
Soviet expansionism. The hostages issue was present-
ed as an obstacle to an enhanced relationship that
would have to be overcome, not as the objective of
the initiative. Colonel North made an extensive pres-
entation to this effect in February 1986; former Na-
tional Security Adviser McFarlane made a similar
presentation in Tehran in May 1986. But the Iranian
officials brought by Ghorbanifar seemed to be inter-
ested only in weapons, and in using the hostages for
bargaining leverage. The full extent of the difference
between these approaches finally was made obvious
to the United States at the meeting in Tehran, which
North, McFarlane and others attended at great per-
sonal risk. Ghorbanifar appears to have misled both
sides in the preparations for that meeting. Afterwards,
the United States suspended discussions arranged by
Ghorbanifar, except to complete the transactions al-
ready underway.

After the Tehran meetings, the United States was
able to approach a very high-ranking Iranian official
using a second channel arranged by Albert Hakim
and his associates. Clearly, Hakim had business mo-
tives in arranging these contacts. Whatever his mo-
tives, he did produce contacts at the highest levels of
the Iranian government. Discussions with this channel
began in the middle of 1986 and continued until De-
cember. They resulted in the release of one further
hostage (David Jacobsen), and U.S. officials expected
them to result in the release of more hostages. Per-
haps more importantly, these discussions appear to

have considered the possibility of broad areas of stra-
tegic cooperation. However, as a result of factional
infighting inside the Iranian government, the initiative
was exposed * and substantive discussions were sus-
pended. Not surprisingly, given the nature of Iranian
politics, the Iranian government has publicly denied
that significant negotiations had taken place.

The Reagan Administration's Iran initiative repre-
sented an attempt to narrow the differences stemming
from the Iranian revolution and the intervening years
of hostility. Both sides confronted sharp internal divi-
sions over the issue of rapprochement. In such a situa-
tion, the margin between success and failure looms
much larger in retrospect than it may seem while
events are unfolding. While the initial contacts devel-
oped by Israel and used by the United States do not
appear likely to have led to a long-term relationship,
we cannot rule out the possibility that negotiations
with the second channel might have turned out differ-
ently. At this stage, we never will know what might
have been.

In retrospect, it seems clear that this initiative de-
generated into a series of "arms for hostage" deals.
But it did not look that way to many of the U.S.
participants at the time. In our view, it is simply
wrong, therefore, to reduce the complex motivations
behind these events to any one simple thesis. Clearly,
the participants from different countries, and even
those within each country, had different, and some-
times conflicting, motives. Without endorsing or
agreeing with the use of arms sales as a tactic, we
believe that U.S. officials made a risky, but neverthe-
less worthwhile effort. To explain why, we shall
begin by outlining the strategic importance of Iran.

The Strategic Context

Iran is the largest country in the Persian Gulf region,
an area of vital economic importance to the United
States and its allies. It is in a strategic position poten-
tially to dominate the world's largest proven oil re-
serves and threaten the vulnerable pro-Western states
of the Gulf littoral.

* The most complete public information about this incident ap-
peared in a September 29. 1987 New York Times article about the
execution of Mehdi Hashemi. The article identified Hashemi as the
former director of the office of Ayotollah Hussein Montazeri,
"Ayotollah Ruhollah Khomeini's personal choice as his successor
in the post of supreme religious guide." The Times also said, (I)
Montazeri and Speaker of the Parliament (or Majlis) Hashemi Raf-
sanjani were factional rivals, (2) Hashemi was arrested in October
1986, and (3) the Montazeri/Hashemi faction was responsible for a
story that appeared in the Lebanese weekly .41 Shiraa in early
November 1986 describing a May meeting in Tehran between Mr.
McFarlane and Rafsanjani That was the story that led to the Iran
arms initiative's unraveling. See John Kifner. "Aide to Khomeini
Heir Apparent Is Reported Executed in Tehran," The New York
Times. Sept. 29, 1987, pp. Al. A13.

520

Chapter 8

For the same reasons, Iran is of critical interest to President Truman was willing to threaten military

the Soviet Union which, in addition to seeking access action to force the Soviet Union to withdraw from

to and control of the West's oil supplies, continues in areas of Northern Iran it had occupied during the

its historic quest for a warm water port. The United war. In defense of its interests, the United States has

States has long recognized these critical and compel- maintained a naval presence in the Persian Gulf since

ing interests. At the end of the Second World War, 1949.

521

Chapter 8

522

Chapter 8

Iran dominates the entire eastern shore of the Per-
sian Gulf; it controls the Strait of Hormuz and can
threaten the free flow of oil from the Gulf to the
industrial economies of the West. In 1987, as part of
its effort to disrupt non-Iranian shipping traffic in the
Gulf, Iran has used anti-ship missiles and other muni-
tions to attack neutral oil tankers, and laid mines
throughout the Gulf. U.S. and allied warships have
been deployed in the Gulf to ensure that the flow of
oil is not impeded. Although less than six percent of
U.S. oil consumption transits the Gulf, 24 percent of
Western Europe's oil and almost half of Japan's total
oil consumption must pass through the Strait of
Hormuz. Iran alone supplies some five percent of
Western Europe's and Japan's oil. Increased oil pro-
duction elsewhere in the world, and the opening of
new pipelines to take oil through Turkey, Iran and
Saudi Arabia have somewhat reduced the Gulfs rela-
tive importance.' Even so, Iran remains able to be a
seriously disruptive force to the world's economy.

In addition to its importance to oil supplies and oil
routes, Iran, whose population of about 45 million is
larger than the other Gulf states combined, is in a
position to dominate or destabilize the small, weak,
pro-Western countries of the Western Gulf coastal
region. Recent Iranian policy toward Kuwait exempli-
fies the pressure Iran can exert on its neighbors. An
aggressive Iran can promote anti-Western Shiite fun-
damentalism throughout the Middle East, threatening
key U.S. allies such as Israel, Egypt, and Turkey.

Events of the last decade have raised the strategic
stakes in the Persian Gulf region and given the Soviet
Union the chance to expand its influence in an area
where it historically has had little. The fall of the
Shah, the installation of a revolutionary Islamic
regime in Tehran, and the Iran-Iraq war have given
the Soviet Union strong incentives to try to improve
its position in Iran and the entire Gulf region.

A Soviet-dominated Iran would pose an even great-
er threat to Western interests than the current radical
regime. Such a development, for example, would give
Moscow direct land access to warm water ports on
the Persian Gulf and Arabian Sea. The Soviet Navy's
home ports on the Soviet mainland are frequently ice
bound in winter, or provide limited access to the open
ocean, making it easier for U.S. and allied navies to
contain the Soviet fleet. Soviet land access to a warm
water port in this region would seriously endanger
U.S. security interests in the entire Indian Ocean
region, from the Indian subcontinent to Eastern
Africa.

On Iran's eastern border, the Soviet aggression in
Afghanistan has further skewed the unstable strategic
balance of the region, unsettled Iran's neighbor Paki-
stan, and left the Soviet Union better-placed to
meddle in post-Khomeini Iran. In response to events
in the Gulf, the Carter Administration developed a
Rapid Deployment Force to demonstrate an increased
U.S. resolve to defend U.S. and Western interests

there. It was against this background that the Reagan
Administration conceived its policy opening to Iran.

On May 17, 1985, just before the United States
decided to pursue the Iran initiative, Graham Fuller,
the CIA's National Intelligence Officer for Near East
and South Asia, produced a memorandum, "Toward
a Policy on Iran," reporting that the intelligence com-
munity was learning of signs of significant internal
unrest in Iran and was monitoring "Soviet progress
toward developing significant leverage in Tehran".^
By the end of 1985, the intelligence community took a
less worried view which was reflected in a new esti-
mate published in February 1986.^

By mid- 1987, however, press reports were begin-
ning to suggest that Fuller's original concern might
have been well founded. These reports involved pos-
sible Soviet intelligence sites in Iran and a pipeline
and railroad through Iran to its long sought after
Persian Gulf warm water port.* Should these ac-
counts prove true, the 1985-86 initiative might even-
tually be seen as a farsighted attempt to prevent seri-
ously troublesome developments that could occur
after the factional struggle everyone expects to begin
when the aged Ayotollah Khomeini dies, if it has not
already begun.

Strategic Opening, Or Only An
Arms-For-Hostages Deal?

The majority report systematically downplays the im-
portance of strategic objectives in the Iran initiative.
We believe, to the contrary, that the record is unam-
biguous on the following facts: (1) that strategic ob-
jectives were important to the participants at all
times; (2) that the objectives were credible, (3) that
they were the driving force for the initiative at the
outset, and (4) that without such a strategic concern,
the initiative would never have been undertaken.

One of the most disappointing forms of evidence-
slanting throughout the majority's narrative is that it
refuses adequately to present the key witnesses' ac-
counts of their own motives, in their own words,
from the hearing record. That failure is most glaring
in connection with the witnesses' statements about the
strategic motives behind the Iran policy. We have no
intention of trying to recite all of the evidence here.
We are convinced, however, that anyone who reads
the material we cite will recognize the bias involved
in presenting what purports to be any analysis of the
arms sales without including the participants' own
explanations of their motivations. The majority may
not agree with the Administration's strategic reason-
ing, but it is simply unfair to ignore it.

The President's words are probably the most im-
portant here. Dale Van Atta, a reporter, knew the
essential facts of the initiative in February 1986. The
President was willing to talk to him on February 24,
on the condition that the information not be used until

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Chapter 8

the hostages came home. Van Atta asked the Presi-
dent about the hostages. Instead of answering in kind,
the President spoke about strategic matters.

All right. The Iranian situation. We have to re-
member that we had a pretty sohd relationship
with Iran during the time of the Shah. We have
to realize also that that was a very key ally in
that particular area in preventing the Soviets
from reaching their age old goal of the warm
water ports, and so forth. And now with the
take-over by the present ruler, we have to be-
lieve that there must be elements present in Iran
that — when nature takes its inevitable course —
they want to return to different relationships . . .
We have to oppose what they are doing. We at
the same time must recognize we do not want to
make enemies of those who today could be our
friends.^

The President's own statements were supported by
senior officials in his Administration testifying before
these committees. For simplicity's sake, we will cite
this material by grouping the references under the
substantive topics covered. These included:

— establish a new U.S. relationship with Iran, thus
strengthening the U.S. strategic posture throughout
the Persian Gulf region;^

— counter Soviet influence in Iran;''
— lessen Iran's dependence on the Soviet Union and
other communist nations as arms suppliers;^

— open a channel to pragmatic Iranian officials;®
— wean the Iranian regime away from terrorism;*"
— encourage a negotiated settlement of the Iran-
Iraq war; ' '

— protect the northern tier countries — Pakistan,
India and their neighbors — and encourage their inter-
est in supporting the Afghan resistance forces;'^

— protect the southern tier countries — Saudi
Arabia, Kuwait, Jordan, Israel and Egypt; '^

— improve U.S. intelligence capabilities in Iran;''*
and

— discourage Iranian arms exports to Nicaragua.'^
As we said earlier, one need not agree with these
strategic goals, or agree that arms sales were a good
way to achieve them, to recognize their importance
to the key players. The Administration felt it was
crucial to begin making some inroads into Iran, before
that country became embroiled in a succession crisis.
The last thing we wanted was to abandon the field to
the Soviets. It was important to keep looking for
opportunities. Unfortunately, our ignorance of the sit-
uation in Iran was such that we had few realistic
ways to do so.

U.S. Intelligence Weaknesses in
Iran

Although the motives were clearly present for trying
to develop a new relationship with Iran, the means
were not. In an important respect, the Iran initiative
had at least one of its roots in an intelligence failure.
There are two different intelligence issues raised by
the Iran initiative. One is that intelligence gaps or
weaknesses influenced U.S. decisions. We agree with
this point. The other is that intelligence was "cooked"
to match the preconceived conclusions of policy
makers. We strongly disagree with this charge, to the
extent that it relates to the information generated by
the executive branch. We do believe, however, that
some officials — most notably. Admiral Poindexter and
Director Casey — failed adequately to present the U.S.
intelligence community's assessment to the President
at a crucial moment of decision.

Let us begin with the issue of intelligence gaps.
Gary Sick, who worked on the National Security
Council staff during the Carter Administration, de-
scribed the state of U.S. intelligence in Iran when the
Shah fell in 1979:

I had written a briefing paper for [National Secu-
rity Adviser Zbigniew] Brzezinski noting that
"the most fundamental problem at the moment is
the astonishing lack of hard information we are
getting about developments in Iran." I comment-
ed that "this has been an intelligence disaster of
the first order. Our information has been ex-
tremely meager, our resources were not posi-
tioned to report accurately on the activities of
the opposition forces, on external penetration, the
strike demands, the political organization of the
strikers, or the basic objectives and political ori-
entation of the demonstrators."'®

General Secord, who became Deputy Commander of
the hostage rescue task force in 1980 after the unsuc-
cessful Desert I operation, confirmed that the lack of
intelligence was the reason why his combat-ready task
force never made a second effort to rescue the hos-
tages. ' ''

Faced with the loss of the Tehran embassy and its
intelligence secrets, the flight or execution of pro-
Western officials and agents, a ruthless secret police
network and restrictions on travel to Iran, U.S. intelli-
gence efforts had to start again from scratch. Accord-
ing to new reports, efforts to rebuild our intelligence
capability were further devastated by the 1983 bomb-
ing of the U.S. Embassy in Beirut, which killed many
of the CIA's leading Middle East experts, and by the
abduction of the post-bombing Beirut station chief,
William Buckley. Before his death as a result of tor-
ture, Buckley was allegedly forced to reveal his ex-

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tensive knowledge of CIA anti-terrorism and other
operations in the Middle East.

There was near unanimity inside the government on
the weakness of U.S. intelligence in Iran. Director
Casey reportedly conceded the point, and his former
deputy, John McMahon, agreed.'* Casey believed
that the need for intelligence was one of the main
reasons for going ahead with the initiative.'^ Robert
McFarlane and John Poindexter both lamented the
dearth of intelligence on internal Iranian politics and
Iranian support for terrorism, which left them vulner-
able and "flying blind". In particular, U.S. policy
makers lacked the information necessary to assess the
influence and bona fides of the Iranian officials with
whom they were dealing.^"

The core problem was a lack of well-placed human
agents within Iran.^' The CIA's Deputy Director for
Operations, Clair George, is responsible for clandes-
tine human intelligence collection. He freely acknowl-
edged that the Directorate was not collecting the
information necessary to influence or deal with Iran.
In the opinion of some intelligence professionals the
CIA's weakness of human intelligence collection re-
flects a long-term shift toward a greater reliance on
more exotic, technical collection methods, which are
considered "clean" and safe compared to the messy
business of running human spies. As Admiral Poin-
dexter said:

The problem is that with technical means of col-
lection, there is no way that you can find out
about intent as to what the people are planning
or doing. The only way you can get that is
through human intelligence. A satellite will tell
you how many divisions or how many tanks or
how many airplanes, but it won't tell you what
they are planning to do with that.^^

One problem with human intelligence is that it
often requires the use of individuals of dubious rep-
utations. Despite criticism of the use of Ghorbanifar
in the Iran initiative, U.S. intelligence may have no
choice but to rely on questionable individuals in
future operations. As George told the Committees: "If
we only served and dealt with the honest and fair, we
would be out of business fairly fast." ^^ Poindexter
made essentially the same point: "Human intelligence
is messy, because you have to deal with people. You
don't always know if they are telling you the truth or
not .... [You] have to deal with pretty despicable
characters if you are going to get penetration of these
organizations".^*

Faced with this frustrating lack of intelligence, it
appears that Admiral Poindexter adopted the view
that the Israelis had better information on the situa-
tion in Iran. Poindexter was so convinced of this that
he even accepted the Israeli view that Iraq gradually
was acquiring a battlefield advantage in the war with
Iran,^^ even though he knew U.S. intelligence held a

contrary view,^" and the issue would have been open
to independent verification.

The Issue of "Cooked" Intelligence

One of the many dramatic charges Secretary Shultz
made about his own Administration involved this as-
sessment of the Iran-Iraq war. Responding to Senator
Inouye, Shultz said that the failure to separate "the
functions of gathering and analyzing intelligence from
the function of developing and carrying out
policy" ^'' resulted in the Administration getting
faulty information on which to base its judgments and
decisions.

I hate to say it, but I believe that one of the
reasons the President was given what I regard as
wrong information, for example about Iran and
terrorism was that the agency or the people in
the CIA were too involved in this. So that is one
point. And I feel very clear in my mind about
this point. And I know that long before this all
emerged, I had come to have great doubts about
the objectivity and reliability of some of the intel-
ligence I was getting.^*

Despite Secretary Shultz's statement, these commit-
tees have found absolutely no evidence to support
allegations of intelligence bias within the CIA. As
Deputy CIA Director Gates has observed, one of the
best guarantees against an intelligence bias is the
widespread circulation of CIA analyses on Capitol
Hill, particularly the intelligence committees' scrutiny
of virtually everything the CIA and intelligence com-
munity produces. ^^ With the exception of one contro-
versial 1982 report, neither committee has exhibited
any concern over the objectivity of analysis within
Casey's CIA, despite the committees' often stormy
relationship with the Director.* Shultz is also refuted
by former Deputy CIA Director McMahon who, in
response to a deposition question regarding the Secre-
tary's assertions, said: "It wouldn't happen. This is
just so [expletive deleted] outrageous, I can't stand it.
That is just so damn false, and I think George Shultz
got away with murder on that one." McMahon also
said he asked Director Webster "why the hell he
didn't challenge Shultz on that." Webster, according

* The 1982 exception provoked the resignation of Admiral (Ret.)
Bobby Inman as a consultant to the House committee. Specifically,
Inman— a former director of NSA and a former Deputy Director
of Central Intelligence and one of the intelligence community's
most respected alumni — gave as his reason for leaving the fact that
he had not been consulted on a Congressional subcommittee report
criticizing intelligence analyses on Central America. Inman felt that
the report, which focused on El Salvador, was "put out on party
lines." Inman also underscored, in his resignation statement, that
Congressional oversight of intelligence agencies had to be nonpo-
litical to earn public credibility. He added thai "if the country
doesn't establish a bipartisan approach to intelligence, we are not
going to face the problems of the next fifty years." See Washington
Post, October 15, 1982.

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to McMahon, said he did ask Shultz, but "I guess he
hasn't heard from Shuhz yet."^°

Admiral Poindexter's reliance on an Israeli assess-
ment that Iran's position was deteriorating in the war
with Iraq was particularly controversial. White House
Chief of Staff Donald Regan's notes of a November
10, 1986 meeting of top advisers makes it clear that
the President was still using the assessment as a justifi-
cation for his decision the previous January to sell
arms to Iran. 3' Poindexter acknowledged, however,
that the assessment differed from that of the U.S.
intelligence community. Poindexter had the option, of
course, of agreeing with such an assessment over the
one he was getting from U.S. intelligence. But he and
Director Casey should have felt an obligation to high-
light that disagreement at the time it was being used
to buttress the proposed January 1986 finding. It is
clear from Poindexter's testimony that he did not
remind the President at the time that this view dif-
fered from the majority view within the intelligence
community. The evidence seems to suggest strongly,
in other words, not that intelligence was "cooked" by
U.S. intelligence, but that the views of U.S. intelli-
gence were not properly passed up the line and high-
lighted to the President.

The Israeli Connection

The Administration's reliance on Israeli intelligence
has raised questions about Israel's role in the Iran
initiative. That role probably will never be fully un-
derstood. The Tower Commission Report, ^^ supple-
mented by some new material in the majority narra-
tive, lays out the basic outline. We have too little
confirmed evidence, however, and too many conflict-
ing theories, to sort it all into neat packages.

The immediate background to the Iran arms initia-
tive had two separate strands in 1984. One strand
begins with Ghorbanifar's desire to sell arms; the
other with an independent review of U.S. policy
toward Iran conducted by the NSC. The two strands
came together in mid-1985.

Ghorbanifar began trying to approach the United
States in June 1984 with the story that he had access
to some important figures in the Iranian government
who wanted to improve relations with the West. The
CIA polygraphed Ghorbanifar, he failed (not for the
first time) and the agency issued a "bum notice" to its
field personnel and other U.S. intelligence services
warning them to treat Ghorbanifar as a known liar.
Clair George told the Committees: "You have to
work at it pretty hard to get a burn notice out of the
Operations Directorate at the CIA." ^^

Over the next several months, Ghorbanifar and
Adnan Khashoggi, a Saudi arms dealer, reportedly
made several attempts to develop a U.S.-Iran arms
relationship. ^^ One of the approaches they made in
1984, according to the Tower Commission, was
through a former CIA officer, Theodore Shackley. In

that approach, the arms dealers specifically linked
weapons to Americans held hostage in Lebanon:

Shackley, a former CIA officer, reported that, in
a meeting November 19-21, 1984. in Hamburg,
West Germany, General Manucher Hashemi,
former head of SAVAK's Department VIII
(councerespionage), introduced him to Manucher
Ghorbanifar. Hashemi said Ghorbanifar's con-
tacts in Iran were "fantastic." Ghorbanifar was
already known to the CIA, and the Agency did
not have a favorable impression of his reliability
or veracity. Shackley reported that Ghorbanifar
had been a SAVAK agent, was known to be an
international deal maker, and generally an inde-
pendent man, difficult to control. ^'^

Shackley's report went to the State Department but
the department was not interested.

By January 1985, Ghorbanifar was discussing a po-
tential arms relationship that would have involved the
United States, Iran and Israel. Participating in these
discussions with Ghorbanifar were Adolph Schwim-
mer, an Israeli arms dealer who had been an adviser
to Prime Minister Peres since September 1984,
Amiram Nir, Peres' Adviser on Counterterrorism, and
Yaacov Nimrodi, another arms dealer who had been
an Israeli defense attache and then an unofficial "con-
sultant" in Tehran for a total of 24 years. ^^ At least
one of these meetings included Roy Furmark, a busi-
ness associate of Khashoggi's and an acquaintance of
Casey's. 3 ■^ Israel and the United States were major
arms suppliers to the Shah's Iran during the 1970s,
and a classified State Department document says
Israel had sold some arms to the Khomeini regime in
1981 and 1982.* The arms dealers in the 1985 group
had an obvious stake in resuming such sales.

At roughly the same time, beginning in early 1984,
the NSC staff was beginning to rethink the U.S. pos-
ture toward Iran. The net effect of the 1984 efforts
was to conclude that the United States neither knew
enough about, nor was in a position to have much
influence over, future developments in that country.
"Eariy in 1985," the Tower board wrote, "the NSC

•According to a November 1986 classified State Department
document, in 1981 and 1982, prior to the initiation of Operation
Staunch, the Government of Israel asked the United States to
approve shipment of certain military items under U.S. control to
Iran. Israeli representatives made many of the same points that
were made in the 1985 arms sale proposals, including that such
transfers would improve access and influence with "moderate ele-
ments" and could lead to progress in securing the release of U.S.
hostages. The United States stated that certain types of US. con-
trolled items could be shipped if specific US Government approv-
al were obtained, but no shipment of such items was ever ap-
proved In May 1982, Israeli officials acknowledged publicly that
Israel had sold substantial quantities of U.S. origin military supplies
to Iran. US Department of State, Memorandum from Richard W.
Murphy to Secretary of State Shultz, "US -Israel Discussions on
Arms Sales to Iran— 1980-82," November 21, 1986, S3547. See also
Secord Test., Hearings. lOO-l, 5/8/87. at 273-74.

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Chapter 8

staff undertook actions aimed at least to improve the
government's knowledge about Iran".''*

One person who got involved with that job was
NSC consultant Michael Ledeen. When Ledeen was
in Europe in March or April of 1985, an official of a
West European country told Ledeen that the situation
in Iran was more fluid than it had been in the past. If
Ledeen wanted to know more about Iran, the official
said that Israel had the best intelligence there of any
country in the Western world. ^^ Ledeen visited Israel
in early May where he met alone for about 45 min-
utes with Prime Minister Peres to express the U.S.
interest in learning more about Iran. The hostages
were not part of this discussion, Ledeen said. Accord-
ing to Ledeen, Peres said that Israeli information was
not all that outstanding, but Peres urged Ledeen to
meet with Shlomo Gazit, President of Ben Gurion
University and a former director of military intelli-
gence. In that subsequent meeting, Ledeen was asked
to carry a request back to McFarlane asking for per-
mission for Israel to sell some artillery to Iran.*"

During May and June, the NSC staff continued to
work on a draft National Security Decision Directive
(NSDD). At the end of its analysis of the United
States' long and short term goals in Iran, a June 11
draft NSDD recommended "provision of selected
military equipment as determined on a case-by-case
basis". McFarlane circulated the NSDD draft to
Shultz, Weinberger and Casey. Shultz responded on
June 29 by saying he disagreed "with the suggestion
that our efforts to reduce arms flows to Iran should
be ended." Weinberger's July 16 answer was sharper.
"This is almost too absurd to comment on," he wrote.
"This is roughly like inviting Qadhafi over for a cozy
lunch." Only Casey endorsed the "thrust of the
draft," but his July 18 response said nothing about
arms sales.*' The draft NSDD was never brought to
the President's attention and was not adopted.

The two separate strands came together in the
weeks after the draft NSDD was circulated and
before all the answers were in. On July 3, McFarlane
met with David Kimche, Director General of the
Israeli Foreign Ministry. According to McFarlane,
Kimche wanted to know "the position of our govern-
ment toward engaging in a political discourse with
Iranian officials," and thought the Iranians would ulti-
mately need something, namely arms, to show for the
meetings.*^

About July 11, Schwimmer came to see Ledeen.
Ledeen testified that Schwimmer claimed he and his
colleagues:

had been introduced a short time before by
Adnan Khashoggi to a very interesting Iranian
by the name of Ghorbanifar, and that Ghorbani-
far had a lot of very interesting things to say
both about Iran and about the intentions of the
leading figures in the Government of Iran.*^

We do not intend to produce a full recitation of
events here, but it is worth pausing at Schwimmer's
reported statement that he had just been introduced to
Ghorbanifar. The clear implication of the statement,
as it was understood by Ledeen, was that Ghorbanifar
was a new source of information for the Israelis, even
though Ghorbanifar had been meeting with them
since January. There is a dispute over Ghorbanifar's
exact relationship with Israel, but no one seems to
think the relationship was new. North, Poindexter,
George and Hakim have said they thought Ghorbani-
far was an Israeli agent or asset.** Hakim specifically
said he thought someone working for Nimrodi had
recruited Ghorbanifar years before in Tehran.**
Shackley, however, described him as "an independent
man" with SAVAK connections (Hakim had also
mentioned SAVAK.) The view of Ghorbanifar as
being essentially independent would be consistent
with his having had a past relationship with Israel,
but with different connotations on the extent to which
Israel could have controlled Ghorbanifar. The inter-
pretation that stresses Ghorbanifar's independence
gains some support from the sheer number and varie-
ty of methods Ghorbanifar tried to use to approach
the United States Either way, however, Ghorbanifar
and Nimrodi knew each other during Nimrodi's quar-
ter century of service in Tehran. Schwimmer's al-
leged representation to Ledeen that he was a new
source therefore seems disingenuous, to say the least.

So, Israel was more than a passive message bearer
at the outset of the initiative. In addition, it weighed
in to help keep the initiative on track at several points
later. These included, among other things, an August
2, 1985 visit Kimche paid to McFarlane to seek au-
thorization for the first Israeli TOW transfer;** Nir's
January 1986 proposal to keep the initiative moving
forward at a time when U.S. interest appeared to be
flagging,*'' and Peres' February 1986 letter to ** and
September 1986 communication with President
Reagan.*^

Shultz V. Shultz— Suckers or Big Boys?

The question that arises out of all this is whether
Israel was playing on U.S. ignorance to draw the
United States into the Iran arms transactions. At a
November 10, 1986 meeting between the President
and his top advisors. Secretary Shultz said, according
to Donald Regan's notes, that he "Thinks Israeli [sic]
suckered us into this so we can't complain of their
sales." *" Shultz apparently expanded on this point in
a private meeting he held with the President ten days
later. A briefing paper Shultz brought with him to
that meeting stated:

Much if not all of the incentive on the Israeli side
of the project may well have been an Israeli
"sting" operation. The Israelis used a number of
justifications to draw us into this operation — in-

527

Chapter 8

telligence gains, release of hostages, high strate-
gic goals, . . . Israel obviously sees it in its na-
tional interest to cultivate ties with Iran, includ-
ing arms shipments. Any American identification
with that effort serves Israeli ends, even if Amer-
ican objectives and policies are compromised.^'

We are inclined to agree with Shultz that Israel
was actively promoting the initiative because the initi-
ative suited Israel's own national interest. We dis-
agree, however, with the idea that the United States
was being played for a sucker. We believe the U.S.
Government responsibly made its own judgments, and
its own mistakes.

To show the extent to which U.S. eyes were open,
it is worth reviewing a few more items in the Com-
mittees' records. In McFarlane's July 13 cable to
Schultz about his own meeting with Kimche and Le-
deen's meeting with Schwimmer, McFarlane seemed
to be more aware than Ledeen that the relationships
being described were not new ones. McFarlane said
that in the course of his conversation with Kimche it
"became clear that [their access to Iranian officials]
has involved extensive dialogue for some time." His
cable also mentioned Ghorbanifar.^^ On the same
day. Assistant Secretary Richard Armacost sent a
cable to Shultz saying that the U.S. Government con-
siders Ghorbanifar to be "a talented fabricator." ^^
Shultz told the Tower Commission he read this cable
on July 16.^'' From early in the initiative, in other
words, the U.S. Government had good reason to be
wary of Ghorbanifar.

Why, then, did the NSC want to pursue this chan-
nel at all? North's answer is persuasive.

I knew, and so did the rest of us who were
dealing with him, exactly what Mr. Ghorbanifar
was. I knew him to be a liar. I knew him to be a
cheat, and I knew him to be a man making enor-
mous sums of money. He was widely suspected
to be, within the people I dealt with at the Cen-
tral Intelligence Agency, an agent of the Israeli
Government, or at least one of, if not more, of
their security services.

That is important in understanding why we con-
tinued to deal with him. We knew what the man
was, but it was difficult to get other people in-
volved in these kinds of activities. I mean, one
can't go to Mother Theresa and ask her to go to
Tehran .... I know there is a lot of folks who
think we shouldn't have dealt with this guy, but
at the bottom we got two Americans out that
way and we started down a track I think we
could have succeeded on. As bad as he was, he
at least got it started there. *^

The United States also went into the initiative
knowing full well that there was far from an identity
of interests between the U.S. and Israel. McFarlane

mentioned in his cable to Shultz at the start of the
initiative, that the risks of failure would be different
for the United States than for Israel; "Surely we
ought to expect that Israel's fear over any Arab (as
opposed to Iranian) fallout would not necessarily co-
incide with our own." ^'^ Shultz's cable of the next
day also mentioned that "Israel's interests and ours
are not necessarily the same".^'

As for the character of the difference between U.S.
and Israeli interests toward Iran, several witnesses
testified that the United States would like to see a
quick end to the Iran-Iraq war, but Israel, at a mini-
mum, might find its interests served by prolonged
fighting between the two countries.^* This key differ-
ence was said by McFarlane to have been openly
discussed in his July 3, 1985 meeting with Kimche:

[Kimche] said, "Obviously Israel's interests are
very different from your own," and pointed out
that they have an interest in sustaining the con-
flict. We don't.

I stressed all of our policy points .... They are
different in many respects from Israel's. But that
was clear on both sides, going in, eyes open. The
President was very conscious of that.^^

Another major point of difference was that Israel,
like most West European and many other countries,
reportedly was selling arms to Iran. The United States
was trying to stop the flow of such arms. For that
reason, the specific method for trying to establish a
relationship, involving arms and hostages, was a par-
ticularly risky one for U.S. policy interests. Once
again, however, this point was thoroughly argued
within the Administration.

The point of all this is that Israel had good reasons
for wanting the United States to get involved, but the
U.S. had its own reasons for listening. The United
States decided the initiative was worth pursuing, for
all of the reasons we have already noted. To be sure,
the U.S. did make important errors of judgment. It
was overeager. On occasion, it did listen too uncriti-
cally to Israeli advice. But the warning flags were
there, and McFarlane at least paid lip service to
noting their presence. Any U.S. mistakes, therefore,
can be laid only at our own country's feet. As Secre-
tary Shultz said before our Committees, "We are big
boys and we have to take responsibility for whatever
it is we do. We can't say that well, somebody else
suggested it to us, therefore it is their fault." ^°

Hostages and the Iran Initiative

We are convinced, as we have argued, that the Iran
initiative started as a desire to pursue a strategic op-
portunity, and that these considerations always re-
mained important. At the same time, there can be no
question — as the President himself acknowledged —

528

Chapter 8

that the President's personal concern for the hostages
added a sense of urgency that skewed our negotiating
tactics, and helps explain the imprudently wishful
thinking that led Poindexter and Casey to proceed
despite repeated disappointments.

It is important to note that the President has an
affirmative duty under U.S. law to do everything in
his power to secure the release of Americans illegally
imprisoned or held hostage abroad. Under the 1868
Hostage Act, invoked by President Carter during the
Iranian hostage crisis of 1979-81:

Whenever it is made known to the President that
any citizen of the United States has been unjustly
deprived of his liberty by or under the authority
of any foreign government, it shall be the duty of
the President forthwith to demand of the govern-
ment the reasons of such imprisonment; and if it
appears to be wrongful and in violation of the
rights of American citizenship, the President shall
forthwith demand the release of such citizen, and
if the release so demanded is unreasonably de-
layed or refused, the President shall use such
means, not amounting to acts of war, as he may
think necessary and proper to effectuate the re-
lease; and all the facts and proceedings relative
thereto shall as soon as practicable be communi-
cated by the President to Congress.®'

Under the Hostage Act, the President has a posi-
tive, legal obligation to take whatever steps may be
necessary and proper, short of war, to secure the
release of American citizens. Even without the act,
however, we observed in our chapters on the Consti-
tution that the President has a duty to protect the
lives and liberty of Americans abroad.

Unfortunately, the duty to protect lives does not
always give clear guidance about what to do in spe-
cific cases. Taking the wrong steps to save an individ-
ual hostage can make hostage taking seem profitable
to terrorists. The methods used to save one hostage,
in other words, may threaten countless other Ameri-
cans traveling or living abroad. We have to acknowl-
edge, however, that it is easier to put advice on a
piece of paper than to implement the advice in the
face of a constant barrage of public criticism, and
direct pressure from the hostages' families.

As hard as it may be to let any American remain
hostage, one was a special case: William Buckley, the
Beirut Station Chief. Buckley was rebuilding the
CIA's Lebanon station after the disastrous embassy
car bombing of 1983. When he was taken hostage, he
knew a great deal about U.S. sources and methods in
the Middle East and U.S. officials strongly suspected
that he was being tortured to force him to divulge
those secrets.

Mr. CHENEY. I would assume partly on the
basis that he was literally one of our own, a man
in service to the nation, that there were special

feelings on the part of Director Casey for Mr.
Buckley as well?

Mr. NORTH. It was my understanding that
there was not only a professional relationship be-
tween Mr. Buckley and Director Casey but a
personal one, and that Director Casey felt very
strongly about William Buckley. To the very
end, Director Casey was anxious to get the body
of Bill Buckley home, and certainly the tortured
confession.

Mr. CHENEY. Would it be fair to say that the
situation of the hostages, and especially Mr.
Buckley, had an impact at least upon the policy
decisions we have been talking about here in
connection with the opening to Iran, the decision
to ship weapons to the Ayatollah?

Mr. NORTH. I believe it did ... . One of the
most difficult things that I experienced in this
rather lengthy ordeal, and I am sure it was the
same for Mr. McFarlane and Admiral Poindexter
and the President, was to see the pictures that we
were able to obtain, the videotapes particularly,
of Bill Buckley as he died over time, to see him
slowly but surely being wasted away.®^

This testimony from North certainly makes it easier
to understand how concern for the hostages could
come to have played too prominent a role in the Iran
initiative.

PEA Activities

We shall digress briefly from the Iran initiative at this
point to discuss another effort the Administration un-
dertook to gain the release of the hostages in Leba-
non. This one involved Drug Enforcement Adminis-
tration (DEA) agents and began in early 1985. The
majority is highly critical of this effort in its report.
This is puzzling to us, because if the DEA operation
had succeeded, there would have been no temptation
to mix concern for the hostages with the strategically
more important talks with Iran.

The majority repeatedly describes the DEA activi-
ties, which were under North's direction, as an overt
attempt to pay ransom for the hostages. Indeed, a
number of the points made by the majority depend on
the ransom theme. The importance of this claim, to
the overall thesis of the majority report is that, if true,
it would show a predisposition toward paying ransom
that would tend to confirm an interpretation of the
Iran initiative as an arms-for-hostages deal. We too
would be troubled if ransom were being contemplat-
ed. But, according to the evidence received in the
Committees' investigation, the DEA rescue plans con-
templated bribes as the means to gain the hostages'

77-026 0-87-11

529

Chapter 8

release. There was no attempt to pay ransom to the
captors.

The majority discounts the testimony of one of the
two DEA agents involved, whom we shall call Agent
1. The agent clearly stated that the plan was to offers
bribes to certain individuals, and not to pay ransom to
those who had directed the capture of the hostages.
The agent emphasized that none of the captors had
solicited ransom. Rather, money was to be delivered
as bribes to those who could effect the release of the
hostages, not to the people who actually controlled
the terrorist organization. The idea was to find indi-
viduals who could be paid off without the knowledge
of those in control. The money was intended to go
directly to these individuals.^^

The majority also ignores the account of the De-
fense Intelligence Agency (DIA) Major who served
on the Hostage Locating Task Force in 1985 and
1986. In January 1986, the DIA Major met with the
other DEA agent involved in hostage activities,
whom we shall call Agent 2, and with two sources
who were assisting the DEA agents. The DIA Major
observed that one of the two sources was more prom-
ising because of his contacts and superior access to
the hostage takers.^'* The DIA Major prepared a
memorandum of these meetings, and he testified to its
accuracy.®^ According to the memorandum, the more
promising of the two sources suggested bribery to
free the hostages.*®

Furthermore, Agent 2 testified that when one
source suggested that the Lebanese hostage takers
would release the hostages in exchange for weapons,
the agent dismissed the suggestion. Asked whether
the subject of weapons was ever raised again, the
agent replied: "No, because I think we had told the
source that forget it, you know. It has got to be a
bribe situation, not a ransom, but a bribe situation".*''
In fact, the questions from the majority's own counsel
clearly recognized that the plan involved bribery.*

A prime example of the majority's attempt to char-
acterize the DEA plans as ransom plans is their analy-
sis of activities in May and June of 1985. The majori-
ty alleges that the plan in that time-frame was to pay
ransom money of $1 million per hostage. On the con-
trary, three memorandums on the issue, written by
Col. North, all clearly described a plan to bribe indi-
viduals other than the hostage takers. The bribe
money was to be paid to individuals with access and
to those who would arrange transportation and safe
passage for the hostages. None of these memoran-
dums mentioned any ransom payments to the hostage

• The counsel stated duinng the deposition: "You were trying to
bribe these people with money at the same time they were trying to
get weapons from North" See Agent 2 Dep., 8/28/87. at 61. Later,
the same counsel asked: "How were these people to be released? In
other words, was it to be a forcible extraction. Was it to be a
bribing ... to look the other way?" The agent responded; "Brib-
ing It was always bribing. May not even be bribing. It may be they
go shoot all the guards." See Agent 2 Dep.. 8/28/87, at 109.

takers.** North's superior, Robert McFarlane, similar-
ly described the plan as one of bribery.*^

The majority also claims that the DEA activities
were inconsistent with the simultaneous effort to gain
the release of the hostages through the Iran initiative.
Such a claim is based on the majority's view that at
the same time North was arranging to sell weapons to
the Iranians to induce them to influence the Hizballah
captors to release the hostages. North was offering
direct ransom payments to the captors. As shown
above, the majority's ransom notion conflicts with the
facts. Also, the majority's theme of inconsistent chan-
nels for release of the hostages ignores the fact that
the DEA activities, which commenced in early 1985,
were in existence months before the first sale of arms
to Iran in August and September 1985. In any event,
the fact is that, notwithstanding the DEA plans as
well as other plans for hostage release, the Iran initia-
tive did lead to the release of three hostages. Any
alleged conflict or inconsistency is based on specula-
tion. Given the majority's inclination to criticize
every perceived or misperceived activity of the Ad-
ministration in its efl"ort to free the American hos-
tages, the case can be made that if North had not
pursued alternatives to the Iranian arms sales, the
majority would have found fault with such failure to
find better ways to free the hostages.

The last important majority contention is that the
activities of the DEA agents were "operational"
rather than intelligence-related, and that such activi-
ties therefore required that Congress be notified. The
facts show that the DEA agents gathered intelligence,
planned several operations to free the hostages, and
took some preparatory steps for these operations.
However, the actual operations to free the hostages
did not take place, to a large extent because of events
in the Middle East beyond the control of the agents.
The participants should, however, have paid closer
attention to accounting, funding, and reporting re-
quirements, in order to ensure full compliance with
the applicable rules and regulations.

In the final analysis, the DEA efforts to free the
hostages must be viewed in perspective. The Presi-
dent was personally committed to do all that he could
to bring the hostages home, and there was intense
national pressure to do so. Accordingly, the Adminis-
tration initiated several alternative programs, includ-
ing the plan to use DEA assets in Lebanon. DEA
efi'orts ultimately failed, and in hindsight these efforts
could have been better implemented. Nonetheless, the
facts show that many involved in these activities
acted at great personal risk and with the best of
intentions. Moreover, the Administration deserves
recognition for its efforts to explore every promising
avenue for the release of the hostages.

530

Chapter 8

The Second Channel

It is tempting, knowing Buckley's fate and the depth
of the President's feehng, to portray U.S. poHcy as
having become "hostage to the hostages." The hos-
tages did become too prominent. Negotiations con-
ducted through the First Channel, arranged by Ghor-
banifar, never got off the arms-for-hostages track, de-
spite repeated U.S. efforts. Once discussions began
through the Second Channel, however, they began to
take in broader geopolitical issues. Some aspects
might potentially have been promising. Others, such
as the Da'wa prisoners, should have been turned off
from the beginning.

The "First Channel" talks between Iran and the
United States, from late 1985 through the May 1986
Tehran trip, were arranged and principally conducted
by representatives of the Iranian prime minister, who
has ties to the more radical elements of the govern-
ment. Representatives of the so-called "middle of the
road" Rafsanjani faction also appear to have attended
some of these meetings. Rafsanjani, generally regard-
ed as the number two official in Iran,''" is the Speaker
of the Majlis or Parliament and has principal responsi-
bility for foreign affairs and the conduct of the war.
These early meetings used an unreliable intermediary,
Ghorbanifar, who misled both sides and who thereby
frustrated the progress of the discussions.

The discussions during the Fall of 1986, on the
other hand, generally referred to as the "Second
Channel" meetings, were sought, arranged and con-
ducted by representatives of Speaker Rafsanjani. Raf-
sanjani proposed that representatives of the other fac-
tions be included in the joint commission that was to
be established to pursue the normalization of rela-
tions.''' These changes in the leadership of the negoti-
ations appear to have corresponded with an increas-
ingly serious willingness on the part of the Iranian
leadership to consider renewed strategic cooperation
with the United States, although the leadership did
not abandon its interest in acquiring arms in return for
hostages.

The Ayatollah Montazeri, a prominent religious
leader who is virulently anti-American and a support-
er of radical fundamentalist violence in Saudi Arabia
and elsewhere, was excluded from both sets of discus-
sions. It was later determined that Ghorbanifar had
leaked information concerning the First Channel
meetings, including the secret participation of Israeli
representatives, to the Montazeri faction. This faction
was responsible for disclosing the U.S. -Iran negotia-
tions in the Fall of 1986 in retaliation for the arrest of
several of its leaders. After the disclosure, factional
warfare within Iran and the U.S. public's response
effectively ended the discussions. Since then, they
have been overtaken by events in the Gulf.

Negotiations

The initial meetings with the second channel took
place secretly in Washington, D.C. over two days in
September, 1986. Detailed contemporaneous notes
have been made available to the Committees. They
show that Colonel North, accompanied by George
Cave, a CIA expert on Iran, engaged in two-way
discussions of the elements of a new relationship in a
way that had not apparently been of interest to the
previous channel. The discussions moved from broad,
strategic objectives to a number of sensitive and
highly specific points. According to the notes, these
included the following:

— U.S. and Soviet interests in Iran;

— U.S. and Iranian interests in Afghanistan;

— Iran's objectives in the Iran-Iraq war;

— Soviet objectives in the Iran-Iraq war;

— Intelligence information about deceased hostage
William Buckley; and

— Establishing secure communications between the
two governments to avoid compromise by hostile
third governments.
The negotiators also raised the possibility of an ex-
panded military supply relationship, but the U.S. par-
ticipants made it clear that such a relationship presup-
posed resolution of the hostage situation, which was
also discussed extensively.^^

The next significant meetings were held in October
1986 in Frankfurt, West Germany. The U.S. partici-
pants were North, Cave, Secord and Hakim. The
Iranians made it clear that they wanted the relation-
ship to go beyond a "merchant" or "trading" relation-
ship.''^ The U.S. and Iranian representatives discussed
common geopolitical interests extensively, and com-
pared available information. The discussion then
turned to the extent to which the United States was
willing to supply additional weapons to Iran. U.S.
negotiators made clear that the weapons Iran had
requested could be supplied if the hostage issue was
resolved first.'* The U.S. and Iranian negotiators also
discussed the Iran-Iraq war, the meaning of an honor-
able "victory" for Iran, the status of Iraq's Saddam
Hussein.''^

North then left the meeting after stating that his
"Seven Point" proposal ''^ was the full limit of his
authority.* The Iranians made a counterproposal.
Hakim and Secord were left with authority to try to
come to an agreement with the Iranians, subject to
approval by the U.S. Government. After some addi-
tional discussion. Hakim and Secord reached a new
"Nine Point" agreement.'''' It provided in substance
for the release of one hostage, with a promise to
attempt to obtain another, in return for the shipment
of some U.S. weapons, instead of insisting on all of

• He had to leave suddenly because he had learned that the
airplane carrying Eugene Hasenfus had been shot down over Nica-
ragua. See North Test., Hearings, 100-7, Vol. II, at 6.

531

Chapter 8

the hostages as North's original proposal had done. It
also included a plan that might result in direct Irani-
an-Kuwaiti negotiations over release of the infamous
Da'wa prisoners.** The agreement was reviewed by
North and Poindexter and Poindexter claims to have
briefed the President.''* The evidence indicates, how-
ever, that the President was not told about the Da'wa.
When he learned about the Da'wa part of the talks
later, the President found it repugnant.''^ So do we.
It is hard to reach a definitive judgment about the
Second Channel meetings. Consider this exchange be-
tween Representative Hyde and Admiral Poindexter
from the public hearings:

Mr. Hyde: The conventional wisdom is that the
Iran overture was a policy disaster. Is that not
too precipitous a judgment? Shouldn't the jury
still be out on that? Because if we do lack good
intelligence, we don't really know whether we
were getting somewhere or not on the hostage
issue or the strategic opening. Is that a fair state-
ment?

Mr. Poindexter: I think that is a very fair state-
ment. I think it is possible if the present people
working this problem in government go about it
properly, I think it is still possible. One of the
interesting things is that we maintained contact
with the second channel right up until the day I
left the White House and we were alerting the
channel as to what we were getting ready to do
so that the President's speech, so that his press
conference didn't surprise them.

We got the Iranian Government to have their
ambassador at the U.N. make a statement which
referred to the United States in terms that are
more favorable than ever had been made public
by this particular Iranian Government, because I
truly believe that with the second channel that
we had established, we were in contact with
some people that really wanted to bring about
some changes in the Iranian Government that
would be much to the benefit of the United
States.

I am not talking about returning to a situation in
Iran that was the same as when the Shah was
there, but turning the government around to a
direction where we could indeed have a con-
structive relationship with them.

••At the meeting in Frankfurt, North specifically told the Iranian
representatives not what the United States would be willing to do
to release the prisoners, but what the Iranians would have to do
before the Kuwaitis would release them. See C378. North did not
promise then or later to take any affirmative steps on behalf of the
United States to seek the relea.se of the Da'wa prisoners. George
Cave testified to this effect as well. See Cave Dep., 9/29/87, at
152-53. See also Id. at 56.

I think it is still possible that that may come
about. 8 0

In some respects, the actual results of the Second
Channel negotiations — a small shipment of arms, the
release of one hostage — were similar to the earlier
agreements conducted through the First Channel.
Two elements of the Second Channel meetings were
different, however. First, although some of the same
people participated in meetings held through both of
the channels, the Second Channel meetings involved a
different, more powerful leadership. Second, the Ira-
nians this time clearly seemed to recognize that if the
hostage problem could be finally resolved, the United
States and Iran had important, mutually compatible
interests that might well sustain a substantially in-
creased level of cooperation.

The precise elements of the strategic relationship
being discussed were decidedly mixed, however.
Some were beneficial to the United States, such as the
exchanges of information over mutual geopolitical in-
terests in the region. Others, such as proposed Da'wa
release, were not. North may have been correct in
saying that the position he endorsed on the Da'wa did
not exactly contradict publicly stated U.S. policy.*'
This technical accuracy does not begin to account,
though, for the way such a position would have un-
dermined U.S. credibility. It is another example of the
NSC staff thinking about literal compliance, without
adequately considering the long term political conse-
quences.

Conclusion: The Role of the NSC
Staff, and Others

The Tower Commission concluded that the Iran initi-
ative was pursued with a flawed decision process
managed by the NSC staff, and suggested that the
procedural flaws were responsible for some of the
initiative's substantive errors.*^ The Tower board, we
believe, underestimated the extent to which major
issues were aired and argued before the President
from November 1985 through January 1986. But the
board was right to say that the lack of regular proce-
dures, fostered by an excessive concern for secrecy,
short-circuited the process of periodic review and
evaluation — both of the substantive desirability of
continuing the initiative, and of the decision not to
notify Congress.

To describe what happened simply in terms of the
process, however, leaves some important questions
unanswered. It is true that good organization can help
make sound decisions more likely. But organization,
at best, is a tool. The real fiaw in the NSC's Iran
negotiations, as well as in the NSC's deceptions of
Congress over Nicaragua, came from errors in judg-
ment. The question, therefore, is: what can an admin-
istration do to ensure that people with the appropriate

532

Chapter 8

breadth and depth of judgment are fully involved in
the process at the appropriate stages? The majority
report seems to want to get at this issue by legislating
organization for the executive branch down to the
finest detail. We are convinced, however that no one
formula will work best for all Presidents.

It is important not to let the record be closed with
a naked criticism of the NSC staff, such as the one
with which we closed our review of the Second
Channel negotiations. The NSC's weakness, and the
way the Iran initiative and Contra support programs
gravitated toward the NSC, point to issues that go
beyond this particular NSC and the specifics of this
investigation. The NSC staff operated within a con-
text that was also a part of the problem.

Presidents can use their NSC staffs in a variety of
different, and equally valid, ways. One President
might prefer a staff that filters and summarizes. An-
other might want a more active, more politically at-
tuned and more powerful NSC staff Like the Tower
Commission, we do not think it is appropriate to tell
Presidents how to arrange the people who work for
them. The best organization is the one that works best
for the elected official who bears final responsibility.
But an administration's style, overall, has to be one
that fits together in all of its parts. If the NSC staff is
to operate primarily as an honest broker, that imposes
responsibilities on cabinet officers chosen for their
judgment. If the cabinet officers fail to meet those
responsibilities, they end up leaving policy initiation,
oversight, substantive review and political review to
people who may not have those tasks as their primary
strengths.

The Reagan Administration has been beleaguered
from the beginning by serious poHcy disagreements
between the Secretaries of State and Defense, among
others. That in itself in not unusual. The perspectives
of those two departments often produce disagree-
ments, under many Presidents. One reason Presidents
need an NSC staff is precisely to help the President
benefit from the differences within his administration,
and not suffer from them. We have learned in our
hearings that President Reagan has been willing to act
decisively to settle policy differences when they are
presented to him. He has not been as successful, how-
ever, in ensuring that all such important differences
are brought to his personal attention. In addition, he
has not taken a strong hand in settling issues on
which policies, personnel conflicts and turf battles
merge. One result has been that some people in the
Administration have had an interest in seeing the
NSC staff play the role of honest broker, and not
being an independent source of power. Their interest
coincided with President Reagan's own preference for
cabinet government, and for a less independently
powerful NSC staff than those of his predecessors.
It is ironic that many have looked upon the Iran-
Contra Affair as a sign of an excessively powerful
NSC staff In fact, the staffs role in the Iran and

Nicaragua policies were the exceptions of the Reagan
years rather than the rule. When Robert McFarlane
resigned in December 1985, both Chief of Staff
Donald Regan and Secretary Shultz were wary of a
strong successor. Passing over some widely discussed,
and independently powerful people, such as Jeane
Kirkpatrick, the President chose McFarlane's deputy,
Admiral Poindexter. Press accounts written at the
time saw Poindexter's selection in precisely these
terms, as a decision to have the National Security
Adviser play the role of honest broker.*^ This image
of the NSC lasted almost until the moment the Iran
arms initiative became public.** Poindexter was seen
as a technician, chosen to perform a technical job, not
to exercise political judgment.

Poindexter is a talented man. In addition to his
skills as a naval officer, he is highly intelligent,
knowledgeable about international relations, and expe-
rienced with procedures in the Reagan White House.
He was not the sort of man, however, who normally
sought to initiate policy or engage in jurisdictional
battles. On the other side of this same character trait,
he had little feel for the "people" side of domestic or
international political strategy. That would not be a
problem, however, as long as he managed to stay in
the role of honest broker.

Of all people, White House Chief of Staff Donald
Regan surely should have known of Poindexter's
strengths and weaknesses. He should not have tried to
second-guess everything the National Security Advis-
er did, but his job in the White House did require him
to take note of when issues were likely to cause the
President political problems. Even if Regan were not
an expert in the substance of the international issues, it
was his job to stay on top of the political implications
of the NSC staffs activities. That alone should have
led him to see red warning flags, and to make a
careful check, when North was asked to testify about
support for the Nicaraguan democratic Resistance
after press accounts and a formal Resolution of In-
quiry. He should have had a similar reaction when
the NSC never reviewed the decision not to notify
Congress about the January 17 finding.

One way of looking at Poindexter's mistakes is to
say that they were just waiting to happen. Once the
NSC staff had to manage two operations that were
bound to raise politically sensitive questions, Poin-
dexter was not well equipped to handle them. It is not
satisfactory, however, for people in the Administra-
tion simply to point the finger at him and walk away
from all responsibility. For one thing, the President
himself does have to bear personal responsibility for
the people he picks for top office. But the problem
here may not have been who was picked. Instead, it
may be that a person chosen to do one kind of a job
as National Security Adviser suddenly was thrust into
a very different kind of a situation. The question.

533

Chapter 8

therefore, is: how did it happen that the NSC came to
play so prominent a role in the Iran-Contra Affair?

There is no mystery why the NSC staff became so
important for U.S. policy toward Nicaragua. North's
powerful personality, and disputes within the Restrict-
ed Interagency Group before Abrams became Assist-
ant Secretary of State, both contributed to North's
growing power. But the fundamental reason for the
NSC's prominence, beginning in 1984, was the Boland
Amendment. Once that amendment was passed, the
CIA and State Department were all but read out of
the picture. The NSC staff was able to operate under
the restriction, and it did.

The evolution of the NSC's role in the Iran initia-
tive was more accidental. David Kimche brought Is-
rael's proposal to McFarlane in August 1985, instead
of to the State Department, because he knew McFar-
lane well, because the State Department had rejected
similar overtures in the past, and because he knew the
issue would have to be decided by the President. The
NSC staff was asked for flight assistance, instead of
State, in November 1985, for essentially the same rea-
sons. In January 1986, Amiram Nir saw Poindexter
and North partly because Nir and North were their
respective governments' counterparts on counterter-
rorism and had worked closely together in that capac-
ity, partly because the hostages made this a
counterterrorism issue, partly because the initiative
had already started in the NSC, and partly, or mostly,
because Secretries Weinberger and Shultz were
strongly opposed to the arms sales.

In addition, the CIA was more than happy not to
be managing the operation itself. It was content, as
former Deputy Director of Central Intelligence John
McMahon has said, to play a support role.*^ Clair
George, the Deputy Director for Operations, ex-
pressed even stronger feelings, as did his whole direc-
torate, because Ghorbanifar was being used as the
intermediary. After having issued a burn notice on
Ghorbanifar once before, Casey asked George to re-
evaluate him. The agency reinterviewed Ghorbanifar
in late December 1985 and gave him a second poly-
graph in January 1986.*® George told North how
poorly Ghorbanifar had done, and then told Casey:
'"Bill, I am not going to run this guy any more,' which
means in our language, 'I will not handle him; he is a
bum.' " *'

There were a number of reasons peculiar to the
particular operation, in other words, that explain why
the NSC staff ended up running the Iran initiative. It
is important to remember, however, that this function
was an aberration. But the NSC lacked not only a
person at the top who was picked for policy judg-
ment; it also lacked operational experience.* There

were people with such experience in the line agencies,
but their Secretaries were vehemently opposed to the
initiative.

In the best of all textbook worlds, the department
secretaries and other political appointees would ac-
knowledge the President's decision and work hard to
make sure the decision is implemented professionally.
As George Shultz said in his testimony, however,
issues never seem to be settled in Washington.** Con-
cern was rampant throughout the government that
trusting anyone to run a policy he or she opposed
vigorously was an open invitation to having the
policy undermined, through leaks or otherwise. The
situation helps explain why the NSC staff, when run-
ning a dangerous operation during which hostages
could easily be killed, decided to be secretive.

There can be no question that the NSC denied
Secretaries Shultz and Weinberger some information
they should have had. However, if one looks at the
record presented in testimony, it is also clear both of
the Secretaries had many indications of what was
happening. Weinberger did not push as hard he might
have done to insist on a policy review, but we do not
accept the Tower Commission's conclusion that he
simply distanced himself from what was going on. On
the other hand, the Tower Commission's assessment
of Shultz seems more accurate. He does seem to have
distanced himself, and then complained loudly after-
ward about what had happened.

Let us begin with Weinberger. During our hear-
ings, the Secretary of Defense described himself as
having been "pretty horrified" at a November 10,
1986 White House meeting, when he heard Poin-
dexter give what the Secretary described as Poin-
dexter's first general exposition and report on the
initiative.*^ In contemporaneous notes, Weinberger
also said he was surprised to learn that the President
had signed a finding for the initiative in January
1986.®° It would be misleading to treat Weinberger,
however, as if he were left in the dark. For example,
even though Weinberger did not know the President
had signed a finding on January 17, he did attend a
meeting at which the finding was discussed the day
before, and he did know the Defense Department was
shipping weapons to the CIA for Iran in February.
He also learned about McFarlane's trip to Tehran
from reports even though he had not been told about
it in advance by Poindexter, and he knew about the

• However, the NSC played an operational role in a series of
risky foreign activities during the Reagan Administration: the raid
on Libya, the freeing of the American students on Grenada, and
the capture of the Achille Lauro seajackers. Admiral Poindexter

pointed out that nobody (Congress and press included) ever com-
plained about the NSC's role in these successful operations. It was
not until the problems with the Iran initiative and the Contra
assistance program (both highly controversial foreign policy initia-
tives) that the NSC's operational role was questioned. Poindexter
Test.. Hearings, ICK)-8, 7/17/87, at 167-168. This raises a serious
question as to whether the NSC should be legislatively prohibited
from ever playing an operational role to assist the President with
sensitive and risky activities that the State and Defense Depart-
ments bureaucraties might he too cumbersome to react lo effective-
ly

534

Chapter 8

October 1986 shipment.^' When he did not see all of
the hostages come out, he could have said it was time
to see how the policy was working. In fact, Wein-
berger said that he did make the point "all through
that year" to Admiral Poindexter.

I talked to Mr. Poindexter so many times, and I
don't remember whether the President was
present at some of those meetings or not. I think
he may well have been, but I am not sure of that.
But the continued objection was made all
through that year with repeated — my repeatedly
calling attention to the fact that it wasn't work-
ing.*^

Weinberger was repeatedly told by Poindexter,
however, that the President had made up his mind
and it was useless to keep rearguing the point. ^^
Weinberger probably could have insisted on a review
anyway. Poindexter's past record, however, led
others, mistakenly on this one issue, to see him as a
person who (a) carried cabinet level messages faithful-
ly and (b) was not an inordinate risk-taker. We have
to surmise from Weinberger's behavior, therefore, that
he accepted Poindexter's characterization and con-
cluded that the issue was not important enough to
him to be worth repeated pushing. Other battles, over
arms control for example, must have been of higher
priority.

Shultz is more open to criticism than Weinberger,
in our view. For one thing, the Iran initiative directly
went against Operation Staunch and other State De-
partment programs. He had more reason bureaucrati-
cally to insist on an active role, and more solid rea-
sons than Weinberger to think the initiative might be
running counter to the positions he and his depart-
ment were charged with enforcing.

Secretary Shultz submitted a chronology to the
Committees that listed an impressive number of occa-
sions on which he was led by Poindexter to think that
the United States was not contemplating or engaged
in arms sales to Iran.** Nevertheless, there are also a
significant number of occurrences that would have
given a more engaged Secretary, or one who wanted
to be more engaged, an opportunity to insist upon
being fully informed.

For example, on December 5, 1985 Shultz was
briefed by Poindexter on Iran. In that briefing, Shultz
complained about the State Department being cut out
of distribution on certain reports. Despite the com-
plaint, the reports did not start coming to him.®^
From the very beginning of Poindexter's tenure as
National Security Adviser, therefore, Shultz was
given a strong signal that he would have to be very
aggressive to stay on top of all of the relevant infor-
mation he would need to know. Then, in January,
Shultz all but told the secretive Poindexter that he
would let him be the judge of what he thought Shultz
should be told about Iran:

What I did say to Admiral Poindexter was that I
wanted to be informed of the things I needed to
know to do my job as Secretary of State.

But he didn't need to keep me posted on the
details, the operational details of what he was
doing. That is what I told him.

Now, the reason for that was — I'm not — this is
the gist of what I told him. I don't remember the
exact words, but that was about it. The reason
for that was that there had been a great amount
of discussion of leaks in the Administration, justi-
fiably so. ... I felt it would probably leak, and
then it wouldn't be my leak.*®

Shultz insisted that he intended and expected to be
informed about major issues. But he did leave it to
Poindexter to decide which issues were which.

On January 7, 1986, the President held a meeting to
discuss Amiram Nir's proposal to resume the arms
sales with Iran. Shultz, Weinberger, Meese, Casey,
Regan and Poindexter were there. Shultz and Wein-
berger opposed selling arms to Iran, as they had in
past meetings. Unlike other meetings, Shultz said, "it
seemed to me that as people around the room talked,
that Secretary Weinberger and I were the only ones
who were against it." *'

Then, on January 16, Shultz attended a cabinet
meeting at the White House. After the meeting, he
was invited to come back later in the afternoon for a
meeting about Iran. Shultz said he could not attend
because he had another engagement. In our hearings,
Shultz made a point of complaining that he did not
know the meeting was to discuss what became the
January 17 finding."* But he must have known, after
the January 6 meeting, that arms sales and hostages
were on the agenda. Weinberger, Meese, Casey, Spor-
kin and others attended the meeting, which was held
in Poindexter's office. The finding was discussed ex-
tensively. Weinberger could have begged off on the
same grounds as Shultz, by saying that the President
was aware of his view. But the Defense Secretary
attended and heard a thorough discussion of the find-
ing. Shultz stayed away, did not send a stand-in, and
never asked for, let alone insisted upon, a briefing on
what had happened. After this sequence, one could
certainly understand how Poindexter got the impres-
sion that Shultz did not really care to be informed. If
this meeting did not give off every signal of a major,
policy event, it is hard to know what would. And if
Shultz chose not to come or to inquire afterwards,
what should Poindexter have been expected to con-
clude about how much to tell the Secretary?

On February 28, Poindexter told Shultz that hos-
tages would be released the following week and that
Iranians wanted a higher level meeting, but even after
the January meeting Shultz did attend, this news did
not prompt Shultz to ask about arms. Shultz also

535

Chapter 8

approved the Terms of Reference for McFarlane's
trip to Tehran on February 28. The trip was delayed
repeatedly. Then, on May 3, Shultz received a cable
while he was attending a summit meeting with the
President in Tokyo. The cable said that the U.S. Am-
bassador to Great Britain had learned that a British
businessman, Tiny Rowlands, had been approached
by Nir to take part in an arms transaction with Iran
that had White House approval and included Ghor-
banifar and Khashoggi.

Don Regan . . . told me that the President was
upset and this was not anything he knew about,
and Admiral Poindexter told me, I think his
words were something like "We are not dealing
with these people. This is not our deal."

He told Ambassador Price, who called him, that
there was, I think his words were, "only a smid-
gen of truth in it," something like that.^^

It is puzzling to us how Shultz could have been
reassured by what Poindexter told him in Tokyo. The
phrases "this [as opposed to something else?] is not
our deal" and "smidgen of truth" should invite skepti-
cism.

What is the point of reviewing Shultz's record of
disengagement? Shultz and Weinberger left the im-
pression in our hearings, whenever they were asked
about the subject, that the main reason to have asked
for an NSC review of how the Iran policy was being
implemented would have been to reargue the Presi-
dent's basic decision. But surely, that is not the only
obligation a cabinet secretary owes to his President.
Full NSC members have a responsibility to remain
engaged to make sure (1) that the President's policies
are being implemented correctly, with a proper eye
for consequences not noted by an agency running an
operation, and (2) to insist that the President periodi-
cally review important policy decisions, so all power
is not left in the hands of the people most committed
to pushing forward.

If a top official cannot honestly serve his President
in this way, raising questions about implementation
even when disagreeing with the underlying policy
decision, then it is time to think about resigning.
Presidents need the judgment and support, even if it is

honestly skeptical support, of their top appointees. If
the appointees find the policy so repugnant that they
can only distance themselves from it, then they are
not doing their best to serve. Weinberger did make
sure that the Defense Department aspects of the oper-
ation were implemented properly. Shultz simply failed
to find out about the aspects of the negotiations that
directly affected his own department's responsibilities.

Everyone who had a stake in promoting a techni-
cian to be National Security Adviser should have
realized that meant they had a responsibility to follow
and highlight the political consequences of operation-
al decisions for the President. Even if the cabinet
officials cannot support the basic policy, they have an
obligation to remain actually involved, if they could
manage to do so without constantly rearguing or un-
dermining the President's basic policy choice. That is
an essential corollary of a system of cabinet govern-
ment, with a relatively weak National Security Coun-
cil staff. If the NSC staff is not expected to provide
independent judgment, somebody else must do so.

It is at least theoretically possible that the idea of a
strong cabinet government, with a weak NSC staff,
will not meet any President's needs in today's interna-
tional climate. That is, with the constant pressure of
events and the inevitability of interdepartmental dis-
agreement, it is possible that future Presidents will
decide that some important issues over the course of a
full term inevitably will require them to have some-
thing more than an honest broker as National Security
Adviser. If the need is inevitable. Presidents would be
well advised to choose people who are known for
their independent skills at understanding the strategic
politics of international relations, both domestically
and abroad. President Reagan certainly reached this
conclusion when he picked Frank Carlucci to replace
Poindexter, and we expect that General Powell will
also turn out to be a person with the requisite sense of
judgment. But Presidents should not simply assume
that the Iran-Contra affair automatically proves the
inevitable need for an independently powerful NSC
staff. President Reagan's approach toward governing
automatically requires something from the cabinet
that was not supplied in this case. The model, in other
words, was never given much of a chance.

536

Endnotes

Chapter 8

1. Youssef Ibrahim, "New Pipelines Are Reducing Per-
sian Gulfs Strategic Role," New York Times, October 7,
1987.

2. Tower at B-6.

3. Iran: Prospects for Near-Term Instability, Special Na-
tional Intelligence Estimate (SNIE), February 1986.

4. See Philip Taubman, "Iran and Soviets Draft Big
Projects, Including Pipelines and Railroad," New York
Times, May 8, 1987; Elaine Sciolino, "A Soviet Overture to
Iran Reported," New York Times, June 30, 1987; "Soviets,
Iran Seek Accord to Open Pipeline, Rail Links," Washing-
ton Post, Aug. 8, 1987; "Iran and Soviets Are Said to Near
a Friendship Pact," Wall Street Journal, August 13, 1987.

5. Poindexter Test., Hearings, 100-8, 7/20/87, at 307.

6. Secord Test., Hearings, 100-1, 5/7/87, at 244 and 5/8/
87, at 272-73, 341-42, 344; McFarlane Test., Hearings, 100-2,
5/13/87, at 222, 244 and 5/14/87, at 273; Poindexter Test.,
Hearings, 100-8, 1/\1/%1, at 216 and 7/20/87, at 290.

7. McFarlane Test., Hearings, 100-2, 5/13/87, at 222;
North Test., Hearings, 100-7, Vol. II, 7/13/87, at 61; Poin-
dexter Test., Hearings, 100-8, 7/17/87, at 210 and 7/20/87 at
290; Tower at B-8, B-90.

8. McFarlane Test., Hearings, 100-2, 5/13/87, at 222, 225;
North Test., Hearings, 100-7, Vol. II, 7/13/87, at 62; Tower
at B-7-8, B-61.

9. Secord Test., Hearings, 100-1, 5/8/87, at 267, 272-73;
McFarlane Test., Hearings, 100-2, 5/13/87, at 223; Hakim
Test., Hearings, 100-5, at 363; North Test., Hearings, 100-7,
Vol. II, 7/13/87, at 62; Poindexter Test., Hearings, 100-8, 7/
17/87, at 210-11, 216-17.

10. McFarlane Test., Hearings, 100-2, 5/13/87, at 224;
North Test., Hearings, 100-7, Vol. II, 7/13/87, at 62; Poin-
dexter Test., Hearings, 100-8, l/lQ/%1, at 290; Tower at B-8,
B-61, D-12-13.

11. McFarlane Test., Hearings, 100-2, 5/13/87, at 224;
North Test., Hearings, 100-7, Vol. II, 7/13/87, at 62; Poin-
dexter Test., Hearings. 100-8, 7/20/87, at 290; Tower at B-8-
9, B-61, B-89-90, D-12-13.

12. McFarlane Test., Hearings, 100-2, 5/13/87, at 224;
North Test., Hearings, 100-7, Vol. II, 7/13/87, at 62; Poin-
dexter Test., Hearings, 100-8, 7/20/87, at 290; Tower at B-7,
B-90.

13. McFarlane Test., Hearings, 100-2, 5/13/87, at 224;
North Test., Hearings, 100-7, Vol. II, 7/13/87, at 62; Poin-
dexter Test., Hearings, 100-8, 7/20/87, at 290.

14. McFarlane Test., Hearings, 100-2, 5/13/87, at 225;
Poindexter Test., Hearings, 100-8, 7/17/87, at 214-16 and 7/
20/87, at 290; Secord Test., Hearings, 100-1, 5/8/87, at 342;
Tower at B-8.

15. North Test., Hearings, 100-7, Vol. II, 7/13/87, at 62.

16. Gary Sick All Fall Down: America's Tragic Encoun-
ter With Iran (1986), at 104.

17. Secord Test., Hearings, 100-1, 5/6/87, at 148.

18. McMahon Dep., 9/2/87, at 64-67.

19. See Weinberger Test., Hearings, 100-10, 7/31/87, at
140. See also North Test., Hearings, 100-7, Vol. I, 7/9/87, at
220.

20. McFarlane Test., Hearings, 100-2, 5/13/87, at 229;
Poindexter Test., Hearings. 100-8, 1/\1/%1, at 216.

21. Secord Test., Hearings, 100-1, 5/6/87 at 148-50, 5/7/
87 at 230-31 and 5/8/87 at 352-55; Poindexter Test., Hear-
ings, 100-8, 7/17/87, at 215.

22. Poindexter Test., Hearings, 100-8, l/\l/il, at 215.

23. George Test., Hearings, 100-11, 8/5/87, at 190.

24. Poindexter Test., Hearings, 100-8, 1/\1/%1, at 215.

25. Memorandum from Poindexter to the President, Janu-
ary 17, 1986, p. 1, Ex. JMP-28, Hearings, 100-8.

26. Poindexter Test., Hearings, 100-8, 7/17/87, at 215. See
also Weinberger Test., Hearings, 100-10, 7/31/87, at 146.

27. Shultz Test., Hearings. 100-9, 7/23/87, at 52.

28. Id. at 53..

29. Robert M. Gates, "The CIA and the Making of
American Foreign Policy," Speech delivered at Princeton
University, September 29, 1987, p. 23.

30. McMahon Dep., 9/2/87, at 27.

31. Regan notes, p. 13, Ex. DTR-41A, Hearings, 100-10.

32. Tower at III-4 to 1II-8 and B-1 to B-24.

33. George Test., Hearings, 100-11, 8/5/87, at 190.

34. U.S. Senate, 100th Cong., 1st Sess., Select Committee
on Intelligence, "Preliminary Inquiry Into The Sales of
Arms to Iran and Possible Diversion of Funds to the Nica-
ragua Resistance," S. Rept. 100-7, p. 3.

35. Tower at B-3, citations omitted.

36. Lally Weymouth, "Yaacov Nimrodi: A Tale of Arms
and the Man," The Washington Post, Dec. 14, 1986, p. H4.

37. Tower at B-11.

38. Tower at B-4.

39. Ledeen Dep., 3/11/87, at 9-11.

40. Id. at 16-19; Tower at B-4 to B-6.

41. Tower at B-9.

42. Tower at B-14.

43. Ledeen Dep., 3/11/87, at 28.

44. North Test., Hearings, 100-7, Vol. I, 7/9/87, at 218;
Poindexter Test., Hearings, 100-8, 7/21/87, at 385; George
Test., Hearings, 100-11, 8/5/87, at 194; Hakim Test., Hear-
ings, 100-5, 6/4/87, at 261 and 6/5/87 at 393.

45. Hakim Dep., 5/25/87 at 58-60.

46. Tower, at B-1 9.

47. Poindexter Test., Hearings, 100-8, 7/21/87 at 385 and
Poindexter notes, Ex. JMP-23, Hearings, 100-8.

48. Letter from Prime Minister Peres to President
Reagan, 2/28/86, J7431.

49. Ex. JMP-58, Hearings, 100-8.

50. See Ex. DTR-41 (notes by Alton Keel) and Ex. DTR-
41 A (notes by Donald Regan), Hearings, 100-10.

51. Briefing paper for November 20, 1986 meeting, S3921.

52. McFarlane cable to Shultz, July 13, 1985, Ex. GPS-9,
Hearings, 100-9.

53. Armacost cable to Shultz, July 13, 1985, Ex. GPS-8,
Hearings, 100-9.

54. Tower at B-1 7.

55. North Test., Hearings, 100-7, Vol. I, 7/9/87, at 218.

56. McFarlane cable to Shultz, July 13, 1985, Ex. GPS-9,
Hearings. 100-9.

57. Shultz cable to McFarlane, July 14, 1985, Ex. GPS-

10, Hearings, 100-9.

58. See Secord Test., Hearings, 100-1, 5/8/87, at 273;
North Test., Hearings, 100-7, Vol. I, 7/8/87, at 219 and Vol.

11, 7/14/87, at 150-51; McFarlane Test., Hearings, 100-7,
Vol. II, 7/14/87, at 173-74; Poindexter Test., Hearings, 100-
8, 7/20/87, at 305; Shultz Test., Hearings, 100-9, 7/24/87, at
184-85.

59. McFarlane Test., Hearings, 100-2, 5/13/87, at 175.

537

Chapter 8

60. Shultz Test., Hearings, 100-9, 7/24/87, at 185.

61. 22 U.S.C. 1732 as cited by President Carter in Execu-
tive Order 12294 affecting private claims against Iranian
assets held in the United States, 46 Fed. Reg. 14111 (1981).
Both the law and executive order are cited in Dames &
Moore v. Regan. 453 U.S. at 675-76.

62. North Test. Hearings, 100-7, Vol. II, 7/10/87, at 22.

63. Agent 1 Dep., 8/12/87, at 191-196.

64. DIA Major Dep., 7/2/87, at 88-90.

65. T3Id. at 94.

66. DIA Major Dep., Ex.1, at 4.

67. Agent 2 Dep., 8/28/87, pp. 57, 109.

68. Memorandum from North to McFarlane, 5/24/85 at
3, 4, North Test., Hearings, 100-7, Part II, Ex. OLN-262;
memorandum from North to McFarlane, 6/7/85, at 2-4,
North Test., Hearings, 100-7, Part II, Ex. OLN-262; memo-
randum titled "DEA support for recovery of American
hostages seized in Beirut," Ex. EM-2, Hearings, 100-9.

69. McFarlane Test., Hearings, 100-2, 5/11/87, at 44.

70. Cave Dep., 4/17/87, at 111; Cave Dep., 9/29/87, at
67-69.

71. Allen/Cave memo on the Frankfurt meetings, 11/3/
86, C09522-23.

72. Memorandum of conversation, Sept. -Oct. 1986 at
1,2,3,6,7,9,17-18, P59.

73. Transcript of Second Channel Meeting at C332.

74. Id. at C366-67.

75. Id. at C367-71.

76. Ex. OLN-308, Hearings, 100-7, Vol. II.

77. Ex. OLN-310, Hearings, 100-7, Vol. II.

78. Poindexter Test., Hearings, 100-8, 7/15/87, at 69.

79. Shultz Test., Hearings, 100-9, 7/23/87, at 69; Regan
Test., Hearings, 100-10, 7/30/87, at 20-21.

80. Poindexter Test., Hearings, 100-8, 7/16/87, at 216.

81. North Test., Hearings, 100-7, Vol. I, 7/10/87, at 332.

82. Tower at IV-3-4.

83. See, for example, "Primus, Pares and Poindexter,"
New York Times editorial, December 6, 1985; Mary Belch-
er, "White House shift realigns influence in foreign policy.
More clout likely for State, Defense," The Washington
Times, December 5, 1985, p. 1.

84. Leslie H. Gelb, "How the New Admiral at the White
House Fares," New York Times, September 23, 1986, p. 24.

85. McMahon Dep., 9/2/87, at 69-72.

86. George Test., Hearings, 100-11, 8/6/87, at 158.

87. Id. at 160.

88. Shultz Test., Hearings, 100-9, 7/24/87, at 48.

89. Weinberger Test., Hearings, 100-10, 7/31/87, at 150.

90. Ex. CWW-28, Hearings, 100-10.

91. Id at 143-45.

92. Weinberger Test., Hearings, 100-10, 7/31/87, at 145.

93. Poindexter Test., Hearings, 100-8, 7/31/87, at 42.

94. Ex. GPS-Chronology-B, Hearings, 100-10.

95. Shultz Test., Hearings, 100-9, 7/24/87, at 30.

96. Shultz Test., Hearings, 100-9, 7/23/87, at 6.

97. Shultz Test., Hearings, 100-9, at 33.

98. Shultz Test., Hearings, 100-9, 7/23/87, at 33.

99. Shultz Test., Hearings, 100-9, 7/23/87, at 10.

538

Chapter 9
Iran: The Legal Issues

These Committees' hearings and the majority report
have trivialized important disagreements over interna-
tional policy, and the political relationships between
the legislative and executive branches. In an attempt
to gain partisan advantage, the majority has focused
upon legal disputes, trying to portray the Committees'
role as that of prosecutor. We have indicated several
times that we have some policy disagreements with
the Administration's actions of 1984-86. We disagree,
for example, with the decision to sell arms to Iran and
to withhold notification to Congress for as long as the
President did in this case. We also think it was a
political mistake for the President not to have con-
fronted Congress over the Boland Amendment in
1984. In neither case, however, do we think the Ad-
ministration made serious legal missteps. Our reason-
ing with respect to the Boland Amendment was laid
out in an earlier chapter. Here, we examine the major
legal points raised by the majority in criticism of the
Iran initiative. We conclude that the Administration
was in subtantial compliance with the law throughout
the Iran initiative.

Introduction

The Iran arms sales involved two different kinds of
transactions. The 1985 shipments involved sales, from
Israel to Iran, of arms Israel had purchased from the
United States. The President gave his verbal approval
for these sales,* and the U.S. assured Israel that the
weapons could be replenished from U.S. stocks. The
August-September 1985 TOW missile sales took place
without any direct U.S. participation. A shipment
problem in November 1985 brought General Secord
into the picture. Ultimately, the CIA also became
involved in a minor, peripheral way, because (1)
Secord used a CIA proprietary, at commercial rates,
to ship the missiles and (2) because CIA personnel
became involved in trying to help arrange transship-
ment through a European country. Because of the
CIA's participation, the CIA's General Counsel, Stan-
ley Sporkin, drafted a written Presidential Finding
within days of the event that was signed by the Presi-

• For the dispute over this point, see Tower, B- 19-23. These
Committees have developed no important new evidence on the
point.

dent about December 5, 1985. This is the Finding
Admiral Poindexter said he destroyed in November
1986.' A draft of the Finding has been entered into
the Committees' record as an exhibit.^ The 1986 ship-
ments, in contrast, all involved the shipment of U.S.
arms through a commercial cutout, the Secord-Hakim
"Enterprise." All of these shipments were adequately
described and fully covered by a written Presidential
Finding signed January 17, 1986.

The basic law governing most sales of U.S. arms to
other countries is the Arms Export Control Act
(AECA).3 Under the AECA, the President is re-
quired to notify Congress of covered arms sales, and
Congress has an opportunity to pass a joint resolution
prohibiting major sales, if it can get the President's
signature or a two-thirds veto override vote. The
AECA also requires special waivers if a sale is to be
made to a country, such as Iran, that has been named
by the Secretary of State as one that supports interna-
tional terrorism.'' Finally, the AECA requires any
country that receives arms under the terms of the act,
such as Israel, to notify the President of any proposed
transfers to third parties or countries, and to limit
such transfers to countries or organizations otherwise
eligible to receive arms under the terms of the act.
Under this provision, transfers from Israel to Iran
would be governed by the same notification and
waiver requirements as direct sales or transfers from
the United States. Similar restrictions apply to the
retransfer of arms given to another country under the
Foreign Assistance Act (FA A) of 1961.^ Under the
AECA and the FAA, sales of munitions valued at less
than $14 million are not subject to the formal report-
ing requirements outlined in 22 U.S.C. 2753 (d). Arms
sales may also proceed covertly under the National
Security Act,® with prices set under the terms of the
Economy Act.^ The National Security Act does con-
tain rules requiring notification of Congress,* and the
Hughes-Ryan Amendment to the Foreign Assistance
Act of 1961 limits the use of appropriated funds to
support CIA foreign operations, to ones for which the
President finds the operation to be important to the
national security.' The legal issues raised by the arms
sales to Iran may therefore be summarized as follows:

(1) Did the arms sales of 1985, from Israel to Iran,
violate the terms of the AECA or FAA?

539

Chapter 9

(2) Did the 1985 Israeli sales to Iran violate the
requirements for Presidential authorizations or Find-
ings under the terms of the National Security Act and
the Hughes-Ryan Amendment?

(3) Did the 1986 sales violate the National Security
Act's requirements for notifying Congress?

Our answer to each of these questions is no. We
conclude that the Administration was in substantial
compliance with the law during each of the Iran
transactions.

Export Controls and the 1985
Shipments

All of the arms transfers before January 17, 1986—
that is, the transfers of August, September, and No-
vember 1985— were accomplished by Israel's ship-
ment of weapons from its own supplies. These weap-
ons were originally obtained from the United States
and were sent to Iran with the understanding that the
United States eventually would replenish Israeli
stocks.

It is reasonable to assume that the weapons Israel
shipped to Iran in 1985 were originally supplied under
the AECA or FAA. These two statutes do permit the
President or the Secretary of State to consent to re-
transfers, provided that certain conditions are satis-
fied. Under the Arms Export Control Act, these con-
ditions are that the United States itself must be able to
sell weapons to the third country directly; that the
third country transferee must agree in writing not to
retransfer without U.S. permission; and that Congress
must be notified. '° The Foreign Assistance Act con-
tains provisions similar to the first two above, but no
notification provision. ' ^ It should be noted that while
the Letter of Offer and Acceptance ^^ Israel signed in
receiving arms in the first instance required it to re-
ceive written authorization from the U.S. for re-
transfer of weapons to a third party, neither the
AECA nor the FAA require a written authorization.
In these instances, Israel received oral authorization
for the retransfers. Because each of these transactions
involved less than $14 million, compliance with the
formal reporting requirements of the AECA and
FAA is not required.'^

The retransfer restrictions of the AECA and FAA
were intended to cover situations in which the trans-
ferring country, rather than the United States, is the
sole source of the retransfer request. The laws seek to
ensure that such retransfers foster the national securi-
ty interests of the United States. But in the case of the
Iran arms sales, the Israeli shipments were made with
the agreement of American authorities, and Israel was
promised and later was given substantially identical
replacements. Clearly, the Iran arms sales were pre-
mised on U.S. views about America's own national
security interests. In short, the substantive purposes of
the AECA and FAA were met.

An Alternative Route

The National Security Act provides an alternative
legal route to using the AECA or FAA. Like the
AECA and FAA, the National Security Act presup-
poses some kind of Presidential determination. Specifi-
cally, the determination must be that an action — in
this case a retransfer — would "affect" the national
security. ''' If the CIA is involved, the so-called
Hughes-Ryan Amendment requires a more emphatic
Presidential determination. Instead of saying an activi-
ty must "affect" national security, Hughes-Ryan says
it must be "important." More significantly, this deter-
mination must be made personally by the President,
and reported in a "timely fashion" to Congress.

We believe that the terms under which the Presi-
dent may use the National Security Act in fact meet
all of the underlying purposes of the AECA and
FAA, and that is why Congress has been satisfied to
let the one approach be a substitute or alternative
route to the other.* The fact is that the 1985 IsraeH
transactions essentially— and legally— were equivalent
to ones in which the United States sold the weapons
directly to Iran.

The evidence indicates that Israel participated in
the 1985 transactions in reliance on U.S. assurances,
provided by the NSC staff with the President's ap-
proval, that the U.S. would not oppose the transac-
tions, and that the U.S. would replenish the arms
Israel sent to Iran. The same arms could have been
supplied lawfully, however, directly from American
stocks. Indeed, the transactions of 1986 did proceed
directly, under the authority of the National Security
Act and the Economy Act. Assistant Attorney Gener-
al Cooper pointed out in his December 17 memoran-
dum to the Attorney General:

[I]t is apparent that the real nature of the 1985
transactions was a bilateral sale by the United
States to Iran, with Israel serving solely as a
conduit or facilitator in the execution of that sale.

We see no reason to treat the legality of Israel's
participation differently than we would treat the
participation of any other party that served as a
conduit in a lawful covert operation. Had the
United States consigned weapons from American
stocks to Israel for shipment to Iran, Israel's role
would have been exactly equivalent to the role
that common carriers and public warehouses play
in overt transactions. Because, so far as we know,
the weapons that Israel shipped to Iran in 1985
and received from the United States were com-
pletely fungible, a similar equivalence is present-
ed here. Just as an illegal sale of arms to Iran

* There are differences in the formal reporting requirements, to
be sure. In some circumstances, we might imagine that such differ-
ences could be significant. In this particular retransfer, they were
not.

540

Chapter 9

would not be made legal by using Israel as a
conduit, so too a legal transaction could not be
made illegal by Israel being used in the same
way.'®

The Laws Governing Covert Action

We turn now to the laws governing covert operation,
which were the ones under which the Administration
was operating. In our earlier chapter on the Constitu-
tion, we argued that the President has the inherent
authority to use special agents and to encourage or
order covert activities. Once the President begins
using appropriated funds, however — including salaried
personnel — Congress can put strings on the use of
such funds. Congress can, for example, tie the Presi-
dent's hands in knots by appropriating money for only
one specified operation at a time. For any number of
important national security reasons, we noted in the
Constitution chapter, the Congress has recognized
that the President needs a contingency reserve fund
to meet changing conditions during the course of a
fiscal year. Once Congress gives the President a con-
tingency reserve, there are lines of inherent Presiden-
tial authority that Congress may not properly cross.
Those lines come into play most importantly in the
extremely rare circumstance when the President has
legitimate reason to believe that reporting must be
withheld. We shall discuss this issue below. For any
circumstances outside the extreme, however. Con-
gress has put a number of requirements on the Presi-
dent that seem to us to pass constitutional muster.
For most of the country's history, covert activities
were conducted by giving the President a contingen-
cy fund, without any additional, explicit statutory au-
thorization. The first law codifying this power was
the National Security Act of 1947. That law estab-
lished the National Security Council and gave it the
power, among others, to perform "such other func-
tions as the President may direct . . . ."** In the
polite language of the post- World War II diplomatic
world, in which covert activities were not acknowl-
edged publicly by governments, everyone understood
this term to give broad authority to the President to
use the NSC as he saw fit. Another title of the same
law, however, created the CIA as the government's
main body for conducting such activities:

It shall be the duty of the Agency, under the
direction of the National Security Council ... to
perform, such other functions and duties related
to intelligence affecting the national security as
the National Security Council may from time to
time direct.'''

Historically, this language has been understood to au-
thorize a wide range of foreign covert activities, in-
cluding arms transfers.

Covert Transactions

The position that covert arms sales could proceed
without triggering the requirements of the AECA
was expressed as the Administration's interpretation
of the law in October 1981. In conjunction with one
covert transaction that year, Davis R. Robinson,
Legal Adviser to the Secretary of State, wrote:

It seems clear that Congress has not regarded the
FAA and the AECA as an exclusive body of law
fully occupying the field with respect to U.S.
arms transfers. There are several illustrations
where Congress, having been made aware of
transfers to foreign countries outside that body of
specific authorities, has reacted by enacting limit-
ed restrictions or reporting requirements rather
than by prohibiting such transfers altogether. '^

Robinson noted that if Congress had thought the
AECA and FAA completely covered the field, it
would not have passed the Clark Amendment of 1976,
prohibiting covert aid to Angola, or the Hughes-Ryan
Amendment establishing separate finding and notifica-
tion requirements for CIA covert operations.

Three days after the Robinson memo was written.
Attorney General William French Smith forwarded a
copy to Director Casey. Smith wrote:

We have been advised by the State Department's
Legal Adviser that the Foreign Assistance Act
and the Arms Export Control Act were not in-
tended, and have not been applied, by Congress
to be the exclusive means for sales of U.S. weap-
ons to foreign countries and that the President
may approve a transfer outside the context of
those statutes.'^

The Attorney General concurred with this opinion,
and Congress was well aware of this fact.

Congressional awareness is shown most clearly in a
provision of the Intelligence Authorization Act for
Fiscal Year 1986. This provision, which became a
new section to the National Security Act, reads as
follows:

Sec. 503. (a)(l)The transfer of a defense article or
defense service exceeding $1,000,000 in value by
an intelligence agency to a recipient outside that
agency shall be considered a significant anticipat-
ed intelligence activity for the purpose of section
501 of this Act.

(2) Paragraph (1) does not apply if~

(A) The transfer is being made to a depart-
ment, agency, or other entity of the United States
(so long as there will not be a subsequent re-
transfer of the defense articles or defense services
outside the United States Government in con-

541

Chapter 9

junction with an intelligence or intelligence-relat-
ed activity); or

(B) the transfer~(i) is being made pursuant to
authorities contained in part II of the Foreign
Assistance Act of 1961, [or] the Arms Export
Control Act . . . .^o

This act makes it clear, beyond any doubt, that
Congress intended some covert arms transfers to
occur outside normal AECA channels. It was precise-
ly for this reason that it put in a threshold to trigger
the reporting requirements under the provisions gov-
erning reporting and Congressional oversight of intel-
ligence.

The General Accounting Office agreed with this
conclusion. In a March 1987 report on the direct U.S.
arms sales to Iran, the GAO said:

Since Congress has explicitly recognized that in-
telligence activities may include the secret trans-
fer of arms (Intelligence Authorization Act for
fiscal year 1986, section 403 [quoted above as
section 503 of the National Security Act]), the
CIA is authorized by the Economy Act to turn
to other agencies for that equipment. Therefore,
we believe that the decision to use the Economy
Act to provide support for this covert transaction
was proper.

Transfers of equipment by the CIA and others,
including foreign governments, are governed by
applicable laws relating to intelligence and spe-
cial activities, rather than the Arms Export Con-
trol Act, which ordinarily governs overt arms
transfers overseas. Consequently, we consider
those transfers to be subject to the requirements
pertaining to the conduct of intelligence and spe-
cial activities. As a general rule, those transfers
would not be subject to the pricing or reporting
restrictions applicable to overt arms transfers
conducted under the Arms Export Control
Act. 21

Hughes-Ryan Amendment

The direct statutory regulation of special activities
began only recently, in 1974. In that year. Congress
passed the Hughes-Ryan Amendment to the Foreign
Assistance Act of 1961. As amended by the Intelli-
gence Oversight Act of 1980, Hughes-Ryan reads as
follows:

No funds appropriated under the authority of this
or any other Act may be expended by or on
behalf of the Central Intelligence Agency for op-
erations in foreign countries, other than activities
intended solely for obtaining necessary intelli-
gence, unless and until the President finds that
each such operation is important to the national
security of the United States. [The following was

added in 1980 to replace earlier "timely notifica-
tion" language.] Each such operation shall be
considered a significant anticipated intelligence
activity for the purpose of section 501 of the
National Security Act of 1947. [Section 501 is the
1980 Oversight Act.] 22

As pathbreaking as Hughes-Ryan was at the time,
its omissions are at least as important as its coverage
for analyzing the Iran arms sales. Hughes-Ryan ap-
plies only to those covert operations involving the
expenditure of appropriated funds by or on behalf of
the CIA.

August-September 1985 Transactions

Specifically, the omissions of Hughes-Ryan mean that
the Israeli's TOW transfers to Iran in August and
September 1985 — v/hich did not in any way involve
the CIA — did not require a covert action Finding
under the terms of the law.* In fact, no written Find-
ing was made at that time. Nonetheless, theie is evi-
dence indicating that the August-September and No-
vember 1985 shipments were carried out pursuant to
the oral authorization of the President. In fact, the
Hughes-Ryan Amendment contains no requirement
that this Finding be reduced to writing or that it be
articulated in any particular form. The main purpose
of the Presidential finding requirement is to ensure
that the President himself decides, before each such
operation, whether the national security justified its
being carried out. An oral authorization therefore sat-
isfies the Hughes-Ryan finding requirement.**

We do believe it would be better to reduce covert
action Findings to written form, so as to memorialize
the undertaking and to avoid any confusion in imple-
mentation and notification. Certainly, all of the 1985
arms shipments should have been preceded by a writ-
ten Finding or Findings. Paying more attention to

* It should be noted that Executive Order No. 12333 on United
States Intelligence Activities (Dec. 4, 1981, 46 Fed. Reg. 59941)
extended the finding requirements of Hughes-Ryan to the "intelli-
gence community." As we have already pointed out in the Boland
Amendment chapter, however, this language, and the earlier lan-
guage of the Oversight Act of 1980, were crafted deliberately to
exclude the NSC, which was the only U S. government agency
involved in even tangentially in the August-September shipments.

•* This is the position taken by Assistant Attorney General
Cooper in. Cooper Memorandum, "Legal Authority . .. ". n. 15
infra, at 7-8. In the President's National Security Decision Direc-
tive (NSDD) 159, dated January 18, 1985. there is a provision
stating that the appropriate procedure for Presidential approval of
covert actions is a written Presidential Finding. (See Ex, BGS-15,
Hearings. 100-5.) However, this procedure, having been instituted
for the internal use of the President and his intelligence advisers,
cannot be considered to be legally binding on the President. Writ-
ing about Executive Order 12333, which if anything must have
greater binding authority than a classified NSDD, Cooper said:
Activities authorized by the President cannot "violate' an executive
ordei in any legally meaningful sense, especially in a case where no
private rights are involved, because his authorization creates a valid
modification of, or exception to. the executive order. Id. at 14.

542

Chapter 9

formalities could have eliminated a number of legal
issues which have been raised. But this criticism of
the White House's past administrative practices is not
intended to suggest that the shipments themselves did
not meet the legal requirements.

November 1985 Transaction

One difference between the summer and the Novem-
ber shipments in 1985 was that the CIA did play a
role, albeit a minor one, in November. It should be
emphasized that this shipment consisted of a mere 18
HAWK missiles, and the CIA did not pay for their
transportation. CIA officials merely referred North
and Secord to a CIA proprietary airline, and this
airline transported these missiles in a single plane as a
strictly commercial transaction with full payment by
Secord's enterprise to the airline. No CIA funds fi-
nanced the shipment. The CIA's only direct role in
this shipment was to facilitate overflight clearances
from foreign governments. Thus, the CIA provided
logistical support for a secret initiative conducted by
the NSC staff.

There has been an inordinate amount of attention
paid to the CIA's role in the November 1985 ship-
ments. The underlying theory seems to have been (a)
that the CIA and others in the Administration knew
the November 1985 shipment was illegal and (b) that
attempts to "cover up" the 1985 "illegalities" explain
the altered chronologies, shredding and other events
of November 1986. We consider both the theory and
the underlying premise to be unfounded. For one
thing, we do not consider the November 1985 ship-
ments to have had legal problems, except possibly
ones of a technical, minor sort.

Allegations that the CIA covered up an illegal
action have been fueled by the mysterious disappear-
ance of a cable Duane (Dewey) Clarridge allegedly
sent to Country 15 on November 22 and one alleged-
ly sent back to him from the same country the next
day. The officer sending the second cable has said it
informed headquarters that he had learned from Gen.
Secord that the flight would contain HAWK mis-
siles. ^^ There have been questions about what hap-
pened to these cables. Clarridge specifically denies
ever having received the second one, and said that so
do the Deputy Director for Operations and others in
the DDO's office who would normally have received
a copy.^'* Clair George, the DDO, confirmed this
testimony.^* Moreover, Clarridge said, he did not
think the difference between HAWKs and oil-drilling
parts was all that significant from the agency's point
of view, since both were embargoed items. ^^

We do not believe that support of this sort rises to
the level of a CIA covert action that would require a
Finding under Hughes-Ryan. The action, at most,
should be treated as being de minimis. In any event,
there is evidence that the President orally approved
this HAWK shipment from Israel to Iran, and a writ-

ten Finding was made within days. Then-CIA Gener-
al Counsel, and now U.S. District Judge, Stanley
Sporkin, who had as much experience interpreting
Hughes-Ryan as any other federal official, testified
that when CIA Deputy Director John McMahon told
him to draft a Finding to cover the CIA's involve-
ment, Sporkin thought a Finding was not required by
law in this instance, even though he agreed it was
prudent. ^^ According to John Poindexter, who in
early December 1985 succeeded Robert McFarlane as
Assistant to the President for National Security Af-
fairs, the President signed the Finding, probably on
December 5, 1985.^8 By its terms, the Finding ratified
the prior actions that the U.S. government took to
obtain the release of the American hostages.

The November-December 1985 Finding reflected in
written form that the President had been briefed
before the shipments on the efforts made to obtain the
release of the hostages, and that the President himself
had found that these efforts were important to the
national security of the United States. Therefore, in
both the oral Findings referred to earlier, and the
written Finding itself, the President accordingly rati-
fied all prior actions and directed further actions to be
taken.

As for the 1986 arms transfers, the President's writ-
ten Finding of January 17, 1986 clearly and obviously
satisfied Hughes-Ryan for all of them. These Findings
covered both the U.S. sales to Iran, and the portion of
the May 1986 transaction that replenished Israeli
stocks for the 1985 transfers.

Timely Notification

Our closing pages on the Constitution contained an
extensive analysis of why Presidents have the inherent
power, under exceptional circumstances, to defer noti-
fying Congress of a covert operation. Congress wisely
recognized this fact when it passed the Intelligence
Oversight Act of 1980.

The Oversight Act was an outgrowth of the the
proposed intelligence charters of the 1970s, which we
outlined in our chapter on the Boland Amendments.
In this chapter, we shall concentrate on one aspect of
that law, the requirement for Administration reports
to Congress about intelligence activities. That law
appears in the statute books as a new section 501 of
the National Security Act.^* Under section 501(a),
the Director of Central Intelligence or the heads of
other agencies or entities involved in intelligence ac-
tivities,* are required to keep the intelligence commit-
tees of Congress "fully and currently informed of all
intelligence activities," including "any significant an-

* We showed in the Boland Amendment chapter that the lan-
guage in the Oversight Act dehberately excluded the NSC from
these requirements.

543

Chapter 9

ticipated intelligence activity." However, section
501(a) further provides:

[I]f the President determines that it is essential to
limit prior notice to meet extraordinary circum-
stances affecting vital interests of the United
States, such notice shall be limited to the chair-
man and ranking minority members of the intelli-
gence committees, the Speaker and minority
leader of the House of Representatives, and the
majority and minority leaders of the Senate.

This is the provision that permits an Administration
to limit advance notification to a so-called "Gang of
Eight." The law also specifically contemplates a situa-
tion, however, in which notifying the Gang of Eight
might be too risky. Consider this wording from sec-
tion 501(b):

The President shall fully inform the intelligence
committees in a timely fashion of intelligence op-
erations in foreign countries, other than activities
intended solely for obtaining necessary intelli-
gence, for which prior notice was not given under
subsection (a) and shall provide a statement of the
reasons for not giving prior notice. [Emphasis
added.]

While we agree with the majority that the idea of
"timely" notification almost always envisioned a short
time period, the rare conditions under which prior
notification has been withheld could not possibly have
been defined in calendar or other precise statutory
terms. As a result, the decision not to notify must of
necessity rest on Presidential discretion.

The constitutional basis for withholding notification
was recognized in, but, of course, does not depend
upon, the "preambular" language of section 501:

To the extent consistent with all applicable au-
thorities and duties, including those conferred by
the Constitution upon the executive and legisla-
tive branches of the Government, and to the
extent consistent with due regard for the protec-
tion from unauthorized disclosure of classified in-
formation and information relating to intelligence
sources and methods . . . [the intelligence com-
mittees are to be kept informed of various intelli-
gence activities].

Thus, section 501 acknowledges that reporting re-
quirements cannot limit the constitutional authority of
either the executive branch or the legislative branch,
and further recognizes the need to protect sensitive
information from disclosure.

The legislative history of the Oversight Act firmly
supports our interpretation of its language. Consider
the following explanation of the pending conference
report on the Oversight Act by Rep. Boland, then the
Intelligence Committee chairman:

When prior notice is not given to the committees
or to the smaller group of eight, the conference
report makes clear that the full Intelligence Com-
mittees must receive reports on the covert oper-
ation "in a timely fashion."^"

Clement J. Zablocki, then Chairman of the House
Foreign Affairs Committee as well as a member of
the Intelligence Committee, pointed out:

In addition, the legislation makes the fundamental
recognition that in extraordinary circumstances
advance information on covert operations might
be withheld from the Select Committees on Intel-
ligence, provided the President informs the com-
mittees in a timely fashion and provides a state-
ment of the reasons for not giving prior notice.

Mr. Speaker, this recognition of the need for
limited exceptions to prior reporting of covert
operations is fully consistent with the Committee
on Foreign Affairs amendment to Hughes-Ryan.
I therefore welcome its inclusion in the confer-
ence report. Such exceptions are absolutely essen-
tial to a strong intelligence community and im-
portant for U.S. security.

Such exceptions will also help the American in-
telligence community to maintain the extraordi-
nary secrecy necessary in intelligence activities
and promote cooperation from the intelligence
communities of friendly countries. ^^

William Broomfield, Ranking Republican on the
Foreign Affairs Committee, observed:

Henceforth, in extraordinary circumstances af-
fecting vital national interests — the President will
be allowed to defer reporting to Congress on
CIA covert action operations abroad. The key
word here is defer. The President is not excused
forever from letting us know about such activi-
ties. This is not an abdication of our oversight
responsibility. We are just allowing him to post-
pone his reporting in those rare instances where,
for example, prior disclosure would jeopardize
the lives of the personnel or the methods em-
ployed in a particular covert action activity. As
the conference report notes — "If prior notice of a
covert operation is not given, the President must
fully inform the select committees in a timely
fashion and provide a statement of the reason for
not giving prior notice."

Is that unreasonable? It seems to me common
sense dictates that we allow the President this
flexibility so that he can effectively discharge his
constitutional responsibility to conduct foreign
policy. In this connection, let us not forget that
covert action is an important and sometimes vital
aspect of foreign policy and has been utilized by

544

Chapter 9

Presidents all the way back to George Washing-
ton.

A number of my colleagues have expressed con-
cern about how often a President might invoke
the deferred reporting option provided by this
measure. A look at the record to date is illumi-
nating in this regard. Since the passage of the
Hughes-Ryan Amendment in 1974, there has
been only one known covert action that was not
reported to Congress prior to its initiation. Our
committee was subsequently briefed on that
action and learned that the reason for the de-
ferred reporting was because the President felt
such prior notification could jeopardize the lives
of the personnel involved in that action. More-
over, participants in this successful operation —
which we all applauded when we became aware
of it — agreed to participate in the action only
after being assured that there would be no prior
disclosure to Congress. ^^

Essentially the same interpretation was put on the
bill by Rep. Les Aspin, who was then a member of
the Intelligence Committee. What makes Aspin's
statement particularly important is that it came from a
member who was unhappy with what he perceived as
the bill's "vague" language. After describing, and
complaining about, the provision to limit notification
to the chairmen, Aspin then went on to note: "There
is, second of course, the possibility, and I guess the
statutory possibility that the Administration can, in
effect, just waive the whole thing". ^^

There can be no question from the legislative histo-
ry, in other words, that the statute contemplated situ-
ations in which the President would not give prior
notification. The remaining question is, how long is
"timely"? We would maintain that the answer must
vary with circumstances. To weigh circumstances re-
quires one to use discretion; that function, therefore,
must, belong to the President.

Was 11 months too long for President Reagan to
have withheld notification of the Iran arms sales? We
think so; he could have purchased what Rep. Henry
Hyde has described as some good political "risk insur-
ance" early by coming to Congress and getting Con-
gress on board.* On the other hand, we are also well
aware that President Carter withheld notification for
about six months in a parallel hostage crisis. In fact,
President Carter, in his four years in office, withheld
notification two or three times — about the same
number of times and for roughly the same kind of

waiting period as President Reagan.** In any event,
whenever it finally comes time to notify, the Presi-
dent will have to pay a significant political price if
Congress is not persuaded by the reasons the Presi-
dent gives for having withheld notice.

Conclusion

We conclude that the Administration was in substan-
tial compliance with the law during each of the Iran
arms transactions. The arms sales of 1985 from Israel
to Iran did not violate the terms of the AECA or
FAA. It is reasonable to assume that the weapons
Israel shipped to Iran in 1985 were originally supplied
under AECA or FAA. These two statutes permit the
President or the Secretary of State to consent to re-
transfers. In these instances, oral authorization was
given for the transfers. Moreover, the formal report-
ing requirements do not apply because each of these
transactions involved munitions valued at less than
$14 million. The AECA and FAA seek to ensure that
such retransfers foster the national security interests
of the United States. The Israeli shipments were made
with the agreement of American authorities and were
premised on U.S. views about America's own national
security interests. The substantive purposes of the
AECA and FAA were met.

Moreover, the 1985 Israeli sales to Iran did not
violate the requirements for Presidential authoriza-
tions or Findings under the National Security Act and
the Hughes-Ryan Amendment. The National Security
Act provides an alternative route apart from the
AECA and FAA under which the Administration
was in compliance with the law during the 1985 trans-
actions. The terms under which the President may use
the National Security Act meet all of the underlying
purposes of the AECA and FAA. Therefore, Con-
gress has been satisfied to let the one approach be a
substitute or alternative route to the other.

The Hughes-Ryan Amendment contains no require-
ment that Presidential Findings be reduced to writing.
The November- December 1985 Finding reflected in
written form that the President had been briefed
before the shipments on the efforts made to obtain the
release of the hostages, and that the President himself
had found these efforts were important to the national
security of the United States. Therefore, in both the
oral Findings of 1985, and the written November-
December 1985 Finding, the President accordingly
ratified all prior actions and directed further actions
to be taken. With regard to the 1986 transactions, the
President's January 17, 1986, Finding clearly satisfied
the Hughes-Ryan Amendment.

• U.S. House of Representatives, Permanent Select Committee on
Intelligence, Subcommittee on Legislation, 100th Cong., 1st Sess.,
Hearings on H.R. 1013. H.R. 1371, and Other Proposals iVhich Ad-
dress the Issue of Affording Prior Notice of Cover! Actions to the
Congress. April I and 8, June 10, 1987, p. 30.

♦♦ These examples were discussed previously in the closing sec-
tion of chapter 4. As was there pointed out, in one of the cases
Canadian participation was conditioned on a U.S. agreement not to
notify Congress until Americans hidden in the Canadian Embassy
were safely out of Iran.

545

Chapter 9

Finally, the 1986 arms sales did not violate the
National Security Act's requirements for notifying
Congress. Certainly, the National Security Act re-
quires agencies involved in intelligence activities to
keep the intelligence committees of Congress "fully
and currently informed of all intelligence activities."
However, the law specifically contemplates situations
in which notifying the appropriate Congressional
members might be too risky. The act requires that in
instances in which the President has not given prior
notice of intelligence operations, he must inform the
intelligence committees in a "timely" fashion.

The decision not to notify must rest on Presidential
discretion. The reporting requirements of the National

Security Act cannot limit the constitutional authority
of the President to withhold prior notification of
covert activities in exceptional circumstances. In this
case, the lives of hostages were at stake such that
premature notification was extraordinarily dangerous
to the lives of American citizens. We conclude that,
in circumstances such as these, the President must
have the discretion to determine when notification is
"timely." If Congress, after the fact, disagrees with
the way in which the President has exercised his
discretion, the appropriate remedy is a political and
not a legal one.

546

Endnotes

Chapter 9

1. Poindexter Test., Hearings, 100-8, 7/15/87, at 18.

2. Ex. SS-4, Hearings, 100-6.
3 .22 U.S.C. 2753.

4. 22 U.S.C. 2780

5. 22 U.S.C. 2314.

6. 50 U.S.C. 401 et seq.

7. 31 U.S.C. 1535.

8. 50 U.S.C. 413.

9. 50 U.S.C. 2422.

10. See 22 U.S.C. Sec. 2753(a).

11. See 22 U.S.C. Sec. 2314(e).

12. See Offer and Acceptance Form, Ex. CWW-7, Hear-
ings, 100-10.

13. See 22 U.S.C. Sec. 2753(d).

14. 50 U.S.C. 403 (d)(5).

15. Cooper Memorandum for the Attorney General,
"Legal Authority for Covert Arms Transactions to Iran,"
December 17, 1986, pp. 16-17 reprinted as Ex. EM-69,
Hearings, 100-9.

16. 50 U.S.C. 402.

17. 50 U.S.C. 403.

18. "Memorandum of Law on Legal Authority for the
Transfer of Arms Incidental to Intelligence Collection," by
Davis R. Robinson, Legal Adviser, Department of State,
October 2, 1981, p. 5.

19. Letter from Attorney General William French Smith
to William J. Casey, Director of Central Intelligence, Octo-
ber 5, 1981, reproduced as Weinberger testimony, exhibit 1.

20. 50 U.S.C. 415.

21. U.S. General Accounting Office, Report to the Chair-
men, Senate and House Select Committees Investigating
Iran Arms Sales, "Iran Arms Sales: DOD's Transfer of
Arms to the Central Intelligence Agency," March 1987, p.
8.

22. 22 U.S.C. 2422.

23. See Eggleston narrative in Sporkin Test., Hearings,
100-6, 6/24/87,. at 220.

24. See Clarridge Test., Hearings, 100-11, 8/4/87, at 15.

25. George Test., Hearings, 100-11, 8/5/87, at 201-03.

26. Clarridge Test., Hearings, 100-11, 8/4/87, at 17, 19.

27. Sporkin Testimony to Tower Commission, Jan. 9,
1987, pp. 7-8.

28. See Ex. SS-4 Hearings, 100-6; Poindexter Test., Hear-
ings, 100-8, 7/15/87, at 12, 17.

29. 50 U.S.C. 413.

30. Congressional Record, September 30, 1980, p.
H 10044, emphasis added.

31. W. at H 10045.

32. Id.

33. Id. at H 10047.

547

Chapter 10

The Use or ''Diversion" of the Iran Arms Sales

Proceeds

"What did the President know, and when did he
know it?" That was Senator Howard Baker's famous
crystalhzing question about President Nixon from the
Senate Watergate hearings of 1973. Political tensions
were heightened in the Iran-Contra Affair when the
same question was asked about the so-called "diver-
sion" of funds from the Iran arms sales to the Nicara-
guan democratic resistance. The very term "diver-
sion." given currency by Attorney General Edwin
Meese's press conference of November 25, 1986, had
the sound of illegality.

Beginning with the first public revelations about the
Iranian arms sales in early November 1986, reaction
in the United States was a mixture of curiosity, puz-
zlement, and controversy. The Attorney General's
press conference added a new dimension to the furor.
The prospect that money had been sent to the Con-
tras during the period of the Boland Amendments
greatly intensified the scrutiny the Iran initiative re-
ceived in the media. Speculation ran unchecked. The
Attorney General put the amount that might have
been diverted at $10 million to $30 million.' Members
of the Congressional investigating committees sug-
gested that the amount might have been as high as
S50 million.^ Ultimately, the diversion received more
scrutiny than any other aspect of the Iran-Contra
Congressional investigations.

The evidence is overwhelmingly clear, however,
that the President did not in fact know about the
diversion, despite Democratic wishes to soft-peddle
the point by attacking Adm. Poindexter's credibility.
In addition, the use of the word "diversion" itself
assumes that the funds belong to the United States.
We shall show later in this chapter that the legal
questions surrounding the ownership of the proceeds
from the Iran arms sales are by no means settled.
Before we can reach these points, however, it is first
necessary to explain what the diversion was, how it
came about, and how much was transferred.

What Was The Diversion?

What has come to be called the diversion was simply
a transfer of a portion of the proceeds of the Iranian
arms sales to the private Contra resupply operation
under the direction of Gen. Secord. The funds came

from two different sources. The initial diversion ap-
pears to have been from Israeli funds. In late 1985,
after the sale of HAWK missiles by Israel to Iran,
North informed Secord that the Israelis would not ask
for the return of the unused transportation expense
and that Secord could use it for other purposes.
Secord testified that he used it for the Contra project
and so informed North. ^

After the United States began selling Iran its own
arms in February 1986, the transfers took place out of
the portion of the Secord-Hakim funds that were left
after the so-called "Enterprise" paid the U.S. Govern-
ment all that it was owed under Economy Act
prices,* and after other immediate, operational ex-
penses. This remaining money has been referred to as
the "excess," the "profits," or the "residuals," with
each characterization resting on a different point of
view about the ownership of the funds.

The American arms sales to Iran were carried out
under a January 17, 1986, Finding signed by the
President. Sales purposely were not organized as a
direct government-to-government transfer. Rather,
the operation was dependent on middlemen. Col.
North, Gen. Secord, Albert Hakim, Adm. Poindexter,
Clair George of the CIA, Attorney General Meese,
and all others associated with the initial planning of
the Iranian covert operation described it in the same
manner: the United States would sell arms to Gen.
Secord, acting as a commercial cut-out, who would in
turn sell the arms to Manucher Ghorbanifar, who
would in turn sell the arms to the Iranians. From the
American standpoint, the organizational structure was
desirable for several reasons. It gave the U.S. Gov-
ernment some distance from the operation, which
would provide maximum protection and plausible
deniability. It also satisfied the Attorney General's
and Secretary Weinberger's legal concerns about pro-
ceeding under the terms of the Arms Export Control
Act.

The Economy Act established the basis on which
the Department of Defense, in February 1986, sold
the CIA 1000 TOWs for S3. 7 million dollars, or
$3,700 per TOW. The price to be paid by the Iranians

*See Chapter 9 for a discussion of pricing under the Economy
Act.

549

Chapter 10

was not statutorily limited, however. Ghorbanifar ap-
parently offered $10,000 per TOW as early as August
1985. This price eventually became the purchase price
Ghorbanifar paid to Secord in late February 1986. It
should be noted that $10,000 per TOW was not an
exorbitant price. The replacement cost in 1986 of the
TOW missiles utilized in the arms sales was approxi-
mately $8,000.* Under these arrangements, there was
an obvious surplus. Ghorbanifar had paid Secord, the
commercial middleman, the agreed-upon price of
$10,000 per TOW, and Secord had paid the CIA the
Economy Act price of $3,700 per TOW. The surplus
on the February transaction after transportation and
other expenses was on the order of $6.3 million.

How Did The Diversion Happen?

The concept of transferring a portion of the excess
proceeds from an arms sale to another project was
not a new one. Gen. Singlaub explained that he and
North had discussed this concept in connection with
arms sales to an entirely different country in early
1985.** When the Israeli arms sales to Iran begin in
1985, the U.S. was aware that the Iranians were
paying relatively high prices for the arms compared
to what Israel had paid for them. This meant that the
United States could reasonably conclude that some
funds were being put to other uses by Israel.

Secord and North were both aware that the Con-
tras needed money. By late 1985, they had both been
involved in obtaining funds and arms for the Resist-
ance. The specific decision to transfer a portion of
Iranian arms sales proceeds to the air resupply oper-
ation was the result of a number of factors, one of
which was General Secord's involvement in both op-
erations.

The first time a possible surplus came to North's
attention was after the November 1985 sale of

•U.S. General Accounting Office, Report to the Chairmen.
Senate and House Select Committees Investigating Iran Arms
Sales, Iran Arms Sales. DOD's Transfer of Arms to the Central
Intelligence Agency. March 1987, p. 11. The replacement cost is
difficult to calculate with specificity. The basic TOWs sold in
February were obsolete and were to be replaced by an improved
model.

••Singlaub Test., Hearings. 100-3, 5/20/87, at 76. Typical of the
majority's tendentious treatment of the evidence in its diversion
chapter is how much it tries to make out of the so-called "Singlaub-
Studley" plan for transferring arms sales proceeds to anti-commu-
nist insurgents. Yet, after a three page discussion of this plan, the
majority states: "The Singlaub-Studley plan was not implemented.
The majority continues " . . but the idea of using sophisti-
cated U.S. weapons to finance arms . . . was known to those
working to support the Contras before any proceeds from U.S.
sales of arms to Iran were first received." A careful reader will
note that the majority is thereby admitting that the first diverted
funds, those obtained by Israeli sales of arms to Iran, were received
before the Singlaub-Studley plan was tabled in December, 1985.
One can only wonder why the majonty is intent on glossing over
this aspect of the history which the majority itself develops, and
instead assigning another intellectual patrimony to the diversion

HAWK missiles from Israel to Iran. Secord had been
provided with $1 million by the Israelis to cover
transportation for the missiles from Israel to Iran.
When the Iranians expressed dissatisfaction with the
initial delivery, further deliveries were stopped, and
Secord had spent only $200,000 of his retainer.
Secord testified that the $800,000 surplus was eventu-
ally spent on the Contra resupply project.* Hence,
the initial diversion appears to have occurred with
Israeli funds. It set the pattern for the future.

Secord testified that he had not viewed the Iranian
operation as generating any profits for him or his
partners. His foremost concern, he said, was having
sufficient capital reserves to ensure continued oper-
ations.^ When, as it turned out, the sales generated
money in excess of that needed for adequate reserves,
he was more than receptive to the suggestion that he
send the excess funds to the resupply operation. Col.
North had a similar divergence of interests. As strong
as his commitment was for the success of the Iranian
operation, it was equally strong for the Contras.
When surpluses were available, he was unmistakably
motivated to advise Secord to use them for the Nica-
raguan democratic resistance.

According to Col. North's public testimony, the
idea of sending the Contras some of the surplus gener-
ated by the direct U.S. to Iran arms sales was offered
by Ghorbanifar in late January. Earlier that month, or
perhaps in late December, North had discussed with
Nir the possibility of using excess funds for joint U.S.-
Israeli operations, but said that this discussion never
involved using the money for the Nicaraguan resist-
ance.^ North testified that during a January meeting
in London, Ghorbanifar spoke with North in a hotel
bathroom and specifically suggested using the surplus
for the Nicaraguan resistance.' North saw an excel-
lent opportunity to get the Khomeini regime, which
was openly supporting the Sandinistas, to unwittingly
arm the Contras. He thereafter set prices sufficient to
create a surplus and encouraged Secord to send all
available surpluses to the Resistance. After the end of
our hearings, the Committees received an unsworn,
unverified, and unverifiable document purporting to
show that North first conceived of a diversion to the
Contras by early December. An Israeli chronology
claimed that North told Israeli supply officials in New
York on December 6 that the Contras needed money,
and that he intended to use proceeds from the Iran
arms sales to get them some. When North was asked
about the December 6 meeting, he reiterated that he
did not recall discussing the Contras with anyone
involved in the Iran initiative before the late January
meeting with Ghorbanifar.*

We are inclined to believe North in this dispute,
largely because his testimony was sworn and he was
granted immunity from all charges arising out of the
testimony except that of perjury. Ultimately, howev-
er, this dispute is of little importance because even if

550

Chapter 10

the idea was expressed in early December, it never
went beyond North until after the January London
meeting. Poindexter testified that he first heard of the
idea when North asked him to authorize it in Febru-
ary.^ North testified that he first mentioned the idea
to the Director of Central Intelligence, William J.
Casey, at about the same time, in late January or early
February, after the post-finding London meeting.'" In
addition. North and Poindexter both testified that no
one else in the U.S. Government was told about a
diversion before this time. What that means is that the
diversion cannot possibly have been a consideration
for people at the policymaking level before North's
January London meeting with Ghorbanifar.§

How Much Was Diverted?

The most reasonable calculations show that approxi-
mately $3.8 million of proceeds from the Iran arms
transactions was spent for the support of the Nicara-
guan Resistance.* During the period that the "Enter-
prise" received income from the Iranian transaction
(November 1985 through November 1986), it also had
other funds available for support of the Resistance
that totaled $3.4 million. Much of this money came
from foreign and private domestic donations specifi-
cally earmarked for the Contras. During that same
period of time, the "Enterprise" spent approximately
$7.2 million in support of the Contras. If one subtracts
the $3.4 million in non-Iran funds designated for the
Resistance, then the remainder of the $7.2 million, or
$3.8 million, was the total amount of the diversion.**

Who Authorized The Diversion?

The diversion was authorized by Poindexter. The
Committees were careful when taking testimony on
this point to make sure that the principal witnesses
would testify in private session before they had a
chance to hear the crucial public testimony of this
particular point. Thus, Poindexter testified in private
session, before North's closed session or public testi-
mony, that he had authorized the diversion at North's
request." North corroborated this point in his own
executive session testimony before he could have
known anything about what Poindexter had said.f

Poindexter also testified that he believed he had the
authority to make the decision on his own to approve
the use of the Iranian arms sales surplus for the Nica-
raguan Resistance. ft He said that because he had
worked for the President for a number of years, he
felt he knew what the President would want to have
done in this situation. Poindexter stated that to him,
the diversion appeared to involve the use of what
could be considered either third-country funds, or
private funds, to support the Contras, and that he
believed the President favored the use of such private
or third-country funds to support them. Therefore, in
his view, the President would have agreed to the use
of surplus funds in such a manner. However, Poin-
dexter said, because he thought it would be politically
(as opposed to legally) controversial to use the funds
to support the Contras, he decided not to inform the
President of it so the President could truthfully deny
knowledge if the diversion were revealed. ' ^

The President has stated, however, that he would
not have consented to the diversion had he known

§ The Committees have, indeed, received evidence that the Janu-
ary 17 Finding was revised several times in January 1986 to reflect
U.S. strategic goals more clearly. In addition, hearing testimony
specifically showed that the "commercial cutout" arrangement was
designed to mirror the previous Israeli arms sales structure for
security reasons, after the U.S. had decided to make direct sales to
avoid legal questions under the Arms Export Control Act. In short,
both the Finding and the transactions were restructured for reasons
unrelated to the diversion, which could still have been accom-
plished just as readily even if Israel had continued to be either the
seller or had been the intermediary.

•The partners in the "Enterprise" also paid themselves $1.2 mil-
lion in "commissions" out of the Iranian proceeds. That sum can be
considered to have been "diverted," but it is hard to see it as an
expenditure for the benefit of the Contras and the Committees have
not done so.

"The majority's statements about the amount of money diverted
represent what appears to be an amusing political compromise. The
majority says that "at least" $3.8 million ... in arms sales profits
were used for the Contras. Yet the reader is given no factual basis
whatsoever for the conclusion that more than $3.8 million was
diverted, a fact apparently indicative of the continuing disagree-
ment between parts of the majority about what the Committee's
records show. Since we accept the $3.8 million number as a maxi-
mum, the majority view of the Committee actually is that $3.8
million was diverted.

t North Dep., 7/1/87, at 7. The majority purports to show a
conflict between Poindexter and North over the question of the
time lapse between when North requested approval of the diversion
and when Poindexter approved it. Obviously, the majority is con-
ceding here that North did request approval from Poindexter, and
that Poindexter gave it. Moreover, even a casual reader of North's
testimony will see that North had no specific recollection of how
long it was before Poindexter got back to him. North said, "/ don't
recall specifically on this case — but my normal modus operandi on
making a proposal such as that would be to go over and sit down
with the Admiral .... Normally the Admiral would like to think
about it ... . (North Test., Hearings, 100-7, Vol. I, 7/10/87, p. 297,
emphasis added). Counsel then asked; "Did you — do you recall how
long after you first told him about this orally he got back to you?"
North responded: "No, I don't. I guess it was a matter of weeks — or
days or weeks certainly, because by February, we did it." (Id. at
298, emphasis added). Curiously, the majority ignores this testimo-
ny, which would conflict with its preordained conclusion.

tt North also testified in private session that he assumed until
November 21, 1986, that the diversion had the President's approval.
On November 21, he said, he learned from Poindexter that it did
not. See North Dep., 7/1/87, at 7, 25. Poindexter testified in private
session, before North's, that he had specifically decided not to tell
North that the President had not approved the decision. Poindexter
thus corroborates North on the essential point, although he did not
recall the November 21 conversation to which North testified. See
Poindexter Dep., 5/2/87, at 72; 7/2/87, at 17.

551

Chapter 10

about it. He has also stated that in his opinion, Admi-
ral Poindexter did not have the authority to make the
decision without the President's approval.

The Committees have received no documentary
evidence or testimony which shows that any other
U.S. Government official approved or in any other
way was involved in agreeing to the diversion. Col.
North testified that Director Casey knew about, and
was supportive of, the diversion, but North did not
suggest that Casey's approval was either sought or
required.'^

The President Knew Nothing About
The Diversion

The evidence available to these Committees shows
that the President did not know about the diversion.
The President has made this point repeatedly. The
Committees have received sworn testimony support-
ing the President on this point from four individuals
with first-hand knowledge, and from another individ-
ual who directly corroborates some of this key testi-
mony. The plain fact of the matter is that the Com-
mittees have no testimony or documentary evidence
to the contrary.

Poindexter

Adm. John Poindexter stated under oath, in executive
session and during the public hearings of the Commit-
tees, that he had not told the President about the
diversion.^* He did so even though he knew that he
had thereby deprived himself of an important defense
against possible criminal prosecution.'^ Poindexter
also testified that he was certain that the "April 4"
diversion memorandum, the only surviving memoran-
dum that documents the proposed diversion, did not
go to the President.'^ The Committees have received
no testimony or documentary evidence that contra-
dicts Poindexter's testimony on these points.*

•The striking thing about the majority's deeply flawed effort to
impeach Poindexter's testimony on the President's knowledge of
the diversion is that it not only adduces no evidence to contradict
that testimony, it completely ignores directly relevant corrobora-
tive evidence (provided by Paul Thompson and presented below).

Lacking hard evidence, the majority baldly speculates that it was
"totally uncharacteristic" for Poindexter not to have told the Presi-
dent about the diversion and that therefore, the majority implies
but is apparently afraid to state. Poindexter must have done so and
lied to the Committees. The majority selectively uses evidence
concerning Poindexter's background and character. To suggest that
Poindexter was new in the job, and would therefore not have made
this decision by himself, the majority states that the "diversion
decision" was made "only two months" after Poindexter became
National Security Adviser. The reader is not told of Poindexter's
directly relevant testimony that he had served first on the NSC
staff and then as deputy national security adviser for a total of 5Vi
years, and therefore felt confident that he knew how the President
felt about Contra policy and private and third country fundraising,
of which Adm. Poindexter considered the diversion an example
This, he explained, made him confident he knew what the President
would approve without being asked (Poindexter Dep., 5/2/87, at

Thompson

The Committees have also received sworn testimony
which directly corroborates Poindexter's testimony.
Cmdr. Paul Thompson, formerly the NSC General
Counsel and assistant to Adm. Poindexter, testified in
an executive session deposition as follows:

Q: Were you ever asked by Admiral Poindexter
to do any legal research relating to the question
of the use of proceeds of sales of United States
weapons?

A: No.

Q: Have I made that question general enough so
you would construe it to include any aspect of
the law related to a diversion such as the one we
believe actually occurred?

A: Yes, that's sufficiently broad. I asked the Ad-
miral that same question myself on November
25th (1986), why he didn't ask me to do legal
research on that issue.

Q: What did he say?

A: He said he didn't want me, to involve me in
that aspect of the operations.

Q: Did you have any further discussion on that
with him?

A: No. Well, I did. I asked him whether he told
the President or not.

Q: What did he say?

A: No.

After the questions about researching the law. the
deposition turned to who authorized the diversion.

Q: Did you ask him whether or not he had au-
thorized the diversion?

A: No. I didn't ask him in those concrete terms. I
asked him, after I asked if he had told the Presi-
dent and he said no, he went on to say the reason
he didn't tell the President he said he felt confi-

70-71. 75.) The majority also makes a "chain of command" argu-
ment, suggesting that Poindexter would be unlikely to have acted
outside of that chain Yet the majority ignores the fact that Poin-
dexter testified under immunity, in private before North appeared,
that he alone approved the diversion as a command decision and
that he gave this testimony knowing full well, as he said, that he
had thereby deprived himself of an important defense against per-
sonal criminal liability. (Poindexter Dep.. 5/2/87. at 72-75.) Finally,
the majority's character argument utterly ignores the fact that Poin-
dexter was clearly the single most secretive witness the Committees
heard from, a man for whom keeping secrets from long time col-
leagues and associates was a matter of habit. In short. Poindexter
was just about the most likely witness, from a character point of
view, to have made a decision to keep the diversion from the
President

552

Chapter 10

dent the President would approve it. But it was
an interesting few moments because he had for
himself as the naval officer and as the command-
ing officer of the ship, whatever you want to call
it, he had a standard of what we call inescapable
responsibility in the Navy which means you are
inescapably responsible for what any member of
your staff does. I was unable to tell whether or
not he was just generally aware of the diversion
and North's knowledge of the diversion or
whether he was more extensively aware of
it. . . .

Q; But you apparently were concerned enough
about it to ask him both why he hadn't told you
and whether or not he had ever asked you to do
any legal work that might have borne on the
subject; am I right?

A: Well, sure. I was — I saw that as a prime
reason for his resignation or his request to be
transferred and one of my missions was to help
him out in all areas, and I was really just asking
the question why didn't you ask for my help in
this area.

Q: When did the conversation occur, what date?

A: November 25th. . . . [or] . . . during the
course of that week ... I guess it was the
25th. 1^

North

Lt. Col. Oliver North also testified that he had not
told the President of the diversion. North testified
further that he did not have any indication that the
memorandums he had written to seek approval for
the diversion had ever been forwarded to the Presi-
dent. (The memorandums were written to Poindexter
and not to the President.*) North testified that none

*The majority gives an incomplete account of the testimony of
James Radzimski. All available physical evidence and testimony
either fails to support or directly contradicts Radzimski's testimony,
as the majority correctly notes. But the majority ignores the fact
that Radzimski clarified his account of certain key events in his
second deposition. Radzimski specifically admitted then that he had
no independent recollection of any cover memorandum from Poin-
dexter to the President being part of any April diversion memoran-
dum on the Iran initiative, a point the majority appears to have
forgotten. See Radzimski Dep., 8/11/87 at 71-72. Radzimski also
admitted that, if any such document had ever existed, three sepa-
rate actions, involving at least two different secure systems to
which different groups of individuals have access, would all have
to have been taken to remove all record of its existence. See Id. at
73-77. Nor could Radzimski explain why he would have seen, as he
claimed, "non-log" NSC documents such as the diversion memo-
randum which never would have entered the NSC document con-
trol system in the first place. The fact is that Radzimski's testimony
was not deemed credible by the Committees, and he was therefore
not called to testify despite a premature announcement that he
would be so called.

of the memorandums returned to him on this subject
had any indication that they had been seen or ap-
proved by the President. North said:

I did not send them (the memorandums) to the
President, Mr. Nields. This memorandum [refer-
ring to the April 4 diversion memorandum, ex-
hibit OLN-1] went to the National Security Ad-
viser, seeking that he obtain the President's ap-
proval. There is a big difference. This is not a
memorandum to the President. ' ^

I want to make it very clear that no memoran-
dum ever came back to me with the President's
initials on it, or the President's name on it or a
note from the President on it. None of these
memorandums [seeking approval of the diversion,
written to Poindexter]. I do have, as you know,
in the files that you have of mine, many, many of
my memorandums do have the President's initials
on them, but none of these had the President's
initials on them.'^

Col. North admitted at the hearings that he had
misled Gen. Secord when he told him that the Presi-
dent was aware of the diversion in order to enhance
the General's enthusiasm for the project.^" North also
admitted that he had made a comment about the di-
version to Poindexter once as they were leaving a
meeting with the President, but stated that he be-
lieved the President had not heard the remark.**

Diversion Memorandums

Although their accounts of how the diversion was
authorized were consistent. North and Poindexter had
different recollections about the extent to which the
diversion had been documented. North said he be-
lieved he had written five memorandums seeking ap-
proval of diversions, but that he had later destroyed
them. Poindexter said he did not recall seeing most of
these memorandums, although he thought it was pos-
sible that he had seen the original of the surviving
April diversion memorandum and then had destroyed
the section that dealt with the diversion. 2' However,
the references to the diversion apparently usually oc-
cupied one or two paragraphs in a multipage docu-
ment. Given the amount of paper normally flowing
through the National Security Adviser's office, it

**Id. Through what is a surprising oversight, to put it mildly, the
majority's account of North's testimony about the President's tele-
phone call to him on November 25, as it relates to the diversion,
completely omits North's testimony about Earl's statements about
that telephone call. North testified that he did not recall having
said to Earl that the President had said "It is important that I not
know." North continued: "I am sure that what I said (to Earl) was
basically what I told you yesterday ... [I] wouldn't have charac-
terized it the way you have just indicated [Earl testified], I don't
believe." (North 7/8/87, at 93). In short, North's first hand account
disagreed with Earl's hearsay testimony, and North denied having
given Earl the account Earl recalled.

553

Chapter 10

would not be surprising if Poindexter had simply for-
gotten or overlooked these references.*

In any event, the Committees have no evidence to
suggest that any of these North memorandums, which
were addressed to Poindexter, ended up going to the
President. The Committees actually have some docu-
mentary evidence supporting the testimony that they
did not go to the President. Poindexter's practice on
some occasions was to brief the President orally with
respect to what he considered to be the key points of
lengthy memorandums, such as the one supporting
the January 17 Finding. ^^ That is probably what he
did with the April diversion memo, using the "Terms
of Reference" portion that did not contain a reference
to the diversion. ^^

Regan and Meese

The case for the view that the President did not
know about the diversion does not rest solely on the
corroborated, sworn testimony of Poindexter and
North. The Committees also have sworn testimony
from former Chief of Staff Donald Regan and Attor-
ney General Edwin Meese concerning the President's
reaction when he was told of the diversion.

According to Regan's graphic description, the
President's reaction was:

Deep distress, deep distress. You know, the ques-
tion has been asked, I've seen it in the paper time
and time again: did the President know? Let me
put it this way. This guy I know was an actor,
and he was nominated at one time for an Acade-
my Award, but I would give him an Academy
Award if he knew anything about this when you
watched his reaction to express complete surprise
at this news on Monday the 24th. He couldn't
have known it.^*

At his deposition, Regan testified as follows:

Q: And do you recall what the President's reac-
tion was [to learning about the diversion]?"

A: Horror again, and — thinking back on it, it is
hard to — it is like a person was punched in the

•The majority makes a strained effort to fabricate a conflict
between Poindexter and North over whether North was told not to
create written records of the diversion. To do this, the majority
must ignore Poindexter's testimony at his private deposition, given
before North's appearance, that he might have seen the diversion
memorandum at or about the time it was written. (Poindexter Dep.
5/2/87. at 178-179; see also Poindexter Test., Hearings. 100-8, 7/16/
87, at 111-1 13). Further, at the hearings, as the majority also fails to
note, Poindexter stated: "I do recall telling (North) when I took the
decision the first time that I didn't want anybody else to know
about it. I don't recall telling him not to put it on paper, but ... I
thought (Colonel North) understood from earlier discussions with
him, to limit the amount of paper that he prepared ... (Id. at
114, emphasis added). Poindexter testified further that North "prob-
ably" prepared the diversion memorandum at his request. (W. at
114-115).

Stomach. I mean, the air goes out of him, crest-
fallen. You know, a slumping in the chair sort of
thing. A real blow had been delivered here that
not only was there this possibility [of a diver-
sion], but that they — people responsible were pri-
marily OUie North, for whom the President had
high regard as a staff person, and the Attorney
General told the President that Admiral Poin-
dexter had some type of inkling of this and
should have investigated but didn't. ^^

Attorney General Meese testified at his deposition:

Q: And what was the President's response [to
being told about the diversion]?

A: Well, he was very much surprised. I would
say shocked, as was Don Regan.

Q: Do you recall what he said, the President?

A: I can't remember exactly, but it was some
expression of surprise.^®

Meese's testimony at the Committees' public hearings
on this point was to much the same effect.^''

Conclusion

From all of this evidence, it is clear the President did
not know about the diversion. A contrary conclusion
would have to be based on the view that a series of
individuals, including the President, decided to
engage in a criminal conspiracy to cover up the Presi-
dent's knowledge and then to lie about it in a well-
coordinated manner in sworn testimony, much of it
given under grants of immunity protecting the witness
from use of the testimony against him for anything
except a perjury prosecution. The Committees have
no evidence of any kind that would lend the slightest
support to this contrary view.

Who Else In The Government
Knew About The Diversion?

Col. North testified that he told Robert McFarlane
about the diversion at the end of the trip to Tehran in
May 1986. McFarlane was by then a private citizen,
and there is no indication he participated in, planned,
or authorized the diversion. McFarlane has corrobo-
rated North's testimony on this point. In addition.
North testified, and Robert Earl agreed, that Earl
knew about the diversion.^*

North also testified that Director Casey knew about
the diversion. Casey denied knowledge of the diver-
sion to Members of Congress shortly before he en-
tered the hospital. In addition, when Director Casey
learned that there was a possibility that someone had
diverted funds from the Iran arms sales to the Con-
tras, Col. North assured Director Casey and Deputy

554

Chapter 10

Director Robert Gates that the CIA was not involved
in the diversion. Finally, Casey tried to alert Poin-
dexter to the possible problems that were presented
by such a diversion and suggested he seek legal coun-
sel to deal with the situation. These can either be seen
as efforts indicating that Casey did not know about
the diversion, or as efforts to convey an understand-
ing to Gates and others suggesting that he did not
know about it in order to conceal the fact that he did.

Whether or not Casey knew, and we are inclined to
believe that he did, one thing is clear. Casey's knowl-
edge, or lack thereof, is not in any way indicative of
what the rest of the CIA may have known about the
diversion, since it is quite clear that Casey had infor-
mation that he shared with no one else there. The
Committees have no substantial evidence that other
CIA personnel did know about the diversion. The
CIA analysts and operatives who were involved in
the Iran operation did have reason to know that there
was a spread between the cost of the weapons pur-
chased from the Government and the price being
charged the Iranians for them. However, their evi-
dence on this point was equivocal and made it diffi-
cult for them to know how large this spread was in
some of the transactions. In addition, the fact that
there were several intermediaries meant that even
though they knew there was a potential for a "diver-
sion," in the sense that there would be excess funds,
they did not know where the excess funds were
going. In this connection, it is important to remember
that the National Security Council, not the CIA, actu-
ally managed the Iran arms sales operation. There-
fore, the CIA did not have reason to follow the
details in the way they would have done had they
had been managing the transaction themselves. We
have no reason to disbelieve the consistent, unequivo-
cal denials of CIA personnel that they did not become
aware of any possible diversion of funds to the Con-
tras until very late in the day, and did not know that
NSC personnel were involved in the diversion of
funds.

Finally, the Committees have no evidence to sug-
gest that other U.S. Government officials were aware
of the diversion.

Did The Diversion Cause Or
Interfere With The Iran Initiative?

The Iranian government clearly paid higher prices for
U.S. weapons than the United States would have
charged other governments. From this, some have
drawn the conclusion that the diversion must inher-
ently have interfered with the Iran initiative, because
better relations between the two countries could not
be based on higher than necessary prices for U.S.

weapons.* In addition, some have suggested that gen-
erating surplus funds for the Nicaraguan Resistance
was the main motive for moving ahead with the sales.

The question of motive was considered at length in
the previous chapter. What we have just shown about
the diversion only strengthens what was said there. In
our view, the record supports neither of these posi-
tions. Since there is no evidence that the President or
any other major U.S. government decisionmaker
knew about the diversion through the time of the
January 1986 Finding, it would make no sense to
argue that their thinking was influenced by this con-
sideration.

The previous chapter also gives the lie to the idea
that the diversion, or "overcharging," adversely af-
fected the success of the Iran initiative. If the Second
Channel representatives were upset at the prices, ne-
gotiations would hardly have proceeded as we have
described. In fact, Gen. Secord specifically testified
that he was told by Iran that the price was not an
important issue for the Second Channel. ^^ As we
have already noted, the price was not much higher
than the replacement cost. In any case, the Iranians
were in a war, they needed the weapons, and there
was no other place to buy them. As Adm. Poindexter
pointed out, the Iranians had already paid Israel es-
sentially the same premium price the United States
charged. He therefore did not think they would be
concerned about the U.S. price. ^'' North's testimony
corroborated this point:

The fact is that we knew that the Iranians would
pay even more than we charged, from intelli-
gence that we had gathered We knew that
during the first channel, for example, Mr. Ghor-
banifar had a little frolic and diversion of his own
going in which he had pocketed at least some for
himself, if not for others, a considerable sum.
And that even the prices we charged, he further
inflated.

And so we judged that risk [the risk to the hos-
tages from overcharging] to be minimum given
that they would be — basically pay whatever they
could to get these items or weapons from the
source that — whatever source they could. ^^

For these reasons, both Poindexter and North re-
jected the idea that the diversion materially affected
the prospect of achieving a new relationship with the
Iranian Government.''^ The concern the Iranians ex-
pressed about overcharging in connection with the
Hawk shipment is not necessarily to the contrary.

•Interestingly, some of the same people who make the argument
that the diversion hurt the chance for the Iran initiative's success,
also want to say that the initiative had no chance for success in the
first place. It is as if they know the policy must be bad for some
reason, so why not offer some inconsistent reasons to see if any can
be supported.

555

Chapter 10

They were concerned that their own representative,
Ghorbanifar, was profiting from the overcharging.
This does not mean that the United States could not
have continued to charge these same prices, since the
Iranians had no practical alternative but to pay
them.^^

Some Legal Questions Growing
Out Of The Diversion

The technical legal questions surrounding the diver-
sion appear to us to turn on the issue of ownership.*
If the money was rightfully the property of Gen.
Secord and Albert Hakim, then it follows that they
were free to donate the excess proceeds to the Resist-
ance, or use it in any other legal manner that they
wished. They may have felt a moral obligation to use
the money as suggested by North, but they would
have been under no legal obligation to do so.

If, however, the funds belonged to the United
States, it follows that the money should have gone
into the Treasury of the United States and could only
be sent to the Nicaraguan Resistance under the terms
of an authorized disbursement. Sending the money to
the Contras would not technically have been a viola-
tion of the Boland Amendment even under these con-
ditions, because the funds were not appropriated. But
if the funds were technically the property of the
United States, then the Executive had no authority to
direct how it would be spent, except under an appro-
priation or some other legal authorization.

Substantial legal arguments can be made to support
and oppose each of the conclusions about who owns
the Enterprise's funds. In support of the view that the
funds belonged to the United States, it can be argued
that Secord was acting as an agent of the United
States. The facts that the price to Iran for the arms
was set in consultation with North, that the United
States selected Iran as the ultimate buyer, that the
United States anticipated that the sales would trigger
Iranian help in the release of American hostages held
in Lebanon, that Secord and Hakim represented them-

•Three transactions are at issue. In February 1986. Ghorbanifar
provided Khashoggi with four postdated checlcs for $3 milhon
each. Khashoggi deposited $10 million in the Lake Resources ac-
count controlled by Hakim and Secord. The CIA then received its
contract price of $3.7 million for 1,000 TOWs and certified the
availability of the funds to DOD. The certification and payment of
the amount to DOD initiated the transfer of the TOWs to the
custody of Secord, who arranged for their transportation and deliv-
ery to Iran. Thereafter. Iran transferred $7.85 million to the Lake
Resources account, which was supplemented by $5 million from
Israel stemming from the abortive HAWK missile shipment in
November 1985. Khashoggi was repaid $12 million from Lake
Resources, leaving a profit for the Enterprise of $6.3 million, less
the cost of transportation of the TOWs. The same general method
of financing was employed in the transfer of 1,008 TOWs and
HAWK spare parts in May 1986, August 1986, and October 1986.
The aggregate surplus to the Enterprise in dispute approximates
$8.5 million.

selves as spokesmen for the United States at various
times, that Secord did not expect to make a profit
from his services, and that North and Secord both
expected that any surpluses would be used to further
U.S. interests, all support the contention that Secord
was an agent and that the surplus funds were the
property of the United States.^*

On the other hand, there are substantial facts to
support the conclusion that Secord was purely an
independent contractor, with his own risks of profit
and loss. Secord was never designated formally, in
writing or otherwise, as a U. S. agent. Any argument
that they were agents has to be based on a theory of
constructive trust, rather than from some facts that
will show an explicit, written trust relationship. In
addition, Secord claims that although North gave him
suggestions and he listened, he made all the decisions
and therefore had the control.^*

One relevant fact that would support the conclu-
sion that the United States did not have an automatic
claim to the funds would be the fact that the CIA and
DOD were paid the full amount the law requires for
the arms, and refused to transfer the weapons until
full payment was received. That fact would not settle
the issue, however, because the price the Defense
Department set was based on the knowledge that the
first buyer was another Government agency, the CIA.
The real question of ownership does not turn on the
relationship between Defense and CIA, but between
the CIA or NSC, on the one hand, and the Enter-
prise, on the other.

It does seem relevant, on Secord's side of this argu-
ment, that the Enterprise assumed all of the major
financial risks of the operation. For example, if the
arms were destroyed during the shipment because of
an air crash or otherwise, there was no agreement
that the CIA would restore to the Lake Resources
account the payment previously received. Similarly, if
Iran was dissatisfied with the arms and refused to
pay — as occurred with the transfer of Israeli arms in
November 1985 — there was no understanding that the
CIA would repurchase the arms for the amount previ-
ously paid.^^

We have not attempted to resolve this legal ques-
tion of ownership, because it is not within the charter
or province of the Congressional Investigation Com-
mittees to do so. It is a matter for the courts to
decide. We do, however, believe that even if Secord
and Hakim were not agents under the technical terms
of the law, they nevertheless received the arms sale
proceeds only because there was an expectation be-
tween themselves and North, based on trust, that they
would put the money toward mutually agreed-upon
public ends. Whether legally required to do so or not,
therefore, they ought to feel some moral obligation to
turn the surplus over to the United States, after de-
ducting reasonable costs and compensation for serv-
ices.

556

Chapter 10

Conclusion

The diversion has led some of the Committees Mem-
bers to express a great deal of concern in the public
hearings about the use of private citizens in covert
operations in settings that mix private profits with
public benefits. We remain convinced that covert op-
erations will continue to have to use private agents or
contractors in the future, and that those private par-
ties will continue to operate at least partly from profit
motives. If the United States tries to limit itself to
dealing only with people who act out of purely patri-
otic motives, it effectively will rule out any worth-
while dealing with most arms dealers and foreign
agents. In the real world of international politics, it
would be foolish to avoid dealing with people whose
motives do not match those of the United States.
Nevertheless, we do feel troubled by the fact that
there was not enough legal clarity, or accounting
controls, placed on the Enterprise by the NSC.

Whether viewed with foresight or hindsight, and
regardless of its legal status, the decision to use part
of the proceeds of the Iran arms sales for the benefit
of the Contras was extremely unwise. Even if the
diversion is determined by the courts to have been
legally permissible, it was the result of poor judgment
on the part of U.S. Government officials. The deci-
sion to proceed with the Iran arms sales was itself
fraught with great potential for controversy and dis-
agreement. There was no sound basis whatsoever for

adding to the political risks of the operation by bring-
ing into it another hotly debated aspect of American
foreign policy.

It was equal folly not to tell the President of the
planned use of the proceeds of the arms sales. The
question of legality aside, the President should have
been given the opportunity to exercise his own good
judgment to instruct the participants not to allow the
diversion.

The diversion decision was not the first time an
unwise operation has been undertaken in the conduct
of American foreign affairs, and, unfortunately, it un-
doubtedly will not be the last. At a minimum, the
decision should generate a fuller awareness in the
executive branch of the serious negative ramifications
of risky and short-range decisions that have not had a
full airing in the Presidential office, let alone in the
halls of Congress.

The decision also serves to underscore the tremen-
dous pressures placed on the Chief Executive and his
staff in carrying out an effective and coherent foreign
policy in Central America or elsewhere when Con-
gress unnecessarily and unwisely abuses its power of
the purse to manage foreign affairs with an inconsist-
ent on-again, off-again policy. Congress needs to learn
that to be an effective participant in the field of for-
eign affairs, it must afford Presidents from either
party the latitude to plan and implement an effective
foreign policy based on clear decisions that are free
from annual change. When Congress learns this, the
world will be more stable for us and our allies.

557

Chapter 10

Endnotes

1. Attorney General's Press Conference of Nov. 25, 1986,
pp. 2, 7; Ex. EM-54, Hearings. 100-9.

2. Sara Fritz and Doyle McManus, Inquiry Traces Mil-
lions in Iran Sales to Contras, The Los Angeles Times,
March 7, 1987, at A-1.

3. Secord Test., Hearings, 100-1, 5/6/87, at 95-96.

4. Secord Test., Hearings. 100-1, 5/6/87, at 95.

5. Secord Test., Hearings. 100-1, 5/7/87, at 158, 162.

6. North Test., Hearings. 100-7, Part I, 7/10/87, at 296.

7. North Test., Hearings, 100-7, Part I, 7/8/87, at 106; 7/
10/87, at 295-96; Part II, 7/14/87, at 164-65.

8. Id., at 295.

9. Poindexter Test., Hearings, 100-8, 7/15/87, at 35; Poin-
dexter Dep., 5/2/87, at 69-70.

10. North Test., Hearings. 100-7, Part I, 7/8/87, at 139.

11. Poindexter Dep., 5/2/87, at 70-71.

12. Poindexter Dep., 5/2/87, at 70-73; Poindexter Test.,
Hearings, 100-8, 7/15/87, at 35-37.

13. North Test., Hearings. 100-7, Part I, 7/8/87, at 115,
and 7/9/87, at 240, 245.

14. Poindexter Dep., 5/2/87, at 70-71; Poindexter Test.,
Hearings. 100-8, 7/15/87, at 37-38.

15. Poindexter Dep., 5/2/87, at 72-73.

16. Poindexter Dep., 5/2/87 at 232.

17. Thompson Dep., 7/24/87, at 66-68, 70, 71.

18. North Test., Hearings. 100-7, Part I, 7/7/87, at 13.

19. Id. at 12.

20. Id at 26.

21. Poindexter Dep., 5/2/87, at 178-79; Poindexter Test.,
Hearings. 100-8, 7/15/87, at 44-45.

22. See Poindexter's handwritten notes, Ex. OLN-60,
Hearings. 100-7, Part II.

23. Poindexter Test., Hearings. 100-8, 7/15/87, at 44-45.

24. Regan Test., Hearings. 100-10, 7/30/87, at 29.

25. Regan Dep., 7/15/87, at 62.

26. Meese Dep., 7/8/87, at 144.

27. Meese Test., Hearings. 100-9, 7/28/87, at 251.

28. Earl Dep., 5/2/87, at 32.

29. Secord Test., Hearings. 100-1, 5/6/87, at 134.

30. Poindexter Dep., 5/2/87, at 183-84.

31. North Test., Hearings, 100-7, Part II, 7/13/87, at 89.

32. Poindexter Dep., 5/2/87, at 183-84; North Test.,
Hearings, 100-7, Part I, 7/9/87, at 215.

33. North Test., Hearings. 100-7, Part II, 7/13/87, at 89.

34. See 3 Am. Jur. 2d, sees. 17-22.

35. Secord Test., Hearings. 100-1, 5/7/87. at 250.

36. See Uniform Commercial Code, Sec. 2-401; 2-501; 2-
509.

558

PartV
Disclosures and Investigations

Chapter 1 1
From the Disclosure to the Uncovering

On Tuesday, November 4, 1986 the New York Times
carried a front page story disclosing a portion of the
Iran initiative.' Only three weeks later, on November
25, 1986, the Attorney General of the United States
announced that officials of his department had discov-
ered a diversion of funds from that initiative to the
use of the Nicaraguan resistance. This chapter de-
scribes our view of the events of November 1986.
We reach three principal conclusions. First, the
President's decisions about how much to disclose
were motivated by his effort to balance the need for
protection of hostages and secret diplomatic discus-
sions with the public's need for information. Second,
once the President decided that the Administration
did not have a complete picture of the Iran initiative,
the Attorney General undertook an aggressive effort
to obtain the facts. He then made the information
available promptly to the President and to the public.
Third, the President and the Attorney General discov-
ered and disclosed the essential facts, despite efforts
on the part of certain members of the NSC staff and
others to cover up certain events, including the diver-
sion. There is no evidence that the President directed,
encouraged, or in any way condoned this coverup, a
point the majority spares no effort to gloss over. In
our opinion, the Attorney General and his associates
did an impressive job with a complicated subject in a
very short time. Far from being inept, or parties to a
cover up, the Department of Justice was responsible
for uncovering the diversion of Iran arms sale pro-
ceeds to the Contras.

Early November

The Iranian initiative was disclosed for political rea-
sons by high level dissident Iranian religious officials.
The New York Times report was based on a report
from a Lebanese weekly, Al-Shiraa. Its report was in
turn based on a politically inspired leak from Iranian
dissidents bent on retaliation for efforts by the Iranian
Government to curb their support for wide scale ter-
rorism and possibly to reach an accommodation with
the United States. At least one of the key dissidents
has recently been executed by that Government.*

*For more details see asterisk in Chapter 8. at 520.

American officials had learned of the pending dis-
closure of McFarlane's May trip to Tehran at a secret
meeting in Europe a week before the disclosure ap-
peared in the press. Their immediate concern was for
the lives of remaining American hostages. They also
wanted to continue the secret discussions, as did offi-
cials of the Government of Iran. In addition, there
were serious questions about the impact of the disclo-
sures on a significant American ally, Israel.

During the week after the New York Times story,
there were vigorous disagreements within the Admin-
istration about what, if anything, the Administration
should disclose about the Iran initiative. As the situa-
tion was later described by former Chief of Staff
Donald Regan:

I recall discussing with other members of the
staff, "The cover is blown here. We have got to
go public with it. We have got to tell the Con-
gress, we have got to tell the American public
exactly what went on so they were aware of it."

Mr. Smilijanich. What did Admiral Poindexter
recommend?

Mr. Regan. [His recommendation was] Absolute-
ly not. It was later reported in local papers here
that we had a shouting match . . . [W]e did have
a difference of opinion — a strong one. . . . His
reasoning was a good one, that Jacobsen had just
come out as a hostage. North was preparing to
go to London and actually did go to London that
first weekend in November — what was it, the 8th
or 9th, in through there [to meet with Iranian
officials] — and there's a possibility of two more
prisoners coming out, two of the original ones,
and maybe even the additional three, the later
ones. And why blow that chance? We got to
keep the lid on this, we got to deny it, we're
endangering their lives.

And then I might add here, a very dramatic
thing happened. I recall it vividly. Jacobsen had
a Rose Garden ceremony welcoming him back.
He had said in his remarks he had cautioned the
media about discussing this. On the way back, as
the President and he were mounting the steps to

561

77-026 o - 87 - 1 9

Chapter 1 1

the colonnade to go back into the Oval Office,
there were shouted questions from the media
about, "What are you going to do about the
hostages, what about the others that are there?"
And Jacobsen turned and very emotionally said,
"For God's sake, don't talk about that, that is
exactly what I have been saying, you are endan-
gering lives of the people I love, these are my
friends." That made quite an impression on the
President. And even though that same day I
urged him again to get this story out, he said,
"No, we can't Don,' he said, "We can't endanger
those lives." And he didn't.^

Regan's testimony shows the Administration's con-
cern for the hostages. North's notes of a meeting with
Iranian representatives on November 7, three days
after the New York Times story, show both the desire
to continue the negotiations and a concern for the
hostages;

— "Holding to no comment —

— We recog.(nize) that public statement, RR admit-
ting mtgs. w/ [2d Channel] wd be dangerous for you
and Speaker

— Need to know WTF going on
•Press release

•[Second Channel] told in Frankfurt 2 host (two hos-
tages)."

November 10-20

Public pressure for an account of the Administration's
dealings with Iran led during November to meetings,
a speech and press conference by the President, and
testimony by various Administration officials before
Congressional committees. Questions were raised both
inside and outside the Administration about the Ad-
ministration's compliance with civil statutes governing
Executive-Legislative branch relations in the conduct
of covert activities and arms transfers. The President
and his advisers continued to grapple with the ques-
tion of how to balance the diplomatic concerns just
described with the need for public disclosure.*

According to Regan's notes of a November 10
meeting, the President opened the discussion with a
statement to the effect that "as a result of media, etc.
must have a statement coming out of here. . . . Some
things we can't discuss because of long term consider-
ations of people with whom we have been talking
about the future of Iran." ^

At that same meeting, Poindexter made a presenta-
tion on the history of the Iran initiative, that omitted

or misstated certain facts. Poindexter also noted cor-
rectly the fact that the Iranians wanted to continue
contacts despite news reports.* Poindexter noted that
North had met with Iranian representatives the previ-
ous weekend, that "Iranians happy with our no com-
ment. Raf will have to speak out due to world press
comments." ^ At a later point, the President noted:
"We should put out statement . . . but cannot get into
q & a re hostages so as not to endanger them." ^

In the period between November 10 and November
21, the Administration continued to try to balance its
concern for the hostages and the Iranian initiative
with the need for public disclosure. The President
addressed the nation on November 13, and then
agreed to answer questions concerning this matter on
November 19. The drafting of the speech, and the
Presidential press conference preparation on these
issues, were done by the National Security Council
staff acting under Admiral Poindexter's direction.
Some of the information provided during those events
was incorrect. However, the speech, and the Presi-
dent's answers at the press conference, provided basic
information concerning the initiative from the Presi-
dent's point of view while attempting to withhold
certain information in order to protect diplomatic sen-
sitivities such as the role of the Israeli Government.''

There is evidence that the President and most re-
sponsible Administration officials were trying to keep
the public record accurate. For example, the White
House issued an immediate correction with respect to
one factually incorrect statement the President made
at the November 19 press conference. Regan testified
that this inaccurate statement resulted from the Presi-
dent's confusion about what information could be re-
vealed without causing national security problems.^
By this time, however. Secretary Shultz had conclud-
ed— based on the November 13 speech and November
19 press conference answers — that the President was
being misled on some key facts by certain members of
the NSC staff, and sought a meeting with the Presi-
dent to explain this to him in detail. The meeting
occurred on November 20.

During Shultz's meeting with the President, they
reviewed what Shultz believed were a number of
inaccurate or misleading statements the President had
made concerning the Iran initiative.* The State De-

*I| is interesting to note that while the President and his staff
were wrestling with the question whether to disclose the mission
and thereby jeopardize the hostages, the leader of the Government
of a close ally in that pan of the world had a senior aide call North
to ask the President and Poindexter to flatly deny that there had
been an operation such as the one reported about McFarlane in
Tehran. Earl Dcp., 5/30/87, p. 74-75.

'Regan Test., Hearings 100-10. 7/30, at 23-25. The majority's
effort to show that the President made inaccurate statements at his
press conference completely ignores the fact that Israel's involve-
ments in U.S. sales of arms and direct sales of arms were then
regarded as diplomatic secrets which should be concealed to pro-
tect Israel's security. Several of the President's other arguably inac-
curate statements made then were clearly based directly on infor-
mation given to the President by certain members of the NSC staff.

•The majority makes much out of the Secretary's "battle royal"
with the NSC to get out the true facts. It is worth noting in this
connection how much of the disagreement at the time rested on
matters such as differing interpretations of intelligence reports, stra-

562

Chapter 1 1

partment briefing paper prepared for this occasion
went through these matters in considerable detail, in-
cluding comments on such matters as the legality of
various arms transactions, possible political connec-
tions which might be drawn between Iran and Nicara-
gua, and so on.^ The points in Shultz's briefing paper
were designed to give the President what Shultz be-
lieved to be a more accurate picture of the political
history and rationale for the Iran arms deal. Shultz
described the meeting as "a long, tough discussion,
not the kind of discussion I ever thought I would
have with a President of the United States. But it was
bark off all the way." '°

Testimony and Chronologies

The need for additional, detailed information on the
Iran initiative was intensified by the need to testify
before the Intelligence Committees on November 21.
It became clear that the Administration had only an
incomplete "institutional memory" on the origin and
conduct of that highly compartmented initiative and
that different participants had conflicting memories of
certain key 1985 events.

The events surrounding the creation of false and
misleading chronologies have been discussed in detail
during the hearings and there is no need to review the
matter here. These chronologies misstated the fact of
the President's authorization for the 1985 arms ship-
ments, the Israeli participation in those shipments, and
contemporaneous knowledge by United States Gov-
ernment officials of the nature of those shipments. It
is sufficient to note that the preparation of these mate-
rials was almost exclusively the work of then present
and former members of the NSC staff, particularly
North and McFarlane. Their false presentation of
these events appears to have been acquiesced in,
either knowingly or unknowingly, by Casey and
Poindexter.

The later versions of the chronologies, and the dis-
cussions of draft Congressional testimony, led some
Justice Department officials to realize that they did
not know some of the significant facts about the initia-
tive. (The Department had been involved only tan-
gentially in the initiative and in responding to issues
raised by the public disclosure.) The Department offi-
cials also realized that certain other facts concerning
the 1985 arms sales were disputed among the partici-
pants. In response to these Justice Department con-
cerns, Casey altered the draft testimony he had pre-

pared for November 21 to omit false statements that
might otherwise have been made.*

Justice Department Investigation

On the late evening of November 20, 1986, Justice
Department officials alerted Attorney General Meese
about the factual dispute between various participants
in the Iran initiative on certain key events surround-
ing the 1985 arms sales. They indicated "that a lot of
people had different recollections and that the situa-
tion was pretty well fouled up because of that." "
There was no suggestion of intentional wrongdoing,
and Meese did not think that was the situation de-
scribed to him then. The majority report agrees.**
On the morning of November 21, Meese suggested
to President Reagan that the President should author-
ize Meese to conduct an investigation to pull together
an account of all the facts. The reason was to support
a review of the initiative at a meeting of the National
Security Planning Group scheduled for Monday, No-
vember 24, 1986. Accordingly, the investigation was
conducted over the weekend of November 21-24,
1986.12

At that time, the Attorney General had no reason
to believe that any crime had been committed.! The
simple fact is that the statutes that might possibly
have been bypassed by the arms sales were not crimi-
nal statutes. tt For those who would argue that the
investigation should have been a criminal one from
the first, it is worth noting that a Justice Department
Criminal Division memorandum — prepared independ-
ently and dated November 22, 1986 — reviewed these

tegic motives and similar matters of judgment. Only with hindsight
is it clear that concerted efforts to slant the facts, rather than
honest differences of recollection or judgment, were involved in
many cases. This is a fact that a dispassionate student of events
would be well advised to consider.

*The majority are at some pains to show that North attempted to
falsify this Casey testimony. North claimed his proposed changes
were a reaction to CIA drafts, and that he and Casey made changes
to remove affirmatively untrue statements before the Department of
Justice intervened. We are uncertain whether to believe North on
this point or not. but note that exhibits OLN-28, OLN-29, and
OLN-30 tend to support his version of events.

**"Cooper did not know who was right or wrong. {Maj. Rept.,
Ch. 19)." The majority states that Meese had been apprised of the
specifics of this dispute earlier on Nov. 20 by Deputy Attorney
General Burns after Burns had been informed of the problem by
State Department Legal Adviser Abraham Sofaer. The facts are
otherwise. Meese and Burns spoke on an unsecured car telephone
line while Meese was en route to the airport. Burns was very
general in describing the problem while Meese was equally general
in assuring him that as a result of the meeting he had just left
problems had been resolved. (Meese Dep., 7/8/87 at 174-175)
Meese was not given specific information showing the inaccuracy
of the proposed testimony at that point. In any event, within a few
hours, Justice Department officials who stayed involved in the
process discovered the conflict and informed Meese, who decided
that the Casey testimony should be altered. See Meese Test., Hear-
ings, 100-9, 7/28/87, at Idb-lbl.

tThe Attorney General has extensive criminal investigation and
prosecution experience. See Meese Test, Hearings, 100-9, 7/28/87,
at 263.

ttlndeed, the Attorney General discussed the matter with FBI
Director Webster on Friday afternoon and both agreed it would be
premature to involve the FBI in an investigation at that point.

563

Chapter 1 1

statutes and reported no basis for criminal prosecution
based on information then available.***

The Attorney General's brief investigation received
exhaustive scrutiny during the course of the hearings,
both during his own testimony and that of Assistant
Attorney General Charles Cooper. That investigation
has been criticized on a number of points. We think
the criticisms are without merit. The Attorney Gener-
al assembled a team of competent attorneys, two of
whom in addition to him had been confirmed for their
jobs by the United States Senate, and all of whom
had directly relevant responsibilities within the De-
partment of Justice for national security matters, to
conduct the fact finding inquiry.'^

On November 21, the Attorney General personally
requested that the National Security Council make
available to his staff all relevant documents concern-
ing the Iran initiative.'* The investigating team pro-
ceeded to interview all material witnesses with re-
spect to the 1985 arms sales. '^ Witnesses were repeat-
edly instructed by then that the President's interests
would be best served if the Attorney General were
given a full and accurate account of what hap-
pened.'^ Yet McFarlane, North and Poindexter made
false, misleading, or inaccurate statements to, and con-
cealed directly relevant information from, the Attor-
ney General and his representatives. Despite this, the
Attorney General's investigation uncovered "the es-
sential facts that are still the essential facts today." '''
Although the Committee majority makes much of its
purported discovery of "the Enterprise," that network
of shell corporations and secret bank accounts really
represents the mechanics of the diversion the Attor-
ney General discovered, and little else.

In the course of the review of documents on No-
vember 22, Justice Department officials discovered a
memorandum that showed a plan that part of the
Iranian arms sales proceeds were to be used to sup-
port the Nicaraguan Democratic Resistance, but pro-
vided no evidence that the plan had been carried out.

••♦Meese Test., Hearings, 100-9, 7/28/87, at 200. The majority
makes a halfhearted effort to imply that the FBI or the Criminal
Division of the Department of Justice should have been called in
earlier than they were, possibly even as early as November 21. The
majority's reasoning ignores the following points. The "facts" on
which the majority relies, such as the Casey testimony and possible
Arms Export Control Act violations were not criminal in nature, at
least so far as could reasonably be determined at the time. Even
more importantly, the majority utterly ignores the fact that the
Attorney General specifically testified that he had consulted former
FBI Director Webster and the FBI top leadership after the disclo-
sures occurred and had been assured that their view was that
Meese had acted properly; Webster also took this position at his
confirmation hearings. See Meese Test., 7/28/87. pp. 281-282, 291-
292). Finally, ihe majority ignores the fact that the head of the
Criminal Division, also a political appointee, testified that his con-
cerns about Criminal Division involvement, which were not ex-
pressed to the Attorney General at the time, were based on existing
Criminal Division court actions unrelated to the Iran initiative and
to management issues, not matters of propriety or judgments about
evidence of criminal conduct. See Weld Dep., 7/16/87 at 13-20.

They immediately arranged to interview North the
next day, Sunday, and waited until the end of that
interview to confront North with the memorandum.
Meese specifically testified to North's surprise on
being shown the memorandum. After North had con-
firmed that a diversion of funds had in fact occurred,
the Attorney General and his associates undertook to
determine who knew about, and who might have
authorized, such a diversion.*

We think that the suggestion that the Attorney
General's investigative procedures changed in some
irregular manner after the discovery of a possible
diversion is particularly unfair. We encourage any
reader who is interested in this issue to review the
colloquy on this subject between the Attorney Gener-
al and Senator Mitchell in which Senator Mitchell
raised this issue and then dropped it after the Attor-
ney General directly challenged him for doubting
Meese's testimony about it.**

•The allegation has also been made that Department officials
disregarded other "evidence" which came to their attention con-
cerning the possibility of such a diversion, such as the use of
Southern Air Transport in both the Iran and Contra operations.
The question is moot because the Justice Department in fact quick-
ly discovered the first hard circumstantial evidence that members
of the NSC staff had been involved in a diversion, the diversion
memorandum itself However, a close examination of this alleged
"evidence" shows that it was speculation communicated in a vague,
general way which related to a physical or political connection
rather than to evidence of financial diversion. See Sofaer Dep., 6/
18/87 at 68-70; Meese Test, Hearings, 100-9, 7/28/87, at 270-71,
277; 7/29/87. at 414-415. Although there was some speculation by
officials at the Department of State and the Central Intelligence
Agency (based on price differentials) about some type of a diver-
sion, there was no evidence to suggest that the funds had gone to
Nicaragua, or that the disposition of any surplus was being directed
by certain members of the NSC staff The majority attempts to
bootstrap the fact that some of this vague information may have
been conveyed to the Attorney General into an attack on the
truthfulness of the Attorney General's account of his meeting with
Director Casey on November 22. The members of the majority are
much bolder in a report which the Attorney General never saw
before it went into print than they were when he testified and
therefore could respond to similar cheap shots. Suffice it to say that
the Attorney General has consistently and credibly recounted
events at this meeting where appropriate in his testimony in various
forums, including our public hearings. See Meese Tower Board
Test, 1/20/87, at 32-33; Meese Dep., 7/8/87 at 121-123; Meese
Test., Hearings. 100-9, 7/28/87. at 113-115) He testified he made a
deliberate decision to protect his investigation by not asking Casey
for information before confronting North; in our view, this was a
correct and successful decision. See Meese Test., Hearings, 100-9.
7/28/87, p. 278.

••Meese Test., Hearings. 100-9, l/l9/i,l. p. 331-334. The majority
ignores the fact that virtually all of the interviews involved lasted
only a few minutes, took place hurriedly between other meetings,
and involved only a couple of basic questions; who knew of the
diversion and who authorized it. (See Meese Test.. 7/28/87, p. 280)
The majority also ignores the fact that Meese's accounts of these
meetings have been corroborated in substance by the living partici-
pants who have been questioned by the Committees. The majority's
sporadic efforts to suggest conflicts are strained, to put it mildly. A
classic example of the majority's reaching is their statement "Meese
met alone with Regan and the President."

564

Chapter 11

The Attorney General's November 25 press confer-
ence report was based principally on admissions made
to him on November 23 by North. At the press con-
ference, the Attorney General repeatedly made clear
that there were a large number of matters on which
his information was uncertain and subject to addition-
al review and correction.'® At that time, Justice De-
partment officials were not aware of any document
shredding or altering by North and others. As McFar-
lane testified, although he did not participate in the
shredding he did not inform Meese that North had
told him it might occur.'* Similarly, Justice Depart-
ment officials had no immediate way to determine
that several of these officials gave them misleading or
inaccurate answers to their questions. The majority's
pointless cavilling about this press conference is very
much indicative of the quality of their work in this
area. As noted, despite this attempt at a coverup by
certain NSC officials, the Attorney General's investi-

gation turned up the facts that are still the essential
ones today.

There is no evidence that the President directed,
encouraged, or otherwise in any way condoned a
coverup. We reject as completely unsupported by the
record any suggestion that the Attorney General or
his staff ignored signs of potential criminal behavior
or consciously sought not to obtain information in an
effort to assist or protect the President. After intense
scrutiny, by two Congressional committees with a
very large staff, it is clear that the Attorney General
and his staff conducted themselves honorably and dis-
closed to the President and the public their findings
without regard to any political damage which would
ensue.*

*On December 4. 1986, at the request of the Attorney General, a
motion was filed with the Special Division of the Court of Appeals
for the District of Columbia Circuit seeking the appointment of an
Independent Counsel.

565

Chapter 1 1

Endnotes

1. Ihsan A. Hijazi, "Hostage's Release Is Linked to Shift
in Iranian Policy," New York Times, November 4, 1986,
Al, AlO.

2. Regan Test., Hearings, 100-10, 7/30/87, at 21-22.

3. Regan notes of November 10 meeting, Ex. DTR-41-A,
p. 1, Hearings, 100-10.

4. Regan Test., Hearings, 100-10, 7/30/87, at 23.

5. Ex. DTR-41A, p. 5, Hearings, 100-10.

6. Ex. DTR-41A, p. 9, Hearings, 100-10.

7. See p. 562.

8. Regan Test., Hearings, 100-10, 7/30/87, at 24-25.

9. Ex. GPS-45, Hearings, 100-9.

10. Shultz Test., Hearings, 100-9, 7/23/87, at 44.

11. Meese Test., Hearings, 100-9, 7/28/87, at 267.

12. It is noteworthy that Judge Sofaer, on whose suspi-
cions and speculation the majority narrative relies extensive-
ly, often without describing them as such, testified that he
began to suspect a coverup on the afternoon of November
20. (Sofaer Dep., 6/18/87, at 41-42). This seems as good an

indication as any that the Attorney General acted in a
timely fashion. The majority's innuendo that the Attorney
General did not move aggressively on this matter is utterly
belied by the fact that, for example, one of his staff spent
until dawn on November 22 reviewing intelligence reports.
See Cooper Test., Hearings, 100-6, 6/25/87, at 24-27 and
passim.

13. See Meese Test., Hearings, 100-9, 7/28/87, at 281.

14. Id. at 268.

15. Ex. CJC-1, Hearings, 100-6; Ex. EM-42, Hearings, 100-
9.

16. Meese Test, Hearings, 100-9, 1/li/il, at 269.

17. Meese Test., Hearings. 100-9, 7/28/87, at 201, quoting
Secretary Shultz.

18. Meese Test., Hearings, 100-9, 7/28/87, at 269, "at least
40 instances."

19. McFarlane Test., Hearings, 100-2, 5/11/87, at 180-81,
183.

566

Chapter 1 2
NSC Involvement in Investigations

Introduction

The majority chapter entitled "NSC Involvement
in Criminal Investigations and Prosecutions" raises
questions about the connection between the work of
the National Security Council and traditional law en-
forcement activities. Unfortunately, the majority com-
bines carelessly assembled information about matters
which any fair-minded person would conclude raise
no important issues, with scattered and conclusory
judgments about matters where real questions of judg-
ment exist.

Because of the necessity for accurate and timely
information about threats to persons or property
posed by those who may wish to cause harm for
reasons connected to the foreign policy of the United
States, the national security community must some-
times be involved in pending criminal investigations
undertaken by domestic law enforcement agencies.
The real question is not whether but when and how
much involvement is appropriate. To answer this
question requires a close examination of the reasons
for such involvement and the manner in which such
involvement is responded to by law enforcement offi-
cials.

The record of the various investigations discussed
by the majority shows that law enforcement agencies
outside the NSC, from the Department of Justice, to
the FBI and Customs Service, responded in an appro-
priate manner to requests for investigations prompted
by such reasons. In addition, the record of several of
the investigations in which NSC personnel became
involved reveals that NSC involvement in these ac-
tivities, at least at their preliminary stages, was appro-
priate. However, their involvement in others was
questionable at best.

The circumstances of each case will determine
whether such involvement was appropriate. We en-
courage each reader to examine the facts of each
investigation carefully to make this determination. In
order to set the record straight, we provide a brief
review of the investigations related to the Iran-Contra
affair in which the NSC staff was involved.

Basically, the majority alleges that certain Adminis-
tration officials, particularly Colonel North, became
improperly involved in a number of investigations
relating to Contra activities. However, the majority's

highly critical analysis is based on a flawed methodol-
ogy. In view of the majority's intent to show that
Col. North acted improperly, it is noteworthy that the
majority in most cases declined to ask Col. North
himself, during six days of public testimony, about
these allegations against him. During the Committees'
investigation, the majority obtained information on
these matters from witnesses who were in contact
with North, but North was never asked to give his
side of these events. The majority uses selected entries
from North's written notes of conversations and meet-
ings, but even though these entries are often abbrevi-
ated and cryptic, the majority declined to ask North
to explain them. Instead, the majority attempted to
interpret what these notes "suggest." In light of this
flawed methodology, the majority's conclusions re-
garding purported interference with various investiga-
tions cannot be considered objective. Moreover, the
following brief discussions of several of these investi-
gations demonstrate some additional problems.

Miami Neutrality Act Investigation

The majority has analyzed a charge that a Miami
investigation of an alleged conspiracy by a pro-Contra
group to violate the Neutrality Act was impeded by
officials of the Department of Justice. The majority
has concluded that the investigation was not aggres-
sively pursued. However, a review of the facts clearly
shows that the charge of interference was based on
one witness's testimony, which was contradicted by
all of the other witnesses. Further, any delays in the
investigation were caused by legitimate problems.

David Leiwant, an Assistant U.S. Attorney in
Miami, has claimed that he overheard one side of a
telephone conversation on April 4, 1986, between
U.S. Attorney Leon Kellner in Miami and someone at
the Department of Justice, in which Kellner was ad-
vised that the Department wanted him to go slow on
a pending investigation of possible Neutrality Act vio-
lations. According to Leiwant, after the phone con-
versation ended, U.S. Attorney Kellner stated that the
Justice Department wanted the investigation to go
slow and to be kept quiet. Kellner reputedly made
these statements with a sneer, suggesting that he
would ignore these requests.*

567

Chapter 12

Leiwant's account of this incident is unsupported
by any other evidence. In fact, every other person
who was present at the meeting when the telephone
conversation allegedly took place denies Leiwant's
version of events. In addition to Leiwant, five people
were present at this meeting in U.S. Attorney
Kellner's office on April 4, 1986— Kellner, Chief As-
sistant U.S. Attorney Richard Gregorie, Executive
Assistant U.S. Attorney Ana Barnett, Special Counsel
Lawrence Scharf, and Assistant U.S. Attorney Jeffrey
Feldman, who was handling the investigation. All
have denied Leiwant's claim that Kellner received a
telephone call from the Justice Department instruct-
ing Kellner to go slow.^

Leiwant has speculated that the alleged Justice De-
partment call may have come from D. Lowell Jensen,
Stephen S. Trott, or Mark M. Richard,'' but each of
these three officials denies any such conversation and
further denies knowledge of any attempt to impede
this investigation.*

Leiwant himself concedes: "I was listening to it
[the alleged telephone conversation] with half an
ear. . . ." ^ Also, he is certain that he never heard
Kellner tell Feldman to go slow.^

It is noteworthy that Leiwant failed to discuss with
his superiors this disturbing telephone conversation
which he purportedly overheard.'' Instead, Leiwant
began to discuss this matter with outsiders, even
though he had neither requested nor received the
required departmental approval to disclose anything
about this ongoing investigation.^ Within days of the
April 4, 1986, meeting, Leiwant called two Washing-
ton Post reporters in Washington, D.C. According to
his testimony, he mentioned to both of them that he
might have information about the Contras and Nicara-
gua. Since they were not very interested, he purport-
edly did not say much.®

Then, in August 1986, Leiwant leaked his allegation
to John Mattes, a defense attorney who represented
Jesus Garcia, the informant who provided early infor-
mation about the alleged Neutrality Act violations.
Mattes' client was awaiting sentencing on a federal
conviction, and he could have benefited if his infor-
mation led to new indictments.'" Then, Leiwant told
two investigators from the Senate Foreign Relations
Committee. Later, Leiwant told his story to U.S. Sen-
ator John Kerry.'' The publicity generated by
Leiwant's actions led to these Committees' inquiry.

Leiwant has alleged the Neutrality Act investiga-
tion was proceeding too slowly. '^ Similarly, the ma-
jority has claimed that the investigation was not ag-
gressively pursued. These allegations ignore several
important factors.

Assistant U.S. Attorney Feldman, who was as-
signed to handle the investigation, was relatively inex-
perienced. Moreover, the information his investigation
was eliciting was disorganized and, in some respects,
unreliable. Feldman himself described the case as a
"confused mess." "* For instance, a polygraph of

Jesus Garcia, the convicted felon who provided early
information about the reported conspiracy, was incon-
clusive and showed deception on an important issue.
Garcia later admitted he had lied about that issue.'*
One of the two FBI agents assigned to the investiga-
tion testified that Garcia provided inaccurate informa-
tion,'^ and the other agent testified that Garcia did
not have a great deal of credibility.'®

Another example of evidentiary problems was the
information provided by witness Jack Terrell. Most of
Terrell's information was found to be based on hear-
say rather than his direct observation.'^ Feldman's
superiors felt that the investigation needed additional
work, and that the case was not sufficiently devel-
oped to be presented to a grand jury.'*

Furthermore, the delay in the progress of the inves-
tigation was affected by the press of other investiga-
tions.'®

In this regard, it is noteworthy that the Miami U.S.
Attorney's Office is recognized as one of the busiest
in the nation, with limited resources to apply against
an ever-increasing criminal caseload.

Southern Air Transport Investigation

The majority also raises questions, in another chap-
ter of their report, about the handling of an FBI/
Customs investigation of Southern Air Transport. The
FBI, at least, began an investigation of Southern Air
Transport for possible violations of the Neutrality Act
after the shootdown of the Hasenfus aircraft. Howev-
er, Southern Air Transport also provided the air
transportation services for most of the Iran initiative.
This initiative continued after the Hasenfus shoot-
down and in fact produced one hostage in early No-
vember 1986, after a shipment of arms involving
Southern Air Transport.

Whatever the reader concludes about the propriety
of the actions of the NSC staff in requesting a delay,
the record is clear that the Department of Justice and
FBI officials who granted it acted entirely properly.
They were told that the delay was required for the
purpose of protecting the Iran initiative. They
checked to determine whether the ongoing investiga-
tion would be impeded, and were told it would not
be. They granted a delay conditioned on the conclu-
sion that the ongoing investigation would not be af-
fected, and asked that it be resumed promptly, as it
was.^° The Attorney General specifically testified
that when he was asked to grant a delay, he was not
told of any connection between White House officials
and Southern Air Transport's work in the Contra
resupply operation, or of Southern Air Transport's
involvement in this operation.^'

Instigation of Investigations

The majority claims: "North attempted to exploit
his contacts with the FBI to attempt to instigate or

568

Chapter 12

intensify investigations of people and organizations
perceived as threats to the Enterprise. He was uhi-
mately assisted in this effort by Richard Secord and
Glenn Robinette." —

These statements by the majority are false, as we
shall show below. The first instance cited by the
majority appears to have been based on a good faith
but mistaken belief about FBI jurisdiction. The other
two instances cited by the majority, where the FBI
became involved in a matter in which North had an
interest, were based on either legitimate human con-
cerns or a legitimate desire to protect the life of the
President of the United States. In the latter instance,
it is abundantly clear that North did not "instigate or
intensify" any investigation at all.

In the first instance cited by the majority. North
appears to have suggested, in conversation, an FBI
investigation of certain individuals based on a suspi-
cion that a foreign government was secretly financing
or supporting a lawsuit against various United States
citizens, a matter about which it would have been
legitimate for North to inquire for national security
reasons and, which if true, might have constituted a
fraud on the courts of the United States. North, a
nonlawyer, was flatly told that the FBI did not have
the legal authority to investigate such a matter, and
did not pursue the request.

The second instance discussed by the majority is
based on North's request for an investigation of van-
dalism and harassment directed against him. The FBI
investigation occurred in May and June, 1986. North
requested the investigation because of incidents of
vandalism that had been directed against him at work
and at home which he believed might be related to
the actions of foreign intelligence sources. There is no
doubt that the incidents of harassment in fact oc-
curred, and the FBI appears to have concluded that
they might have been associated with the dates of
". . . Congressional votes on Contra aide
(sic) . . ." ^3 They, together with threats against
North's life which occurred at about this time, were
sufficient to motivate North to have a sophisticated
security system installed around his home at precisely
this time.^**

While North may have been completely wrong
about the source or nature of the vandalism which
was being directed against him, we do not find any-
thing in the record to suggest that North's conduct
was based on anything other than a good faith belief
that this harassment might have been based on such
actions. Given North's position in government, and
the nature of his official duties, this possibility could
not be completely discounted. We therefore see noth-
ing improper in North's having asked the FBI to
investigate even though some of the persons who
were to have been interviewed for information might
have been connected to or involved in political oppo-
sition to North's Contra activities, since such persons
were logical sources of information necessary to a

proper investigation. The FBI, in turn, appears to
have acted to determine whether there was any possi-
bility that North's concerns might have a reasonable
basis and then to have dropped the matter.

But it is the third instance cited by the majority
which we find particularly egregious. This instance
concerns an FBI investigation of Jack Terrell based
on the possibility that Terrell had threatened the life
of the President. The majority snidely suggests that
North was responsible for using the FBI to investi-
gate Terrell. They say: "North ultimately hit on a
better formula [for having such investigations con-
ducted], with Secord's assistance." ^^ The facts clear-
ly show just the opposite, and the majority has so
clearly disregarded the facts we are forced to ques-
tion its motives.

Significantly, it was the FBI which first independ-
ently obtained information about a possible threat
against President Reagan. This information came from
a classified source in mid- 1986.^^ The FBI concluded
that the threat "probably" came from Jack Terrell, a
mercenary who had been associated first with Contra
forces, and then with pro-Sandinista forces.^'' The
FBI therefore sent a request to various federal law
enforcement and national security agencies, including
the NSC, specifically asking them for information
concerning Terrell, according to testimony by FBI
Executive Assistant to the Director Oliver B.
("Buck") Revell.^* The majority completely omits to
mention that the FBI asked the NSC for information
concerning Terrell. By coincidence. North was aware
that Terrell was assisting the plaintiffs in a lawsuit
against Secord and others and that Glen Robinette
was involved as an investigator for Secord in that
lawsuit. However, North and Robinette had never
previously discussed Terrell, according to Robin-
ette.^® North called Robinette and asked if he had
any information about Terrell. Robinette said yes, and
North asked him to provide it to the FBI. North did
not ask Robinette to limit his cooperation with the
FBI, or to withhold any information from them, ac-
cording to Robinette.^" Robinette thereafter met with
the FBI and assisted them in establishing surveillance
of Terrell.* In any event, the FBI shortly thereafter
discontinued contact with Robinette and surveilled
Terrell until it concluded that he was not a threat to
the President.**

•Robinette specifically denied that he was asked to wear a
"wire" for surveillance purposes; as a former electronic surveillance
specialist, he was certain he would have reinembered such a re-
quest. (Robinette Dep., 11/5/87, at 34-36.)

••Revell Dep . 7/15/87 at 32, 36. When interviewed by the FBI
in connection with the Terrell matter, North disclosed Robinette's
activities for Secord in connection with the Florida civil lawsuit
brought by Honey and Avirgan in which Secord was a defendant.
(7/25/86 FBI Report of 7/22/86 interview of North, at 2.) North
acknowledged his involvement in U.S. Nicaraguan policy, but
denied Secord "works for him." In short, North appears to have

569

Chapter 12

In all of this, we are unable to discern anything that
resembles a politically motivated effort on North's
part to harass Terrell. The FBI's information concern-
ing the threat was real, obtained independently of
North, and pursued with national security agencies in
the normal manner. The fact that North knew of
Terrell by reputation is nothing but coincidence, and
we think it is extraordinarily unfair to imply that
Colonel North or General Secord acted in this in-
stance in any manner inconsistent with their obliga-
tions as citizens or employees of the United States.
We think it is unfortunate that the majority is so bent
on pressing the thesis of this chapter that they have
included misleading information about this incident in
an effort to try to reinforce it. Clearly, the majority
would not want to suggest that anyone who had
potentially useful information about a threat to the life
of the President should withhold it for fear of later
being accused of political harassment.

The "Reward a Friend" Investigation

The majority has alleged that North and other gov-
ernment officials tried to influence the sentencing of a
former official in a Central American country, who
had pleaded guilty to two felony counts in the United
States. The official had allegedly provided assistance
as a "friend of the U.S." in Central America. Yet, the
only purported result of government support of the
official was his reassignment to a minimum security
prison.'" Such reassignments are commonly requested
and granted.

truthfully disclosed the associations and bias of Robinette, the infor-
mation source North provided here. North's other reported state-
ments, which the Committee did not ask him about during the
hearings, appear to relate to the Neutrality Act issues and were not
relevant to the FBI's investigation of Terrell. Id. North denied
responsibility for "funding, arming, or administrating Contra pro-
grams." Id. at 3. North stated thai he was not involved with any
covert operations being run in the United States./d.

This official had previously received official recog-
nition for his services to the U.S. in the region. The
majority notes that North was concerned that if the
official was dissatisfied with his sentencing in 1986, he
would "break his longstanding silence about the
Nic[araguan] Resistance and other sensitive oper-
ations." ^^ The majority further notes that North
wanted "to keep the official from feeling like he was
lied to in the legal process and start spilling the
beans." ^^ The majority is unable to concede that the
official, assistance to the U.S. may have involved le-
gitimate intelligence operations. Instead, the majority
boldly asserts that the NSC staffs "ultimate motive
appears to have been a desire to prevent disclosure of
certain questionable activities." Significantly, the ma-
jority never asked North to address the issue of the
official's assistance to the U.S. Accordingly, the ma-
jority's suggestion of a cover-up of "questionable ac-
tivities" should be recognized as pure speculation.

The Fake Prince

The majority's main allegation regarding the "fake
prince" is that in 1985 Col. North interfered with the
FBI's bank fraud investigation of this "Saudi prince,"
because North was attempting to develop this individ-
ual as an asset in the Iran initiative and in Contra
activities. (The "prince" was ultimately discovered to
be an Iranian imposter.) North allegedly interfered
because during an FBI interview he requested that an
upcoming FBI interview of the "prince" be delayed
for several days, so as not to interfere with the
"prince's" intended donation to the Contras. Howev-
er, the FBI report notes: "In no way does North want
to interfere with a criminal prosecution of the prince
. . ." 3"' And the majority concedes that North subse-
quently "backed down" on this request. Moreover,
this alleged "interference" had no effect on the pros-
ecution of the "prince" for bank fraud. Following a
plea of guilty, the "prince" was imprisoned. ^^

570

Endnotes

Chapter 12

1. LeiwanI Dep.. 6/2/87. at 12-14. .TO.

2. Kellner Dep., 4/30//87, at 18-20; Gregorie Dep., 7/17/
87, at 19, 20; Barnett Dep., 7/17/87, at 38-42; Scharf 7/17/
87, at 15-17; Feldman Dep.. 4/30/87, at 68-70.

3. Leiwant Dep., 6/2/87, at 1 1, 39

4. Jensen Dep., 7/6/87, at 58, 59; Trott Dep., 7/2/87, at
9; Richard Dep., 8/1/87, at 92, 93.

5. Leiwant Dep.. 6/2/87, at 13.

6. Leiwant Dep.. 6/2/87, at 30, 31.

7. Leiwant Dep., 6/2/87, at 44, 45,

8. Leiwant Dep., 6/2/87, at 29.

9. Leiwant Dep., 6/2/87, at 33-36.

10. Feldman Dep., 4/30/87, at 5, 6, 10.

11. Leiwant Dep.. 6/2/87, at 26-32.

12. Leiwant Dep., 6/2/87, at 26, 27.

13. Feldman Dep., 4/30/87, at 68.

14. Feldman Dep., 4/30/87, at 10, 17, 18.

15. Currier Dep., 5/5/87, at 13, 14.

16. Kiszynski Dep., 5/5/87, at 12.

17. Feldman 4/30/87, at 37, 38.

18. Gregorie Dep., 7/17/87. at 31-33; Feldman Dep., 4/
30/87, at 81-83; Kellner Dep., 4/30/87, at 46.

19. Kellner Dep., 4/30/87, at 117, 118; Gregorie Dep., 7/
17/87, at 39, 42. 44.

20. See Memorandum from William Webster to Mr.
Clark. October 31. 1986. regarding Southern Air Transport,
cited at Meese Test., Hearings. 100-9, 7/28/87, at 274.

21. Meese Test., Hearings, 100-9, 7/28/87, at 237-274.

22. Majority Report, typescript. Chapter 5, at 44.

23. FBI file 246-967, p. 2 of 6/11/86 WFO teletype to
FBI Director.

24. See the testimony of Glenn Robinette. Robinette
Test.. Hearings, 100-6, 6/23/87, at 1-52, passim.; North
Test.. Hearings, 100-7. Vol. I. 7/8/87. at 126-32.

25. Majority Report typescript at 47, Ch. 5.

26. Revell Dep., 7/15/87. at 25-26.

27. Revell Dep.. 7/15/87, at 26, 31.

28. Revell Dep.. 7/15/87, at 26.

29. Robinette Dep., 11/5/87, at 33.

30. Robinette Dep., 11/5/87, at 33-34.

31. Richard Dep., 8/19/87, at 130.

32. North PROF note to Poindexter, 9/17/86.

33. North PROF note to Poindexter. 9/17/86, Ch. 5, at
33.

34. FBI Interview Memorandum, 7/18/85, Ex. OLN-264,
North Test. Hearings, 100-7, Part II.

35. Memorandum of Interview of Nicholas Harbist, 5/
22/87.

571

Part VI
Putting Congress' House in Order

Chapter 1 3
The Need To Patch Leaks

Throughout the majority report, much is made of the
Administration's concern for secrecy. That concern is
portrayed almost exclusively, if not exclusively, as the
desire of some lawbreakers to cover the tracks of
their misdeeds. We agree that the National Security
Council staff, under Admiral Poindexter, let its con-
cern over secrecy go too far. We should not be so
deceived by self-righteousness, however, that we dis-
miss the Admiral's concern as if it had no serious
basis. Our national security, like it or not, does
depend on many occasions on our ability to protect
secrets. It is easy to dismiss the specific Iran arms
sales decisions about executive branch compartmenta-
lization, and about withholding information from
Congress for almost a year, as having been excessive.
Everyone on these Committees would agree with that
conclusion. But unless we can understand the real
problems that led the NSC staff to its decision, future
Administrations will once again be faced with an un-
palatable choice between excessive secrecy, risking
disclosure or foregoing what might be a worthwhile
operation.

Time after time over the past several years, ex-
tremely sensitive classified information has been re-
vealed in the media. Predictably, both Congress and
the Administration have blamed each other. In fact,
both are culpable. It is important for these Commit-
tees to recognize this truth forthrightly. As Secretary
Shultz said, quoting Bryce Harlow, "trust is the coin
of the realm." ' But trust has to be mutual. Some
people on these Committees seem to want to bring
criminal prosecutions against former Administration
officials for not speaking candidly to Congress. It is
true that the business of government requires the Ad-
ministration to be considered trustworthy by Con-
gress. But so too must Congress prove itself trustwor-
thy to the Administration.

We do not mean, by our focus on congressional
leaks, to suggest that we turn our eyes from the same
problem in the executive branch. Executive branch
leaks are every bit as serious as legislative branch
ones. But as long as there is a consensus on this point,
we do not feel a need to dwell on it here. At the end
of this chapter, we will recommend legislation to help
address the issue of executive branch leaks along with
our suggestions for the legislative branch.

There is much less consensus in Congress, however,
about leaks from the legislative branch. Those prob-
lems are real. As Representative Hyde wrote in a
recent article, the fact that the executive branch leaks
more, does little to get Congress off the hook.

Proven Congressional transgressions admittedly
are relatively rare, but so are proven executive-
branch leaks. In truth, only a handful of leaks
ever have been definitively traced to their source,
so lack of proof establishes nothing. A partial
Senate Intelligence Committee study often
quoted by Mr. Beilenson reportedly found that
journalists referenced congressional sources only
8-9 percent of the time, but cited Reagan Admin-
istration officials 66 percent of the time. Report-
ers may not be entirely candid about their
sources. But generously assuming that Congress
has 2,500 people with clearances as opposed to
2.2 million in the executive branch and the mili-
tary, reliance on the Senate study forces us to
conclude that Congress maintains just over 0.1
percent the number of executive branch clear-
ances, but is responsible for 8-9 percent of the
leaks on national security issues. Specifically, on
average, a cleared person in Congress is 60 times
more likely than his counterparts to engage in
unauthorized disclosures.^

We believe that these problems — rather than a desire
to cover up a supposed lawlessness whose existence
we do not concede — contributed significantly to the
Administration's posture in 1985-86.

Protecting Secrecy in the Early
Congress

To put the issue in perspective, it is worthwhile to
consider how the country's Founders dealt with the
problem. Those hardheaded realists understood that
breaches of security during that perilous revolution-
ary period could mean the difference between life and
death. Consequently, only five members of the
Second Continental Congress sat on the Committee of
Secret Correspondence, the foreign intelligence direc-

575

Chapter 13

torate that was mentioned in our earlier historical
chapter.

The Continental Congress was especially careful
about protecting sources and methods. For example,
the names of those employed by the Secret Corre-
spondence Committee were kept secret, as were the
names of those with whom it corresponded. Even
then, there was concern about Congress keeping a
secret. As a result, when the Committee learned that
France would covertly supply arms, munitions and
money to the revolution, Ben Franklin and another
Committee member, Robert Morris, stated: "We agree
in opinion that it is our indispensable duty to keep it a
secret, even from Congress. . . . We find, by fatal
experience, the Congress consists of too many mem-
bers to keep secrets."*

To underscore the importance of protecting sensi-
tive information, the Continental Congress on No-
vember 9, 1775, adopted the following oath of secre-
cy which should still be in effect today:

Resolved That every member of this Congress
considers himself under the ties of virtue, honour
and love of his country, not to divulge, directly
or indirectly, any matter or thing agitated or
debated in Congress before the same shall have
been determined, without the leave of the Con-
gress, nor any matter or thing determined in
Congress, which a majority of the Congress shall
order to be kept secret. And that if any member
shall violate this agreement, he shall be expelled
this Congress, and deemed an enemy to the liber-
ties of America, and liable to be treated as such,
and that every member signify his consent to this
agreement by signing the same. ^

This oath was not taken lightly and no less a revo-
lutionary figure than Thomas Paine, the author of
"Common Sense," was fired as an employee of the
Continental Congress for disclosing information re-
garding France's covert assistance to the American
Revolution. Interestingly, Congress then resorted to
its own covert action and passed a blatantly false
resolution repudiating Paine's disclosure.* Obviously,
the Founding Fathers realized that there are some
circumstances when a well-intentioned "noble lie," as
Plato put it, is a necessary alternative to the harsh
consequences of the truth. They also believed in pun-
ishing leakers, a practice their modern counterparts in
both the executive and legislative branches need to
emulate more consistently.

Let us move forward in history now, to the early
years of the Constitution. President Washington
learned quickly that once information is shared with
Congress, it is up to Congress — often the opposition

•For an earlier discussion of this committee, including this quota-
tion, see supra, ch. 3, p. 470.

party in Congress — to decide when or how it will be
made public.

During the time the Federalists controlled the
House, they enforced a rule that excluded the
public during any debate concerning material
sent to the House by the President "in confi-
dence." After the Republicans gained control,
they changed this rule to allow the majority to
vote for public debate on confidential communi-
cations on an ad hoc basis. Soon thereafter, the
House voted to lift an injunction of secrecy they
had placed on some letters sent by the President
"in confidence." A similar rebellion of sorts took
place in the Senate after the Jay Treaty was
conditionally ratified. The President wanted the
treaty kept secret until all negotiations were com-
plete. The Senate voted, however, to rescind its
injunction of secrecy, although it continued to
enjoin "Senators not to authorize or allow any
copy [to be made] of the said communication
. . . ." Both Senators Pierce Butler of South
Carolina and Stevens T. Mason of Virginia smug-
gled copies out of the Senate chamber, apparent-
ly before the secrecy injunction was lifted, and
on the same day that the Government planned to
make the treaty public, the Republican Aurora
beat it to the punch by printing an abstract of the
terms.®

The Leaky 1970s

Some things never change and as we celebrate our
constitution's bicentennial. Congress is still prone to
unauthorized and sometimes damaging disclosures.
The worst period in recent history was during the
1970s, when the legitimacy of the CIA and covert
operations were under attack. What follows are some
examples of alleged congressional leaks during that
period. Rather than rely on classified material, we
have chosen here to protect still secret information by
relying on accounts from secondary sources. The in-
clusion of this material is not meant to confirm or
deny the veracity of the specific disclosures alleged.
We begin with a 1972 example from Arthur Maass'
book. Congress and the Common Good.

On April 25, 1972, Senator Mike Gravel (D. AK)
asked unanimous consent to insert in the Congres-
sional Record excerpts from a top-secret National
Security memorandum. The 500-page document
concerning policy options in the Vietnam War
had been prepared for Richard Nixon in 1969 by
the National Security Council staff under Henry
A. Kissinger. The senator's normally routine re-
quest was blocked temporarily by minority whip
Robert P. Griffin (R MI). The Senate met on
May 2 and 4 in closed executive sessions to con-
sider Gravel's request, but no decision was

576

Chapter 13

reached. Then on May 9, Gravel, without ad-
vance notice, read into the Record, during debate
on the annual State Department authorization
bill, excerpts from the memorandum dealing with
proposals to mine North Vietnamese ports, an
action that had been announced by the President
on the previous day. Senator Griffin, who en-
tered the chamber during Gravel's statement,
criticized him for acting before the Senate had
disposed of the question. The Senator responded:
"I have an obligation to the American people
... to let the American people have the infor-
mation that he [Richard Nixon] has."

Congressman Ron V. Dellums (D.CA) then ob-
tained from Gravel a copy of the full document
which he placed in the Congressional Record on
May 11, by simply asking unanimous consent to
extend his remarks in the Record without giving
any hint of their contents.®

Maass' book followed this example with two others
from the committees that investigated the CIA.

In January 1976, the House Intelligence Commit-
tee, under Chairman Otis G. Pike (D. NY) sought
to make public a report containing information
that the White House considered to be top secret.
The House intervened, voting 246 to 124 to block
the committee from releasing its report until the
President certified that it did not contain informa-
tion that would adversely affect the nation's intel-
ligence activities. Whereupon Daniel Schorr of
CBS News, having obtained a copy of the report
presumably from a House member or staffer,
gave it to the Village Voice, which published it,
thereby frustrating an overwhelming majority of
the House. Schorr was subsequently fired by
CBS and became a cult hero on the college lec-
ture circuit, commanding top fees for one-night
stands.

. . . The Senate Intelligence Committee chair-
man, Frank Church (D. ID), went to the full
Senate in November 1975 for approval of release
of the committee's report on CIA involvement in
assassination attempts against foreign leaders. The
report included secret information that the Presi-
dent believed should not be made public. The
Senate met in executive session, that is, secret
session, and when considerable opposition to re-
lease of the report developed, more opposition
than Church had anticipated, he and the Demo-
cratic majority adjourned the session without a
vote, and the committee released the report on its
own authority.''

It is clear that leaks during this period were often
motivated by an animus toward the CIA's mission in
general or as a way of killing individual operations.

The same Daniel Schorr who leaked the Pentagon
Papers to the Village Voice wrote about leaks in a 1985
Washington Post article. "The late Rep. Leo Ryan."
Schorr wrote, "told me (in 1975) that he would con-
done such a leak if it was the only way to block an ill
conceived operation." * In fact, wrote former Direc-
tor of Central Intelligence William Colby, "every
new project subjected to this procedure [informing
eight congressional committees] leaked, and the
'covert' part of CIA's covert action seemed almost
gone." ^

The Still Leaky Congress During
the Reagan Years

By the late 1970s, the House and Senate had formed
intelligence committees, reducing the number of com-
mittees to which intelligence agencies had to report.
That clearly improved the situation, but it did not
cure all problems. Senator Joseph Biden, then a
member of the Select Committee on Intelligence,
sounded a bit like the late Leo Ryan in a 1986 Brit
Hume article from The New Republic Biden reported-
ly said he had "twice threatened to go public with
covert action plans by the Reagan administration that
were harebrained."'"

In 1984, according to an article by Robert Cald-
well, CIA officials briefed the same Senate Select
Committee on Intelligence about information indicat-
ing that the Government of India was considering a
preemptive strike against Pakistan's nuclear facility.
When word of the briefing leaked, the operation was
halted. According to Caldwell, the leak showed India
that it had a security breach at a high level. The
breach was discovered and a French intelligence ring
was put out of business.''

The Senate Select Committee on Intelligence was
one of the bodies to which the President would have
had to report the Iran arms sales. Of course the Presi-
dent could have limited the report to the committee
chairmen and ranking minority members as well as
the party leaders of the House of Representatives and
Senate. The problem with this scenario is that some
senior members of the committee have been suspected
of leaking, as was discussed in the Committees' hear-
ings.'^ The House committee has also been the source
of some damaging disclosures. Bob Woodward's
book. Veil, describes one incident that allegedly hap-
pened after members of the committee had sent a
secret letter to President Reagan to protest an oper-
ation about which Director Casey had just briefed
them.

Representative Clement J. Zablocki, the chair-
man of the House Foreign Affairs Committee and
a member of the House Intelligence Committee,
had reviewed the . . . finding and the letter to
Reagan. The sixty-nine-year-old lawmaker leaked

577

Chapter 13

to Newsweek that the letter to Reagan about the
yet unnamed operation in Africa was a plan to
topple Qaddafi ....

Newsweek reporters went back to House Foreign
Affairs Chairman Zablocki after the Libya plan
was denied. Zablocki went to House staff mem-
bers, tipping them that he had been a source for
Newsweek. He was set straight, but the House
Intelligence Committee chairman, Edward
Boland, decided to take no action against Za-
blocki, since leaks were epidemic.'^

Complaints and investigations about subsequent inci-
dents involving the House committee so far remain at
the informal stage.

To complete this picture of the world about which
Poindexter had to make judgments: on November 3,
1985 — in the weeks just before the November arms
transaction — a Washington Post article by Bob Wood-
ward broke a story about a "CIA Anti-Qadhafi Plan
Backed."^*' Director Casey responded to this article
with a blistering letter to the President about execu-
tive and legislative branch leaks. The Washingtonian
magazine, accurately in our view, linked the atmos-
phere in the White House immediately after this leak
to the decision not to notify Congress about the Iran
arms sale. ' ^

It may be that not all these reported details about
named Members of Congress are true. True or not,
they fit in with a real pattern. As such, they form part
of the background Director Casey and Admiral Poin-
dexter had to consider in November 1985. It seems
clear, with 20/20 hindsight, that Casey and Poin-
dexter overreacted. They may even have used the
Post story as a convenient peg in their ongoing battle
over secrecy with Secretary Shultz and others. But
even if they did overreact, it is irresponsible to dis-
miss their fears as being simply irrational, power
hungry or nefarious.

Yes, some foreigners — Ghorbanifar, the Israelis,
Khashoggi, the first and second Iranian channels — did
have to know what was going on. That is the nature
of any secret international dealing. The issue is how
much should be told to anyone who did not have a
need to know to complete the operation successfully.
The simple fact is, we had no way of knowing wheth-
er our sources in Iran were endangering their lives by
dealing with us. Judging from the thousands executed
in the early days of the Khomeini regime and the
recent execution of Mehdi Hashemi, the threat
seemed real enough.'^ Nor could we know whether
the slightest misstep might get the hostages killed.
Certainly, such threats against the hostages lives have
been a part of the hostage takers' media events, and
Kilburn's death was real. Given the track record, no
one in Congress or the executive branch can afford to
be smug about these concerns. Trust is a two-way

street, and each end of Pennsylvania Avenue had
good reasons to doubt the other.

Problems In These Committees

Past leaks contributed to decisions that in turn led to
these investigations. The leaks did not stop, however,
when the committees started to work. The Commit-
tees began with every good intention. Recognizing
that it was dealing with highly sensitive information,
the leadership made a concerted effort to prevent
leaks. The complexity and short time frame of the
probe, however, led to a decision not to compartmen-
talize sensitive information. Consequently, everyone
on the joint staff of some 165 people had multi-com-
partmented clearances and access to the highest levels
of classified material. The same access held true, of
course, for the 26 members of the two Select Com-
mittees. Given the number of people with access to
these secrets, it is surprising there were not more
revelations.

We are reluctant to identify leaks with too much
precision, because confirmation may help adversaries
sort out the ones we consider harmful. Suffice it to
say that the types of leaks included misleading the
media on the nature of a witness' secret testimony
several days before he appeared as a public witness as
well as revealing intelligence collection methods, the
identities of undercover personnel, and the names of a
number of countries which, in one way or another,
were trying circumspectly to be helpful to the United
States in a variety of foreign policy undertakings.
Needless to say, these disclosures, and others, are
causing these and other countries to have serious res-
ervations about future cooperation with the United
States. That turn of events should give us real pause.
This is a highly interdependent world. It no longer is
possible for the United States to go it alone, whether
to combat terrorism or contain Soviet/Cuban expan-
sionism in Central America.

Consider one example. On Friday, May 29, the
Committees took testimony in closed executive ses-
sion from "Tomas Castillo," the former CIA station
chief in a Central American country. At the end of
Castillo's testimony, the following colloquy took
place:

Mr. RUDMAN. I just want to make one com-
ment. It is my understanding that the [declassi-
fied] transcript is going to be made available
sometime tomorrow to the press.

Chairman HAMILTON. That is correct.

Mr. RUDMAN. It is also my understanding that
under the rules of Congress and the Intelligence
Committees that it would be inappropriate for
any members or staff or anyone else to comment

578

Chapter 13

on these proceedings without specific permission
in some way from the chairman.

Chairman HAMILTON. That is correct. Under
the rules of the House Committee at least, you
cannot release classified information without a
vote of the committee and in the Senate my un-
derstanding is it is a similar procedure.

Chairman INOUYE. That is correct.'^

Despite these explicit statements, articles appeared in
May 30 newspapers with May 29 datelines accurately
summarizing the testimony, and quoting named mem-
bers of the Committees giving broad characterizations
of the testimony.* The declassified transcripts were
not available until Sunday night. May 31. There were
no Committee votes in the interim.

Some of these revelations by staff and Members, as
well as current and former Administration officials,
occurred during intense questioning and cross exami-
nation of witnesses and appeared to be inadvertent.
Such mistakes, however, suggest in retrospect that
this nation's security interests would have been much

•See, for example, R.A. Zaldivar and Charles Green, "CIA sta-
tion chief wasn't renegade, congressmen say," The Miami Herald,
May 30, 1987, p. 16A; Fox Butterfield, "Ex-C.l.A. Officer Tells of
Orders to Assist Contras," The New York Times, May 30, 1987, p.
7; Associated Press, "Contra role told by ex-CIA agent." Chicago
Tribune. May 30, 1987, p. 5. Interestingly, The Washington Post, the
same newspaper that publishes Bob Woodward's intelligence disclo-
sures, distinguished itself from the others this day by refusing to
publish certain classified information. The Post also gave no details
about Castillo's testimony and quoted Sen. Rudman refusing to give
information. Dan Morgan, "Higher-Level CIA Officials May Be
Subpoenaed on Contra Aid," The Washington Post. May 30, 1987, p.
A9.

better served had we decided to take more testimony
in closed session. Potentially damaging slips of the
tongue could then have been redacted before a tran-
script was made available to the public.

As a consequence of this probe, and that of Judge
Walsh, this nation's intelligence community could be
facing the same situation it confronted more than a
decade ago after the Church and Pike Committees
investigations. Leaks from those inquiries seriously de-
bilitated our overall intelligence capabilities and it
took us over a decade to repair the damage. A rerun
of that sorry chapter would have grave national secu-
rity implications, coming on the heels of a series of
very damaging spy scandals epitomized by the
Walker family case.

What happened to Castillo's testimony, which was
open to all Committee members and many staff con-
trasts sharply with the executive session deposition of
Admiral Poindexter on May 2, 1987. The two select
Committees recognized that the Admiral's testimony
on the diversion of funds was the pivotal, and poten-
tially most explosive political question of this whole
investigation. As a result, extraordinary steps were
taken to protect the information. Specifically, only
three staff attorneys and no Members of either Com-
mittee participated in the secret questioning. The suc-
cess of these procedures speaks volumes on how to
protect secrets. In the final analysis, as Chairman
Hamilton noted in a perceptive article on protecting
secrets that appeared in the September 4, 1985 Con-
gressional Record, "Leaks are inevitable when so many
people handle secrets."'* The most effective way of
ensuring secrecy is to restrict access to sensitive infor-
mation to just a handful of responsible people.

579

Chapter 13

Endnotes

1. Shultz Test., Hearings. 100-9, 7/23/87, at 52.

2. Henry J. Hyde, "How To Reduce The Leaks, Case
for a Joint Intelligence Committee," The Washington
Times, October 12, 1987, pp. Dl, D4.

3. U.S. Central Intelligence Agency Bicentennial Pub-
lication, Intelligence in the War of Independence, published
by the Nathan Hale Institute (1976), p. 14.

4. Edward F. Sayle, The Historical Underpinnings of the
U.S. Intelligence Community, reprinted by the Intelligence
Publishing Groups Inc., from 1 Journal of Intelligence and
Counterintelligence (1986).

5. Sofaer, War, Foreign Affairs and Constitutional Power
at 96-97.

6. Arthur Maass, Congress and the Common Good
(1983), p. 241.

7. Id. at 243.

8. Daniel Schorr, Cloak and Dagger Relics, The Wash-
ington Post, November 14, 1985, A23.

9. William Colby, Honorable Men (1978), p. 423.

10. Brit Hume, Mighty Mouth, The New Republic, Sep-
tember 1, 1986, p. 20..

11. Robert J. Caldwell, "Button the loose lips in Con-
gress," The San Diego Union, July 26, 1987, pp. 1,8.

12. Meese Test., Hearings. 100-9, im/%1. at 350-51.

13. Bob Woodward, Veil: The Secret Wars of the CIA
1981-1987 (1987), pp. 158, 160.

14. Bob Woodward, CIA Anti-Qadhafi Plan Backed, The
Washington Post, November 3, 1985, pp. Al, A19.

15. Barbara Matusow, "Woodward Strikes Again," The
Washingtonian (Sept. 1987), pp. 114, 234.

16. See Chapter 8 of the Minority Report, "The Iran
Initiative," at p. 520.

17. Castillo testimony. May 29, pp. 85-86.

18. Hon. Lee H. Hamilton, Protecting Secrets, Congres-
sional Record, September 4, 1985, pp. E3855-56.

580

Part VII
Recommendations

Chapter 1 4
Recommendations

The majority report reaches the conclusion, accurate-
ly in our opinion, that the underlying cause of the
Iran-Contra Affair had to do with people rather than
with laws.* Despite this laudable premise, the majori-
ty goes on to offer no fewer than 27 recommenda-
tions, most involving legislation and several of them
multifaceted. Some of the recommendations unfortu-
nately betray Congress' role in the legislative-execu-
tive branch struggle by proposing needlessly detailed
rules for the organization of the executive branch. At
the same time, the majority recommendations barely
touch the problem of leaks, and say nothing at all, to
no one's surprise, about Congress' misuse of massive
continuing appropriations resolutions to conduct for-
eign policy.

We do not intend here to give a detailed critique of
the majority recommendations. We do believe that
requiring the President to notify Congress of all
covert operations within 48 hours, without any excep-
tions, would be both unconstitutional and unwise.**
Many of the remaining recommendations seem to us
to be unconscionably meddlesome. No good reasons
are offered for prohibiting military officers, such as
General Powell, from being National Security Advis-
er. No good reasons are offered for having the Na-
tional Security Council produce regular staff rosters
for Congress. And so forth, and so on. It all strikes as
more of the same: an attempt to achieve grand policy
results by picking away at the details.

In the spirit of offering recommendations, however,
we are pleased to present some of our own.

Recommendation 1: Joint Intelligence
Committee

Congress should replace its Senate and House Select
Committees on Intelligence with a joint committee.

Congress has realized that limiting the number of
people with access to sensitive information can help
protect the information's security. The House and
Senate took worthwhile first steps to limit the number
of Members and staff engaged in intelligence over-
sight by establishing Select Committees on Intelli-

* See Chapter 8 in the Minority Report at 532-536.
•* See the Minority Report, Chapter 4 at 477-478. and Chapter 9 at
543-545.

gence. Unfortunately, as we have seen, security still is
not tight enough. The time has now come, therefore,
for taking the next logical steps.

Given the national security stakes involved. Con-
gress and the Administration must find a remedy for
restoring mutual trust. One major step in that direc-
tion can be taken by merging the existing House and
Senate intelligence committees into a joint committee,
along the lines of legislation (H.J. Res. 48) sponsored
by Representative Henry Hyde and a bipartisan group
of 135 cosponsors (see Appendix C). Such a commit-
tee need not have the 32 Members (plus four ex-
officio) and 55 staff now needed for two separate
committees. Fewer Members, supported by a small
staff of apolitical professionals, could make up the
single committee. In recognition of political reality,
the majority-party membership from each House
would have a one vote edge.

A joint intelligence panel would drastically dimin-
ish the opportunities for partisan posturing and sub-
stantially reduce the number of individuals with
access to classified and sensitive information. This
would not only minimize the risk of damaging unau-
thorized disclosures but would also significantly in-
crease the likelihood of identifying leak sources-
something that rarely occurs now because so many
people are in the "intelligence information loop." Fur-
thermore, with the possibility of discovery so much
greater, potential leakers would be strongly deterred
from unauthorized disclosures.

To achieve both efficiency and secrecy in congres-
sional consideration of intelligence matters, a Joint
Intelligence Committee must have legislative as well
as oversight jurisdiction. Otherwise, the two Houses
would not give the Joint Committee the deference the
two existing intelligence committees enjoy. Neither
would the intelligence agencies have the budget-based
incentives to cooperate with the Joint Committee as
they have now with the two select committees. Inad-
equate jurisdiction might also prompt the various
committees in each House with historical interests in
intelligence to reassert themselves. That could trigger
increased fractionalization of the congressional over-
sight process, with the concomitant proliferation
within the Congress of access to sensitive intelligence
information.

583

Chapter 14

Recommendation 2: Oath and Strict
Penalties for Congress.

To improve security, the Joint Intelligence Committee (or
the present House and Senate committees) should adopt
a secrecy oath with stiff penalties for its violation.

Creating a joint committee will not by itself guaran-
tee the security of intelligence information. Also es-
sential is committee self-discipline. Earlier, we pointed
out how the reputations of the Senate and House
Intelligence Committees have been sullied by leaks
from Members or staff As the importance of congres-
sional oversight, and the reputation for leaking, both
grow, foreign intelligence agencies are discouraged
from unguarded cooperation with the United States.
Change is therefore urgent both to stanch the flow of
leaks and to symbolize to foreign countries that Con-
gress is serious about preserving the confidentiality of
secrets.

One significant change that would help further both
goals would be to require an oath of secrecy for all
Members and staff of the intelligence committees.
Such an oath would not be an American novelty. As
we have already noted, the Continental Congress'
Committee on Secret Correspondence required all of
its members and employees to pledge not to divulge,
directly or indirectly, any information that required
secrecy.

The proposed oath should read; "I do solemnly
swear (or affirm) that I will not directly or indirectly
disclose to any unauthorized person any information
received in the course of my duties on the [Senate,
House or Joint] Intelligence Committee except with
the formal approval of the Committee or Congress."

The Committee Rules should be amended to
compel permanent expulsion from the committee of
any member or staff person who violates his or her
oath. While proceedings remain pending, the accused
would be denied access to classified information. The
rules of the House and Senate should also be amended
to provide that the Intelligence Committee would be
authorized to refer cases involving the unauthorized
disclosure of classified information to the Ethics Com-
mittees. The rules should make it clear that the Ethics
Committees may recommend appropriate sanctions,
up to and including expulsion from Congress.

This approach is well within the Constitution's ex-
pulsion power and the power of each House to set
rules for its own proceedings. The power of each
House of Congress to expel Members for misbehavior
by two-thirds vote is virtually uncircumscribed. ' His-
torically, fifteen Senators and four Representatives
have been expelled. Fourteen of the Senators were
expelled for supporting the Confederate secession.
The fifteenth. Senator Blount, was for conspiring with
Indian tribes to attack Spanish Florida and Louisiana.
The House and Senate also have considered and re-
fused expulsion on twenty-four occasions for charges
as varied as corruption, disloyalty, Mormonism, trea-

sonable utterances, dueling, and attacking other Mem-
bers of Congress. Expulsion decisions of Congress are
probably beyond judicial review.^

Any set of recommendations that limits itself to
Congress would not be adequate to respond to the
problem of leaks. Therefore, we recommend a more
balanced approach that would stiffen the penalties for
others who participate in this activity.

Recommendation 3: Strengthening
Sanctions

Sanctions against disclosing national security secrets or
classified information should be strengthened.

Current federal law contains many provisions pro-
hibiting the disclosure of classified information, but
each of the existing provisions has loopholes or other
difficulties that make them hard to apply. The section
that covers the broadest spectrum of information,
"classified information," only prohibits knowing, un-
authorized communication to a foreign agent or
member of a specified Communist organization.^

Another set of provisions contains no such limit on
the recipient of the information, but applies only to
information related to the national defense.* For some
specified information, unauthorized disclosure or
transmission is criminal under any circumstances.*
The transmission of other "information relating to the
national defense" to an unauthorized person is also
illegal if a person has reason to believe the informa-
tion would be used to injure the United States or to
benefit a foreign nation. The problem with these pro-
visions is that they cover only "information relating
to the national defense" rather than the full range of
national security information whose secrecy the gov-
ernment has a legitimate reason to protect.^

A third set of provisions in current law is limited to
nuclear weapons production.'' A fourth is limited to
information about ciphers or communications intelli-
gence.* This is the law that the National Security
Agency Director, General William E. Odom, believes
should be applied more vigorously against both feder-
al employees and the press.*

♦ The following is quoted from Molly Moore, "Prosecution of
Media for Leaks Urged," The Washington Post. Sept. 3. 1987, p.
A4:

"I don't want to blame any particular area for leaking," said
Odom, who added, "There's leaking from Congress . . . there's
more leaking in the administration because it's bigger. I'm just stuck
with the consequences of it.

Leaks have damaged the [communications intelligence]
system more in the past three to four years than in a long, long
time". . . .

Odom said he has encouraged the administration to use an
obscure law that prohibits disclosures of "communications intelli-
gence." Odom said he has referred several cases involving news
leaks to the Justice Department since 1985 but said the department
has declined to prosecute any of them. The department said it has
not prosecuted any so far. . . .

584

Chapter 14

Finally, a fifth provision — also limited in the infor-
mation it protects — makes illegal the disclosure of
agents' identities. This law is also restricted to disclo-
sures by someone who (a) has authorized access to
the identity from classified information or (b) is en-
gaged in a "pattern of activities intended to identify
and expose covert agents" with reason to believe the
publicity would impair the foreign intelligence activi-
ties of the United States.^ The latter limitation means
that the agent disclosure law does not cover most
normal press disclosures, such as the ones we men-
tioned earlier about reports based on these commit-
tees' work, because they are not normally part of a
pattern or practice of identifying covert agents.

In order to close these loopholes. Rep. Bill McCol-
lum has introduced a bill (H.R. 3066) co-sponsored by
all the other Republican members of the House Iran
Committee. The bill is limited to current and past
federal employees in any branch of government. For
these people, the bill would make it a felony know-
ingly to disclose classified information or material
(not just specific national defense information) to any
unauthorized person, whatever the intent.

Another approach that would supplement the
McCollum bill would be to introduce substantial civil
penalties for the knowing disclosure of classified in-
formation to any unauthorized person. The penalties
might range from administrative censure to a perma-
nent ban on federal employment and a fine of $10,000.
The advantage of giving the Justice Department the
option of using a civil statute would be (a) that the
standard for proof would be the preponderance of
evidence rather than proof beyond a reasonable doubt
and (b) the law could stipulate that contested viola-

"Generally, when I'm with a group of journahsts, I can
usually see two or three people who fall in the category of those
who probably could be successfully prosecuted." Odom told the
reporters.

The following material, from the same press briefing, is from
Norman Black, "Gen. Odom blames leaks for 'deadly' intelligence
loss," Associated Press dispatch published in The Washington
Times, Sept. 3. 1987, pp. 1, 12:

Asked to provide examples. Gen. Odom said he didn't want
"to get specific right now and compound the things, but a number
of sources have dried up in some areas which you are all familiar
with, in the past year or two.

A number of years ago there was a case that had to do with
a Damascus communication. ... It was a leak. It attributed this
thing to an intercept. And the source dried up immediately." Gen.
Odom said.

.Asked then about Libya, he replied, "Libya, sure. Just deadly
losses."

tions should be heard in secret, without a jury. These
procedures should not encounter constitutional diffi-
culties in light of the Supreme Court's broad endorse-
ment of controls on the disclosure of classified infor-
mation in Snepp v. U.S. '"

Recommendation 4: Gang of Four

Permit the President to notify the "Gang of Four" in-
stead of the "Gang of Eight" in special circumstances.
Representative Broomfield has introduced a bill
that, among other things, would permit the President
on extremely sensitive matters to notify only the
Speaker of the House, House Minority Leader, Senate
Majority Leader and Senate Minority Leader. Under
current law, limited notification means notification of
these four plus the chairmen and ranking minority
members of the two intelligence committees. On the
principal that notifying fewer people is better in ex-
tremely sensistive situations, we would be inclined to
support legislation along these lines that would ratify
what has already come to be an informal occasional
practice.

Recommendation 5: Restore Presidential
Power to Withstand Foreign Policy by
Continuing Resolution

Require Congress to divide continuing resolutions into
separate appropriations bills and give the President an
item veto for foreign policy limitation amendments on
appropriations bills.

The way Congress made foreign policy through the
Boland Amendment is all too normal a way of doing
business. Congress uses end of the year continuing
resolutions to force its way on large matters and
small, presenting the President with a package that
forces him to choose between closing down the Gov-
ernment or capitulating. Congress should give the
President an opportunity to address the major differ-
ences between himself and the Congress cleanly, in-
stead of combining them with unrelated subjects. To
restore the Presidency to the position it held just a
few Administrations ago, Congress should exercise
the self-discipline to split continuing resolutions into
separate appropriation bills and present each of them
individually to the President for his signature or veto.
Even better would be a line-item veto that would
permit the President to force Congress to an override
vote without jeopardizing funding for the whole gov-
ernment.

585

Chapter 14

Endnotes

1. See In re Chapman, 166 U.S. 661, 669-670 (1897). 6, Gorin v. U.S.. 312 U.S. 19, 28 (1941)' U.S. v Dedeyan

2. See Powell v. McCormack, 395 U.S. 486, 507 n. 27, 548- 584 F. 2d 36 (4th Cir 1978)
549(1969). 7. 18 U.S.C. 2274. 2277.

3. 50 U.S.C. 783. 8. jg u.S.C. 798.

4. 18 U.S.C. 793 (d) and (e) and 794. 9. 50 U.S.C. 421.

5. See New York Times v. Sullivan, 403 U.S. 713, 737-40 10. 444 U.S. 507 (1980).
(1971); U.S. V. Morison. 604 F. Supp. 655 (1985).

586

Part VIII
Appendixes

APPENDIX A

KAfNU

CORPORATION
ino M. ■ t-^ >o ••• >'M

September 25. 1987

Representative Lee H. Hamilton

Chairman

House Select Committee to Investigate Covert Arms

Transactions with Iran
United States Capitol
Washington, D.C. 20515

Representative Dick Cheney

Ranking Minority Member

House Select Committee to Investigate Covert Arms

Transactions with Iran
United States Capitol
Washington, D.C. 20515

To the Chairman and Ranking Minority Member of the Committee:

The enclosure to this letter, entitled "Reporting Obligations and
Funding Restrictions Affecting Intelligence Departments, Agencies
and Entities of the United States," is submitted to your Commit-
tee through the U.S. Senate Select Committee on Intelligence. I
have prepared the enclosed statement in reply to your letter of
September 3, 1987 (Enclosure 1).

That letter requested my observations and recollections of the
legislative history of intelligence law that:

o "might be helpful to the Committee in its evaluation
of whether any laws were violated by members of the
executive branch in the Iran/Contra affair"; and/or

o "relate to the concept of an 'intelligence agency' or
'intelligence entity' as traditionally understood by
Congress or the Chief Executive."

In preparing a response to your letter, I have reviewed my
records pertaining to the legislative history of both enacted
intelligence legislation and executive orders for the period
1974-1964. Based upon this review and my experience as the
longest continuously-serving consultant to the Senate Select
Committee on Intelligence in the period 1976-1964, I have
prepared Enclosure 2.

My review of pertinent records brought to my attention a related
issue: whether authorisations for covert activities to be
conducted under the direction of the National Security Council
should be subject to a preceding legal opinion respecting the
conformity of the proposed activity to United States law.

In 1974 I reviewed the legal authority for the conduct and
control of foreign intelligence activities of the United States,
under sponsorship of the Intelligence Panel of the Murphy Com-
mission, with the cooperation of the NSC staff and general
counsels of the various intelligence agencies. 5gg

At that time I posed for the Conunission' 8 Intelligence Panel a
set of issues relating to legal authority and accountability.
In particular, I invited the Commission to consider whether
the National Security Act of 1947 should be amended to require,
before NSC authorisation of covert activities, an opinion as to
the activity's legality under the laws of the United States and
obligations of the United States under international law.

Enclosure 3 provides a copy of the Murphy Commission Intelligence
Issues Paper, "Legal Authority for the Conduct and Control of
Foreign Intelligence Activities," as revised on November 22,
1974. See in particular pages 16 to 22, Issue DIO at pp. 21-22,
and Appendix 2.

The Chairman of the Intelligence Panel and the Commission,
Ambassador Robert D. Murphy, did not favor my proposal to estab-
lish a Legal Adviser to the National Security Council, both
because the Attorney General was the principal legal adviser to
the President and because of possible impairment of presidential
freedom of action respecting U.S. covert activities.

The National Security Council is by statute responsible for the
direction of CIA's performance of "such other functions and
duties related to intelligence...." Had a system of mandated
legal review and an NSC Legal Adviser been established in the
1970s, it is entirely possible that the need for your Select
Committee would not have arisen.

I am pleased to learn that the present Special Assistant to the
President for National Security Affairs, Mr. Frank Carlucci, has
established the position of Legal Adviser to the NSC in January
1987. This initiative assures the availability to the NSC of a
legal officer. It does not by itself mandate legal review of
proposed covert activities prior to Presidential finding and NSC
direction.

Intelligence activities of the United States can and must be
conducted under the rule of law in a democratic society. I trust
that the enclosed review of intelligence laws and Congressional
oversight practices will assist your Committee as it completes a
difficult task.

Respectfully submitted ,

William R. Harris
16641 Marquez Terrace
Pacific Palisades. CA. 90272

590

3

Enclosure 1, Letter from Rep. Hamilton and Rep. Cheney to
William R. Harris, Sep. 3, 1967.

Enclosure 2, William R. Harris, "Reporting Oblifations and
Funding Restrictions Affecting Intelligence Departments,
Agencies, and Entities of the U.S." Sep. 25, 1967.

Enclosure 3, William R. Harris, "Legal Authority for the Conduct

and Control of Foreign Intelligence Activities," Issues Paper,

Commission on the Organization of the Government for the Conduct
of Foreign Policy, November 22, 1974.

591

^Hl

RAND

CORPORATION
inr M»- S"M- >o k. ?')•

September 25, 1987
Senator David L. Boren
Chairman

Senate Select Committee on Intelligence
SH-211 Hart Senate Office Building
Washington, D.C. 20510

Senator William S. Cohen

Vice Chairman

Senate Select Committee on Intelligence

SH-211 Hart Senate Office Building

Washington, D.C. 20510

To the Chairman and Vice Chairman of the
Senate Select Committee on Intelligence:

By letter of September 3, 1987, the Chairman and Ranking Minority
Member of the House Select Committee to Investigate Covert Arms
Transactions with Iran requested my assistance regarding:

Legislative history of intelligence laws that might
"be helpful to the Committee in its evaluation of
whether any laws were violated by members of the
executive branch in the Iran/Contra affair."

"[A]ny observations or recollections that relate to the
concept of an 'intelligence agency' or 'intelligence
entity' as traditionally understood by Congress or
the Chief Executive. . .

Between January 1976 and December 1984 I served as a consultant
to the Senate Select Committee on Intelligence and its prede-
cessor committee. In that capacity, I reviewed and sometimes
revised drafts of the oversight charter of the Committee (S. Res.
400 in 1976) and intelligence legislation including the Intell-
igence Oversight Act of 1980 (50 U.S.C. sec. 413). Drafts of
legislation were prepared in unclassified form, but as work
product of the Intelligence Committee. Accordingly, I am trans-
mitting to you my response to the House Committee in conformity
with my secrecy agreements with your Committee executed in 1977
and 1984, and in accordance with Committee Rules.

Please advise me if and when you release the accompanying letter
to the House Select Committee to Investigate Covert Arms Trans-
actions with Iran.

ResDpctf uLXx. submi*,ted ,

William R. Harris
16641 Marquez Terrace
Pacific Palisades, CA.

90272

End: Ltr. to Rep. Hamilton and Rep. Cheney w/ End . 1 , 2, and 3
592

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U.S. HOUSE OF REPRESENTATIVES

SELICT COMMirriE TO INVESTIGATE

COVERT ARMS TRANSACTIONS WITH IRAN

UNITED STATES CAPITOL

WASHINGTON. DC 20616

1202) 226-7902

September 3, 1987

Mr. William R. Harris

The Rand Corporation

1700 Main Street

Santa Monica, CA 90406-2138

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Dear Mr. Harris:

We understand that you participated in the deliberations
and forging of events that culminated in the 1980 Intelligence
Oversight Act, as a consultant to the Senate Select Committee on
Intelligence.

We further understand you played a role in the drafting of
President Carter's Executive Order governing the intelligence
community. We believe your expertise in these intelligence law
matters might be helpful to the Committee in its evaluation of
whether any laws were violated by members of the executive branch
in the Iran/Contra affair.

In particular, we would be grateful for any observations
or recollections that relate to the concept of an "intelligence
agency" or "intelligence entity" as traditionally understood by
Congress or the Chief Executive. A letter to the Committee
addressing these and related issues regarding the history,
intent, or scope of the lOA and President Carter's Executive
Order would be much appreciated.

Sincerely,

{^l^t^

DC/ts

593

77-026 0

87

20

Knclosure 2.

REPORTING OBLIGATIONS AND FUNDING RESTRICTIONS
AFFECTING INTELLIGENCE DEPARTMENTS, AGENCIES. AND ENTITIES

OF THE UNITED STATES

Prepared Statement
of
William R. Harris
In reply to a request of the U.S. House Select Coounittee
to Investigate Covert Arms Transactions with Iran

September 25, 1987

The views expressed are those of the author in his individual capacity.
They neither represent the U.S. Senate Select Committee on Intelligence
nor The RAND Corporation, with regard to the issues considered.

594

REPORTING OBLIGATIONS AND FUNDING RESTRICTIONS AFFECTING
INTELLIGENCE DEPARTMENTS. AGENCIES. AND ENTITIES OF THE U.S.

INCLUSION OF THE NATIONAL SECURITY COUNCIL AND STAFF WITHIN
THE SCOPE OF CONGRESSIONAL INTELLIGENCE OVERSIGHT UNDER S. RES.
400 (1976). H. RES. 658 (1977K AND EXECUTIVE ORDER 12036 (197BK

The Senate established, by S. Res. 21, the Senate Select Commit-
tee on Government Operations with Respect to Intelligence Activi-
ties (the Church Committee) in January 1975. This Committee con-
conducted broad-ranging investigations and drafted proposed
intelligence oversight legislation that resulted in establishment
of the present Senate Select Committee on Intelligence in May
1976.

Preceding S. Res. 21, President Ford signed into law P.L. 93-559,
including as Sec. 662 of the Foreign Assistance Act of 1961 [22
U.S.C. 2422] the Hughes-Ryan Amendment. This required a presi-
dential finding ('"important to the national security") preceding
any expenditure of funds for covert operations of the Central
Intelligence Agency. It did not specify any reporting duty of
the NSC or its staff. It did require the President to report
each "finding" to the "appropriate" committees of the Congress
"in a timely fashion...."

This resulted in reporting of presidential findings to the full
membership of the House and Senate Armed Services Committees, to
the Defense Subcommittees of the Appropriations Committees, and
to the House Foreign Affairs Committee and the Senate Foreign
Relations Committee. [See Gary J. Schmitt, "Congressional
Oversight of Intelligence," Spring 1985.] Subsequent to the
establishment of the Senate and House Intelligence Committees in
1976 and 1977, respectively, the "appropriate" committees
included more than 150 members.

My records indicate that in 1975, a staff attorney of the Senate
Select Committee on Government Activities with Respect to
Intelligence Activities, Ms. Martha Talley, prepared for the
Committee a draft "Intelligence Oversight Act of 1975." The
committee's draft legislation was not introduced in that year,
but is indicative of the scope and intent of the oversight legis-
lation that the Senate approved (S. Res. 400) the following year.

The draft Intelligence Oversight Act of 1975 contained both
proposed amendments to Senate rules (sec. 4 through 10) and
proposed legislation (sec. llff.). Proposed Section 6(a)(1)(B)
[Sec. 3(a)(2) of S. Res. 400] provided jurisdiction over
intelligence activities of all other departments and agencies of
the Government . . . . "

The scope of proposed legislative oversight reflected the exper-
ience of a committee responsible for investigating intelligence
activities of the entire government. The committee did in fact

595

3

investigate intelligence activities of the Postal Service, the
Internal Revenue Service, and other agencies outside the intelli-
gence conuounity whose activities raised issues of legality or
propriety.

The analysis of Section 6 prepared by Ms.Talley for the Committee
in 1975 indicated:

"The Committee would have oversight and legislative
jurisdiction of intelligence activities engaged in
by the following agencies, their successors, employees,
subcontractors, and proprietaries:

•I

"7. National Security Council, and its

subcommittees, panels and working groups
with authority to deal with intelligence,
counterintelligence, internal security,
and related matters".

My records indicate that Senate Select Committee completed a

revised Staff Draft S. Res. on December 31, 1975, to

establish a Senate Committee on Intelligence. Sec. 6 retained
government-wide jurisdiction and proposed (per the suggestion of
a Senator who served on the Joint Committee on Atomic Energy) a
duty of "each department, agency, or instrumentality of the
government" to keep the Committee "fully and currently informed
with respect to all intelligence and counterintelligence poli-
cies, programs, and activities which are the responsibility of,
or are planned, supervised, financed, or carried out by, such
department, agency, or instrumentality...."

The "currently and fully informed" standard was derived from
Section 202 of the Atomic Energy Act of 1946 [42 U.S.C. 2252].

In January 1976 the Office of the U.S. Senate Legislative Counsel

prepared a redraft of S. , titled the "Intelligence Oversight

Act of 1976." Section 6(a)(1)(B) retained jurisdiction over the
"intelligence activities of all other departments and agencies of
the government...." This language was retained in Sec. 3(a) of
S. Res. 400. Sec. 13, which, as later modified, became Sec. 11
of S. Res. 400, proposed a duty for the head of each department
or agency of the United States to keep the Senate intelligence
oversight committee -

"fully and currently informed with respect to all
intelligence activities which in any respect are
the responsibility of or are planned, supervised,
financed, or engaged in by such department or
agency. "

596

The above-quoted language, preserving the exact language of Sec.
11(a) of the draft Intelligence Oversight Act of 1975, appeared
unworkable to representatives of intelligence agencies in early
1976. In early 1976, the Special Counsel to the Director of
Central Intelligence, Mitchell Rogovin, proposed alternative
reporting language in a meeting with William R. Harris, a
Consultant to the Senate Committee. My records indicate that the
Rogovin-Harris substitute read:

■■ . . . it shall. . .be the duty of the head of each depart-
ment and agency of the United States to keep the
Committee on Intelligence Activities fully and
currently informed with respect to intelligence
activities which are the responsibility of such
department or agency."

This language retained a reporting duty for each department or
agency of the United States, without restriction to agencies of
the intelligence community. It was later amended by Senatorial
initiative to add the phrase "including any significant
anticipated activities...." before its introduction on March 1,
1976 (with 19 co-sponsors) as S. Res. 400.

On April 9, 1976, the Senate Rules Committee favorably reported
S. Res. 400, and on May 19, 1976, the Senate considered, amended
and approved S. Res. 400 by a vote of 72 to 22.

Sec. 11(a) provided: "It is the sense of the Senate
that the head of each department and agency of the
United States should keep the select committee fully
and currently informed with respect to intelligence
activities, including any significant anticipated
activities, which are the responsibility of or engaged
in by such department or agency; ..."

Sec. 14(a) defined "intelligence activities" to
include intelligence, counterintelligence,
covert or clandestine activities (without
specific restriction to an intelligence agency's
sponsorship), and internal security intelligence.

Sec. 14(b) included in the definition of
"department or agency" any federal organization,
including any "committee, council, establishment,
or office within the Federal Government."

[For parallel definitions adopted by the House
Permanent Select Committee on Intelligence, see
H. Res. 656 of July 14. 1977, Rule XLVIII, sec.
10(a) and (b)].

Despite misgivings on constitutional and other grounds,
"[pDrior notice to the Intelligence Committees of significant
covert actions programs has been the practice since 1976..."

597

[See prepared statement of William G. Miller, former Staff
Director, Senate Select Committee on Intelligence, Sep. 22,
1983, HPSCI Hearings, Comm. Print, 1984].

On July 14, 1977 the House of Representatives established the
House Permanent Select Committee on Intelligence, adopting H.
Res. 658 by a vote of 247 to 171. The House Committee juris-
diction paralleled that of the Senate Committee, without re-
striction to agencies of the intelligence community.

The following month staff assistants of the President asked the
staff of the Senate Select Committee on Intelligence to review a
draft Executive Order on intelligence activities. With
amendments, some suggested by the Committee staff, this became
President Carter's Executive Order 12036 of January 24, 1978.

Section 3-4 of E.O. 12036 [43 F.R. 3674 at 3689-90] provided for
reports to the intelligence committees of Congress. It applied
to the "Director of Central Intelligence and heads of depart-
ments and agencies of the United States involved in intelligence
activities." It utilized the "fully and currently informed"
standard of the Atomic Energy Act and S. Res. 400 of 1976. It
included a duty to report on significant anticipated activities
"which are the responsibility of, or engaged in, by such depart-
ment or agency."

In sum, the legislative history of enabling resolutions of 1976
and 1977 for the present intelligence oversight committees of
Congress indicate legislative intent that any head of a depart-
ment, agency or institution that is involved in intelligence
activities report to these committees. The initial draft of 1975
explained an intent to include the National Security Council
within the purview of the reporting duties.

Executive Order 12036 of January 1978 applied to all departments
and agencies of the United States, and impliedly would cover the
National Security Council staff were it to have proposed to
engage in "significant anticipated activities" during application
of this Executive Order in 1978-1981.

EXCLUSION OF THE NATIONAL SECURITY COUNCIL AND STAFF FROM THE
SCOPE OF MANDATORY REPORTING DUTIES UNDER THE INTELLIGENCE
OVERSIGHT ACT OF 1980.

In 1976 the Senate Select Committee on Intelligence, through a
subcommittee chaired by Senator Walter Huddleston, introduced
draft legislation that, were it enacted, would have reduced the
scope of mandatory reporting to heads of departments, agencies or
other entities of the intelligence community. On February 9,
1978, Senator Huddleston and 19 co-sponsQrs introduced S. 2525,
the National Intelligence Reorganization and Reform Act of 1978.
Representative Boland introduced S. 2525 in the House as H.R.
11245 on March 2, 1978.

598

As a proponent of streamlined, mission-oriented legislative
charters, I did not actively participate in drafting the 263-page
1978 charter legislation (S. 2525) or the initial 172-page 1980
charter legislation (S. 2284). Section 151(g) of S. 2525
required reports to the intelligence oversight committees by the
"head of each entity of the intelligence community...."

The 1978 Senate charter legislation (S. 2525) introduced the
concept of an "entity" of the intelligence community, but did not
include the term in its definitions. Sec. 104(16) did define the
"intelligence community" without any express inclusion of the NSC
or its staff, and impliedly exempted that Council and staff from
mandatory reporting.

A limitation of mandatory reporting duties to the head of each
"entity of the intelligence community" remained in the provisions
of S. 2284, the National Intelligence Act of 1980, introduced by
Senator Huddleston, Chairman of the Subcommittee on Charters and
Guidelines, on February 8, 1980. See Section 142(a). Rep.
Boland introduced a companion bill, H.R. 6586 in that same month.

As opposition to detailed legislative charters developed in the
executive branch (objecting to reporting other than "in a timely
fashion") and in the Congress, the Senate Select Committee Staff
Director approved my review of the 172-pag«5 for the purpose of
abbreviation and simplification consistent with protection of
civil rights and safeguards. I consulted with Keith Raff el, John
Elliff, and others of the Committee staff between February 14 and
March 19, 1980, first to make technical changes in S. 2284 as
drafted, and second, to produce streamlined charter legislation.

It was during the first phase of review in late February 1980
that I identified the failure of S. 2284 's oversight provisions
to provide for mandatory reporting of NSC intelligence
activities . I proposed to extend the reporting duties of Section
142(a) beyond the head of each "entity of the intelligence
community," for the express purpose of including the National
Security Council and its staff within the scope of reporting
duties respecting intelligence activities, including "signifi-
cant anticipated intelligence activities...."

Neither Kr. Keith Raff el nor Mr. John Elliff, who had partici-
pated in the work of the Subcommittee on Charters and Guidelines,
favored express inclusion of the National Security Council in the
reporting duties under Sec. 142(a) of S. 2264. Neither claimed
that the NSC was covered by the phrase "intelligence community. "
It is clear from the pertinent text on Congressional oversight of
intelligence activities t-hat neit-her the HSC nor its staff was
covered. In particular, section 103(12) defined "Intelligence
community" and "entity of the intelligence community" to mean --

(A) the Office of the Director of National Intelligence;

(B) the Central Intelligence Agency;

599

(C) the Defense Intelligence Agency;

(D) the National Security Agency;

(E) the offices within the Department of Defense for the
collection of specialized national intelligence
through reconnaissance programs;

(F) the intelligence components of the military services;

(G) the intelligence components of the Federal Bureau of
Investigation;

(H) the Bureau of Intelligence and Research of the

Department of State;
(I) the foreign intelligence components of the Department

of the Treasury;
(J) the foreign intelligence components of the Department

of Energy;
(K) the successor to any of the agencies, offices,

components, or bureaus named in clauses (A) through

( J) ; and
(L) such other components of the departments and agencies,

to the extent determined by the President, as may be

engaged in intelligence activities."

Specific requirement of reporting by the National Security
Council raised constitutional issues relating to "executive priv-
ilege" and separation of powers. It was my position that, unless
the mandatory reporting duties included the NSC and its staff,
there was a foreseeable risk of the NSC managing covert opera-
tions through the NSC staff itself, without a specific duty to
report on such activities to the oversight committees of the
Congress. The Charter and Guidelines Subcommittee staffers
indicated that the President would not authorize this change in
customary practice, precisely because, upon discovery, the
Congress would enact legislation requiring mandatory reporting by
the National Security Council or the President regarding its
activities.

At this point (on a day in February 1980 that I cannot ascertain
from my records), I took the issue to the staff director of the
Senate Select Committee, William G. Miller. Any change of the
nature I was proposing would reopen constitutional issues of
concern to the Attorney General and the Counsel to the President.
Mr. Miller reminded me that both Vice President Mondale and David
Aaron, the Deputy Special Assistant to the President for National
Security Affairs, served with the Committee. The President would
not permit, I was advised, the conduct of covert operations by
the NSC staff itself. I reminded the staff director that intell-
igence charters must be designed to function under changed and
partly unforeseen circumstances, well beyond the seirvice of
officials who knew the precise reasons for legislative action.
The staff director decided to leave sec. 142(a) as it stood.
Hence, I did not reiterate my proposed i^^draft when I summarized
a set of possible amendments to S. 2264 on March 4, 1980.

I did recommend providing the President additional flexibility,

600

under "extraordinary circumstances," to delay from 46 hours to 30
days notice to the full oversight committee membership, so long
as prior notice were provided the leadership and committee
chairmen and vice chairmen (sec. 125 of S. 2264). This was a
proposed amendment that was not adopted.

On March 17, 1980 Representative Aspin introduced H.R. 6820, a
much abbreviated intelligence bill. It retained the provisions
of S. 2264, effectively exempting from mandatory reporting duties
the NSC staff, even if they were engaged in intelligence
activities. Sec. 102(a) stated:

"The head of each entity of the intelligence community
shall keep the intelligence committees fully and
currently informed of all intelligence activities which
are the responsibility of, are engaged in by, or are
carried out for or on behalf of, that entity."

On March 19, 1960 Keith Raffel, William R. Harris, et al . , of the
SSCI staff completed a streamlined, simplified National Intelli-
gence Act of 1960. Labeled "Draft C" (expectably following
drafts "A" and "B"), it covered in 30 pages much of what S. 2284
initially covered in 172 pages. It retained the concept
"entities of the intelligence community, " and once again excluded
the National Security Council and Staff from its list of
"entities" [sec. 101(b)(l through 12)]. This draft provided an
impediment to, if not a guarantee against potential unreported,
self -executed NSC covert operations: Section 103(b) provided
that special activities be "conducted only by the Central
Intelligence Agency, " except when the President determined that
another agency should support an activity. Whatever the merits
of streamlined intelligence charters might have been, the
consensus in support of any charters legislation had disinte-
grated during the earlier drafting of detailed charters (S. 2525,
and S. 2284).

On April 12, 1960 the House Committee on Foreign Affairs provided
for consolidated reporting of presidential findings, and
favorably reported H.R. 6942. This retained the Hughes-Ryan
Amendment, but reduced the reporting requirement from eight to
the two intelligence committees of Congress.

On April 17, 1960 the Senate Committee on Foreign Relations held
hearings on the role and accountability of the Special Assistant
to the President for National Security. Whatever concerns the
Foreign Relations Committee had did not result in legislation to
require reports to the Congress on activities of the National
Security Council or its staff.

On April 17, 1960 the Senate Select Committee reissued a revised
draft of S. 2264. Shortly thereafter, the executive branch
submitted to the Senate Select Committee a document labeled
"Agreed SSCI-Executive Branch Condensation of S. 2284." This
document generally reflected agreements, but also set forth

601

9

executive branch preferences for legislative charters where
issues remained unresolved. Section 132 retained a mandatory
reporting duty for "the head of each entity of the intelligence
community. ..."

Of some interest, section 111(c) of the so-called "Agreed SSCI-
Executive Branch Condensation" specified that the Title not be
construed to prohibit any department or agency from collecting,
processing, or disseminating information if otherwise authorized
to do so. Hence, the understanding of the executive branch
(which had an interagency committee on intelligence charters in
operation throughout enactment of the Intelligence Oversight Act
of 1980) and the Senate Committee that drafted the legislation
was that duties imposed by this Title not be applied to other
entities of the federal government merely because they collected,
processed, or disseminated intelligence information under other
existing authority. Hence, the National Security Council,
authorized by the National Security Act of 1947 to evaluate the
quality of intelligence and otherwise authorized by the Presi-
ident, did not become an "intelligence entity" merely by reason
of collecting, processing, or disseminating information.

The Senate Select Committee considered S. 2284 in executive ses-
sion on April 30, and thereafter on May 1, 6, and 8, 1980.
Senator Inouye proposed an amendment restricting prior reporting
of significant anticipated covert activities under "extraordinary
circumstances" as determined by the President. [See 50 U.S.C.
sec. 501(a)(1)(B)]. Senator Wallop and Senator Moynihan proposed
further reporting on significant intelligence failures. [See 50
U.S.C. sec. 501(a)(3)]. See S. Rpt. 96-730 for a summary of these
amendments .

On Mui ?. 19?0 •th'? Senate Select Committee on Intelligence
unanimously approved S. 2284 as amended, containing primarily the
provisions for legislative oversight and provisions to protect
the identities of agents. On May 15, 1980 the Committee issued
S. Rpt. 96-730, to accompany S. 2284, the Intelligence Oversight
Act of 1980. This report indicated that "references to 'any'
department, agency, or entity in subsection (a) impose obliga-
tions upon officials to report only with respect to activities
under their responsibility, subject to the procedures established
by the President under subsection (c)." [S. Rpt. 96-730, May 15,
1980, p. 7].

On June 3, 1980 the Senate took up consideration of the Intelli-
gence Oversight Act of 1980, S. 2284. A colloquy on the Senate
floor represented concerns of the Counsel to the President, Lloyd
Cutler, and General Counsel of CIA, Daniel Silver, that diverging
executive-legislative views on executive privilege and on manda-
tory reporting be contained in the floqr debate. The Senate
adopted the Intelligence Oversight Act by a vote of 89-1.

The Senate's provisions for legislative oversight [what became
subsections 501(a) through (d)] were not contained in the House

602

10

Bill, H.R. 7152. In the September 1980 Conference, members of
the House Intelligence Committee (Rep. Boland and others), the
House Armed Services Committee (Rep. Price and others), and the
House Foreign Affairs Committee (Rep. Fascell and others) agreed
to the Senate provisions for Sec. 501, with a supplementing
amendment [sec. 501(e)]. This amendment indicated that duties to
protect intelligence sources and methods did not authorize the
withholding of reports to the intelligence committees of the
Congress. See the House Conference Report 96-1350, on S. 2597.

The Senate (on Sept. 19th) and the House (Sept. 30th) agreed to
the Conference Report. President Carter signed the Intelligence
Authorization Act for FY1981, on October 14, 1980. Title V, the
Intelligence Oversight Act of 1980 [P.L. 96-450, 94 Stat. 975],
provides in Sec. 501(a) [50 U.S.C. 501(A)]:

"The Director of Central Intelligence and the heads
of all departments, agencies, and other entities of
the United States involved in intelligence activities
shall --

(1) keep the Select Committee on Intelligence
of the Senate and the Permanent Select
Committee on Intelligence of the House of
Representatives. .. fully and currently
informed of all intelligence activities
which are the responsibility of, are
engaged in by, or are carried out for or
on behalf of, any department, agency, or
entity of the United States, including
any significant anticipated intelligence
activity. . . .

(2) furnish any information or material
concerning intelligence activities which
is in the possession, custody, or control
of any department, agency, or entity of
the United States and which is requested

by either of the intelligence committees....

(3) report in a timely f ashion. . . any illegal
intelligence activity. ..."

Notwithstanding efforts in 1980 to broaden Its scope of coverage,
what became Section 501(a)(1) of the Intelligence Oversight Act
of 1980 did not represent a legislative effort to include
operations of the National Security Council or its staff within
the mandatory reporting duties of this subsection. Sec. 501 of
the Intelligence Oversight Act did not prohibit the conduct of
"special activities" by the staff of , the National Security
Council. A precursor draft (Draft "C" of March 19, 1980) that
would have prohibited covert operations other than by CIA except
by Presidential determination, was not enacted.

603

11

Over a three year period from the initial drafting of S. 2525 in
late 1977 through enactment of the Intelligence Oversight Act on
October 14, 1980, the linked reference to "department, agency, or
entity" engaged in intelligence activities developed a meaning
widely understood in the executive and legislative branches.
This phrase of legislative art applied exclusively to the intell-
igence agencies or specialized intelligence collection components
of the U.S. intelligence community. This definition did not
include within its scope other entities of government that
supervised the intelligence "entities" or summarized and dissem-
inated their products. Indeed, the legislative history of the
Intelligence Oversight Act of 1980 applies only to such of an
"entity" activities as are "under their responsibility, subject
to the procedures established by the President under subsection
[501](c)." [S. Rpt. 96-730, May 15, 1980, p. 7].

SCOPE OF "DEPARTMENT. AGENCY. OR ENTITY" INVOLVED IN INTELLIGENCE
ACTIVITIES SUBSEQUENT TO THE INTELLIGENCE OVERSIGHT ACT OF 19BQ.

EXECUTIVE ORDER 12333 (1981)

On December 4, 1981 President Reagan implemented section 413 of
the Intelligence Oversight Act of 1980, hy signing Executive
Order 12333 [46 F.R. 59941], "United States Intelligence
Activities . "

Section 3.1 provided for the implementation of Congressional
oversight. It established "[t]he duties and responsibilities of
the Director of Central Intelligence and the heads of other
departments, agencies, and entities engaged in intelligence
activities to cooperate with the Congress in the conduct of
its responsibilities for oversight of intelligence activities

Section 3.4(e) defined "intelligence activities" to mean
"all activities that agencies within the Intelligence Community
are authorized to conduct pursuant to this Order." Section
3.4(f) specified agencies or organizations of the "Intelligence
Community," excluding from the listing the National Security
Council and its staff. It is notable that the Executive Order
followed the established scope of the Intelligence Oversight Act
of 1980, and also notable that the principal coordinator of the
Executive Order, Kenneth DeGraf f enreid, came to the NSC staff
from staff work at the U.S. Senate Select Committee on Intelli-
gence, where he served during enactment of the Intelligence
Oversight Act.

SEC. BOlfA) OF THE INTELLIGENCE AUTHORIZATION ACT FOR FY1994
AND SUBSEQUENT INTELLIGENCE AND POD AUTHORIZATION ACTS

The Intelligence Oversight Act of 1980 and the 1981 Executive
Order implementing it define intelligence activities of depart-
ments, agencies or entities with exclusive regard to entities of
the "intelligence community." This establishes a presumption

604

12

that only "intelligence community" entities are intended to be

covered by other intelligence-related legislation utilizing this

phrasing. But the presumption may be rebutted by evidence of
actual legislative intent to the contrary.

The October 20, 1983 amendment (Boland) to the Intelligence
Authorization Act for FY1984 [P.L. 98-215, sec. 801(a)] pro-
hibited obligating or expending funds for the Central Intelli-
gence Agency "or any other department, agency, or entity of the
United States involved in intelligence activities" for covert
assistance to military operations in Nicaragua. [Roll Call 403,
Cong. Rec. p. H8426] .

The Intelligence Authorization Act for FY1984, Sec. 108 [P.L. 98-
215] authorized not more than $24 million to CIA, DOD "or any
other agency or entity of the United States involved in intelli-
igence activities which may be obligated or expended for the
purpose or which would have the effect of supporting, directly or
indirectly, military or paramilitary operations in Nicaragua...."

The specific legislative history of these or subsequent Boland
Amendments is not known to me. Consequently, I would not seek to
evaluate whether the presumption of a limitation to entitles of
the "intelligence community" as defined in Executive Order 12333
has been rebutted by the specific legislative history of these
Acts of Congress.

Acts of Congress requiring evaluation of legislative intent
include: Sec. 106 of Title I of the Intelligence Authoriza-
tion Act for 1987 [P.L. 99-569] providing that funds available to
the [CIA, the DOD] "or any other agency or entity of the United
States involved in intelligence activities may be obligated and
expended during fiscal year 1987 to provide funds, material....";
and Sec. 9045 of the DOD Appropriations Act for FY 1987 [P.L. 99
-591] prohibiting expenditure of funds available to CIA, DOD "or
any other agency or entity of the United States involved in
intelligence activities. ..."

INTELLIGENCE AUTHORIZATION ACT FOR FY1985.
TITLE VIII. SEC. 601

Sec. 801 of Title VIII of the Intelligence Authorization Act for
FY1985 provided, without regard to the agency or entity sponsor-
ing the activity that: "No funds authorized to be appropriated
by this Act or by the Intelligence Authorization Act for fiscal
year 1984 [Public Law 98-215] may be obligated or expended for
the purpose or which would have the effect of supporting,
directly or indirectly, military or paramilitary operations in
Nicaragua by any nation...." This prohibition is not in any way
limited to entities of the intelligence oommunity.

Similarly, section 2907 of Title IX of P.L. 98-369 [98 Stat.
1210, 22 U.S.C. 2151] prohibits the mining of ports or terri-

605

13

torial waters of Nicaragua, without limit to an entity of the
intelligence conununity.

SENATE EXERCISE OF INTELLIGENCE OVERSIGHT ACT JURISDICTION
JURISDICTION IN 1984 OVER THE BUREAU OF VERIFICATION AND
INTELLIGENCE. U.S. ARMS CONTROL AND DISARMAMENT AGENCY

This review of legislative history relating to "departments,
agencies, and entities" involved in intelligence activities would
be incomplete without noting the practices of the intelligence
oversight committees since enactment of the Intelligence Over-
sight Act in 1960. The two oversight committees have a special
stake in the Intelligence Oversight Act of 1980, particularly
because it treats their access to the information required for
effective legislative oversight.

To the best of my knowledge, in the period 1980 through 1963 the
intelligence oversight committees treated Section 501(a)(1) as if
it covered only entities within the intelligence community, as
defined in President Reagan's Executive Order 12333 (1981).

In the spring of 1964 the Senate Select Committee on Intelli-
gence, whose staff had drafted section 501(a) of the Intelli-
gence Oversight Act, first applied that section to an "entity"
outside the intelligence community. During preparation of the
Intelligence Authorisation Act^ for FY1985, the Committee reviewed
the requirements and capabilities of the Bureau of Verification
and Intelligence of the U.S. Arms Control and Disarmament Agency
(ACDA).

On behalf of the Chairman of the Budget Subcommittee (Senator
Wallop) of the SSCI , in the spring of 1984 I reviewed the
legislative history of the Intelligence Oversight Act of 1980,
and prepared a letter to the Director of ACDA, advising the
Director of the Committee's assertion of Jurisdiction under the
Intelligence Oversight Act of 1980. To the best of my knowledge,
after review of my proposed assertion of oversight jurisdiction
by the staff director, the Committee Chairman, Senator Goldwater,
signed the letter to the ACDA Director in the spring of 1984.

Predictably, the Director of the Arms Control Intelligence Staff
of CIA objected informally to the assertion of oversight Juris-
diction, on the grounds that ACDA was not a part of the "intelli-
gence community" as specified in E.O. 12333. There was, however,
a statutory basis for the assertion of Jurisdiction. Section 37
of the Arms Control and Disarmament Act (the Derwinski Amendment
of 1977) provides the Director of ACDA legal responsibility for
verification of compliance and noncompliance with arms control
agreements. The Bureau of Verification and Intelligence performs
statutorily-required intelligence assessment functions under
Section 37 of the Arms Control Act.' The Director of ACDA
accepted the Senate Select Committee's assertion of oversight
Jurisdiction in 1984.

606

14

CONCLUDING REMARKS

In the period 1975-1978, Congressional investigations of intelli-
gence activities encompassed entities of the entire federal
government, and proposals for mandatory reporting to the Congress
mirrored that broad jurisdictional concern.

Commencing in 1978, the intelligence oversight committees adopted
the procedure of enacting separate intelligence authorisation
acts for all entities of the "intelligence community" engaged in
national intelligence or counterintelligence. Concurrently, from
1976 onwards, draft legislation proposing mandatory self -report-
ing by heads of intelligence departments, agencies, or entities
encompassed expressly specified departments and agencies and
other "entities" that performed classified missions within the
"intelligence community." Proposals in 1980 to extend the scope
of "entities " to include the National Security Council and its
staff were expressly rejected in the course of streamlining what
became the Intelligence Oversight Act of 1980.

This legislative history establishes a presumption that parallel
or subsequent legislation including the phrase "departments,
agencies, or entities" engaged in intelligence activities applies
to entities of the "intelligence community" and not the National
Security Council or its staff. But the presumption may be
rebutted by any specific legislative history of a later Act of
Congress if that legislative history indicates unequivocal intent
to prohibit the expenditure of any federal monies by any entity
of the federal government. I am simply not aware of the precise
legislative history of restrictive legislation that originated in
the House of Representatives in 1983 and later years.

Whatever the specific findings may be regarding the scope of
legislative restrictions in 1984 and thereafter, a general
principle must apply to all intelligence activities conducted in
a democratic society: Intelligence activities and related covert
activities conducted in the national security interests of the
United States, must be conducted under and subject to the rule of
law. I trust that the foregoing review of intelligence laws and
Congressional oversight practices will assist your Committee as
it completes a difficult task.

RespectfuJ

■fill 1 Y submitted,
William R. Harris

607

APPENDIX B

John Norton Moore
824 Flordon Drive
Charlottesville. Virginia 22901

August 4, 1987

Th« Honorable Oani*l K* Inouye
Cbairaanr The Select Coamlttee on the

Secret Military Assietance to Iran t

the Nicaragua Opposition
SH-722 Hart Senate Office Building
Washington, DC 20510-1102

Dear Chairman Inouyet

During the course of the Iran-Contra hearings Lieutenant
Colonel Oliver North apparently inadvertently created the
impression that I had provided him with legal advice concerning
the constitutionality and scope of the so-called "Boland
Amendment" that has been at the center of the hearings,
although he seems to have implicitely corrected this in later
testimony^ Since I had not provided any such legal advice, I
immediately called his counsel and sent a letter to correct this
apparent misimpression. Enclosed is a copy of the letter that Z
would appreciate your making part of the hearing record.

As a national security lawyer -- indeed one who has sought
to pioneer the new field of national security law -- I have long
urged the establishment of a strong legal office in the National
Security Council (NSC) staff, with involvement in all activities
of the NSC. When the Tower Commission was appointed I wrote a
letter to Chairman Tower urging establishment of such an office.
It was a matter of great satisfaction for me to see that the
commission recommended such an Office, that the President singled
this recommendation out as one of the recommendations he believed
most important to the Nation, and that Assistant to the President
for National Security Affairs, Prank C. Carlucci, has moved
vigorously and effectively to implement this recommendation.
This is, I believe, one of the most important structural changes ■
in the national security process to emerge from the Iran-Contra
affair and I hope that your Committee will endorse this change.

As I am sure the Committee is aware, there is a great
difference in lawyering roles in being consulted for legal advice
prior to events and a variety of lawyering roles, including public
comment on the law, after events have transpired. Prior to
events, effective lawyering should provide, among other things,
advice that prevents persons acting in good faith from having
future legal problems and advice that includes the creative
potential of legal-system options for serving the national

608

The Honorable Daniel K. Inouye
August 4, 1987
Page 2

interest. In contrast, after events have transpired, lawyers
have an obligation to work for due process in protecting
individuals who have acted in good faith, and in educating the
public about important issues. In this latter connection, it is
noteworthy that the hearings produced diaaetrically opposed
interpretations of the applicable "Boland Aaendaent" from public
servants, all of whom seem to have conscientiously sought to
serve the nation. Surely a major lesson of the Iran-Contra
affair has been the great need for the structural change that has
now been made of a strong legal office in the NSC to provide
legal advice in advance as to significant NSC activities.

JNM:kww

Enclosure: as stated

^2^-^^

£f^^e.

Norton Hoore

cc: Mr. Brendon Sullivan

Mr. Eugene C. Thomas, President,

American Bar Association
Richard A. Merrill, Dean, Oniversity of Virginia
School of Law

609

John Norton Moore
824 Fiordon Drive
Chariottesviile, Virginia 22901

July 9. 1987

Mr. Orendon Sullivan
Williams & Connally
I7ih and Eye Street. N.W.
Washington. DC. 20003

Dear Mr. Sullivan:

It has come to my attention that your client. Lieutenant Colonel Oliver North,
may have inadvertently created the impression by his testimony this morning that I
have provided him with legal advice regarding the constitutionality and scope of the
so-called 'Boland Amendment* that has been at the center or the current Iran-
Contra controversy. This may have been implicitly corrected this afternoon, when I
am told he testiried that he had received legal advice on this issue only Trom the
present Counsel to the President's Intelligence Oversight Board, but I would
appreciate your correcting the record should any doubts remain.

As you are no doubt aware, I served as a Special Counsel for the United
States in the Nicamgua case before the International Court of Justice. Subsequently,
in my personal capacity, I have written and spoken widely about the war in Central
America, including a book. The Seerei War in Central America (published by
University Publications of America earlier this year), and several addresses on the
legal issues delivered before members of the press and congressional staff at the
White House.

There have, of course, been a multiplicity of 'Boland Amendments* concerning
Nicaragua dating back to December 19S2. On more than one occasion in years past
when I have been asked to address some of the legal issues involved in the Central
American controversy I have expressed the view that I did not believe U3. support
for the Contra program conflicted with the 'Boland Amendment'-referring at the
time, of course, to earlier versions and events then known. Certainly this is
reflected in my published writings and is a conclusion concerning these earlier
'Boland Amendments* that seems well supported by the record. I have been told
that Colonel North was frequently called upon to addreu similar audiences, and
although I don't recall encountering him in that context, it is quite possible that he
heard me express such views on the *Boland Amendment,* and he is likely to be
familiar with my published writings. He may also have been familiar with my
Opinion Editorial 'Government Under Law and Coven Operations* published in the

610

Mr. BrcnJon Sullivan
July 9, 1987
Page 2

Washington Times on February 24, 1987, in response to the Iran-Contra controversy
that docs make the point that the scope of the I984-8S 'Boland Amendment* has
been embroiled in a dispute.

For the record, however, prior to the public disclosure or the current Iran-
Contra controversy late last year I had not even had occasion to examine the 1984-
8S 'Ooland Amendment,* and thus I am certain that I did not provide Colonel
North or anyone else with a *lesal opinion' about its constitutionality or whether it
encompassed the National Security Council. The first time I have had occasion to
even preliminarily review the range of domestic legal issues involved in the Iran-
Contra affair was during the writing of an opinion editorial on the issues after the
affair had become public.

Although the 'Boland Amendment* at issue in the current controversy seems to
me, on the basis of a preliminary review, to contaio relevant ambiguities-and at
least one separation-of -powers constitutional scholar whose judgment I respect has
expressed doubts to me about the constitutionality of at least certain
interpretations of the amendment-I have not at this time personally taken a
definitive position on these important issues which would, of course, among other
things require a careful review of the legislative record. I have, however, on
numerous occasions expressed my view in response to media inquiries, after the
Iran-Conira affair had become public, that the relevant 'Boland Amendment* may
well be ambiguous, and to the extent that it is, well recognized principles of due
process and separation of powers would require that it be interpreted to protect
Executive Branch flexibility.

Thus, while I had not had occasion to review the pertinent 'Boland
Amendment' prior to the Iran-Contra affair bcconaing public knowledge, and have
still not had an occasion to do a careful legal analysis of that amendment and its
voluminous legislative history, it is my preliminary judgment on reviewing that
amendment that it may well be ambiguous in several key respects. It is also my
judgment that there are strong policy reasons why any significant ambiguity should
be construed in favor of continued Executive Branch authority. Certainly, when
Congress does act in an area of sensitive presidential power, such as the conduct of
covert activities, it must do so clearly. Any other conclusion does a serious
disservice to separation of powers and the dedicated men and women who serve to
implement foreign policy in the Executive Branch.

611

Mr. Brcndon Sullivan
July 9. 19S7
Page 3

I have no doubt but that Colonel North's reference to mc this morning was
a consequence of misunderstanding, and I have no desire to add to his burdens at
this dirficult time. But as a lawyer, I am sure you can appreciate my concern that
an inaccurate impression not be left that I have participated in providing legal
counsel to Colonel North on the 'Doland Amendment' or any other national laws
involved in the Iran-Contra affair.

It would not be inaccurate for Colonel North, or any other individual, to note
that on numerous occasions, including in my recent book The Secret War in Central
America, I have publicly expressed my conviction that United States asiistance to
the Contras is consistent with the norms of international law as reflected in the
United Nations and Organization of American States Charters. This is premised upon
a factual recognition of covert Nicaraguan armed aggression against El Salvador and
other democracies in the region dating back to at least i9S0-a conclusion affirmed
on several occasions by both the House and Senate Intelligence Committees. This
armed aggression-which predated by well over a year the United States decision to
provide similar assistance to the Nicaraguan opposition in an effort to deter the
ongoing effort to overthrow the government of EI Salvador-violates article 2(4) of
the United Nations Charter and numerous other prohibitions against aggression. It
gives the United States a right of collective defense under Article SI of the United
Nations Charter and. indeed, may create a legal obligation under Article 3 of the
Rio Treaty to assist EI Salvador to meet the armed attack.

Enclosed is my Opinion Editorial 'Government Under Law and Covert
Operations.' as well as a just completed piece The Iran-Contra Hearings and
Intelligence Oversight in a Democracy.* This latter piece raises important issues
that. I believe, should be addressed as to whether the current public hearings are
the most appropriate mechanism for intelligence oversight of covert operations.

612

Mr. Brendon Sullivan
July 9. 1987
Page 4

It is important to keep in mind that the views I have expressed over the years
on these subjects are my own, and in particular should not be attributed to the
United States Government, the American Bar Association, the University of Virginia
School of Law, or any other organization with which I am or have been aTriliatcd.

Thank you for your assistance.

With best wishes.

)ohn Nortoo Moore
JNM/sb

Enclosures: (1) 'Government Under Law and Covert Operations' published as 'The
Rule or Law Tor the Coverc*
(2) 'The Iran-Contra Hearings and Intelligence Oversight in a
Democracy'

cc: Mr. Eugene C. Thomas, President, American Bar Association

Dean Richard A. Merrill, Dean, University of Virginia School of Law

613

Government Under Law and Covert Operations

by
John Norton Moore*

The level of rhetoric about law violation in the Iran-Contra
afrair has been high. Some of the public debate has even assumed
criminal violation, with prominent members of Congress speculating
as to length of sentence and calling for Presidential pardons. Yet
the discussion has been as void of specifics about such violations as
it has been pregnant with allegations.

Without knowing all the Tacts and the full context of actions it
is not possible to make responsible legal judgment. It is important,
however, that the debate proceed in a more complete context of
assumptions about government under law. Both the important
principle of due process and real-world complexities of the^ rule of
law for covert operations suggest that the level of rhetoric should
be restrained as we focus more clearly on the enduring issues.

First, no one involved in the Iran-Contra affair should be
presumed guilty of law violation-much less criminal violation—until
found guilty by a court of law. Just as our democratic system
requires that government officials operate within the law it also
provides that they be accorded a presumption of innocence until a
duly constituted court finds otherwise. Similarly, it should be clearly
understood that appointment of an independent counsel does not
demonstrate law violation. The Ethics in Government Act, which
Congress courageously did not apply to itself, has an extraordinarily
loose standard for the appointment of such a counsel. This has been
borne out by most such counsel reporting that no law violations
have occurred within their mandate. It should also be understood
(hat there is a major difference between civil and criminal
responsibility. Criminal responsibility flows only from violation of
clearly applicable pre-existing criminal statutes. Indeed, if individual
criminal— or even civil-responsibility flowed inexorably from all
nonconformance with statutes the members of Congress would be
guilty of multiple offenses as they repeatedly ignore their own
budget act.

Most importantly, the structure of law as it applies to covert
operations is highly technical and complex and the public debate has
been as simplistic as the law is complex. For example, the public
discussion of legal issues has assumed that the Arms Export Control
Act applies to presidentially authorized special activities. Special
activities, however, for reasons of their extreme sensitivity and
secrecy, have their own legal structure and it may well be that this

614

and many other laws enacted Tor quite dirrerent settings do not
apply to such activities. Given the strong constitutional
underpinnings or special activities as presidentially directed, iT
particular statutory restrictions are constitutionally valid at all,
certainly they would need to be unambiguous in their application.
Similarly, much o( the public discussion has assumed that the Tailure
to provide notice to the intelligence committees constitutes a
violation of the shall inform 'in a timely fashion' language of the
Intelligence Oversight Act of 1980. But this ambiguous language
papered over a serious underlying constitutional dispute between
Congress and the Presidency as to whether the President must notify
Congress of all special activities. Moreover, Congress conceded by
the Act that not all such activities must be reported in advance and
in that setting the more reasonable interpretation of 'timely' would
seem to relate functionally to the reason for great secrecy rather
than a mechanical passage of time. The Carter Administration seems
to have interpreted the Act this way as it spent months planning
the Iran hostage rescue operation with no reporting under the Act.
These Executive Branch concerns about reporting all special
activities in advance to committees of Congress reflect enduring
policy concerns about the ability of Congress as an institution to
maintain secrecy. This institutional concern has been shared by the
constitutional framers, George Washington as our Nation's first
President, and by numerous administrations since, both Democratic
and Republican. Moreover, a policy requirement for extraordinarily
sensitive covert operations is to hold knowledge to the smallest
possible group whether in or out of Congress. Informing members of
Congress of all such operations not only increases the absolute
number of persons with information but may also have a multiplier
effect as Executive Branch personnel associated with Congressional
relations become involved. Whatever the policy wisdom of not
reporting, certainly the failure to report under the ambiguous
Intelligence Oversight Act is not a legal scandal, and it is probably
within the President's power both as a matter of statutory and
constitutional law. To the tame effect, most of the numerous 'Boland
Amendments' limiting assistance to the Contras clearly do not apply
to the activities in question and the one that may be applicable has
been embroiled in a dispute as to whether it applied to activities of
the National Security Council and, more importantly, is by its terms
fact-sensitive, including whether particular funds were available to
an agency or entity of the government within the meaning of the
law. Whatever the policy wisdom of proceeding in the face of legal
ambiguity (as well as other policy issues in linking the Iranian and
Contra operations), policy shortcomings do not show that those who

615

octed did so illegilly. Whatever the rinil resolution of t host of
technical legal issues raised by the arrair, due process suggests that
the proressional reputation of our public servants not be lynched by
a posi-Watergaie mob that convicts of criminal violation when there
may be no law violation, civil or criminal. We should remember that
the essence or McCarthyism is the unrounded allegation.

Second, whatever the final resolution or legal and policy issues
in this case, the Administration should take this occasion to appoint
a Tull-time general counsel to the National Security Council siaTr.
After years of criticism by international lawyers who urged the
addition of legal experts to the National Security Council. Dr.
Zbigniew Brzezinski added an excellent lawyer to the staff who
served about half-time as a legal specialist and that legal presence
has been continued and augmented under the Reagan Administration.
There should, however, be a clearly designated full-time general
counsel on the staff with an office of one or two national security
law specialists and that office should operate under procedures that
ensure its involvement in all national security activities, overt and
covert. It is simply a fiction that all national security issues,
particularly those arising ia crisis management settings, will
inevitably be reviewed by general counsel in the major departmer.::.
The absence of full involvement of knowledgeable lawyers in national
security decisions has for years harmed our national foreign policy
under both Democratic and Republican administrations. Such
involvement is not required solely to prevent illegal actions, as
important as that may be, but also to provide relevant policy advice
on associated political and implementation issues. If such an
enhanced presence were needed two decades ago, it is now
imperative given the extraordinary growth of national security law
over the last two decades. In the future any foreign policy makers
who do not seek legal counsel before a significant new activity have
only themselves to blame for subsequent legal problems.

Third, our Nation is likely to have no ability to conduct covert
operations if it conducts its post-mortem of failed operations as the
Iran affair has been handled. It is understandable, and probably
desirable, once the public concern about the Iran-Contra affair had
reached the level of hysteria, that the Administration request
appointment of an independent counsel and Congress establish special
Senate and House Committees to investigate. For the future,
however, we should use the capable mechanisms established by law
during the 1970s* sweeping reorganization of intelligence oversight.
That is, allegations about illegality and other improprieties in special
operations should be investigated solely by the Senate and House
Select Committees on Intelligence, the President's Intelligence

616

Oversight Boird. tnd the Attorney General. Following such
investigations any illegal conduct should be made known to the
American people. In the meantime, an Adminstration and the
Congressional Commillees should 'neither confirm nor deny"
allegations about special activities. We cannot expect as a Nation to
retain the ability to conduct covert operations if allegations about
such operations, perhaps leaked by our adversaries, can trigger a
public orgy o( selT-riagellation. That is. a pattern or public
disclosure and multiple investigations about the specifics of special
activities, triggered simply by allegations of policy mistakes or legal
impropriety, would cripple our ability as a Nation to have options
that may sometimes be needed to avoid either war or capitulation to
a ruthless enemy with no such constraints. There is an additional
reason that public debate is not the appropriate forum to reach
conclusions about covert operations. By the nature of such
operations an Administration is usually not able to disclose the
detailed information and precise context in which it acted without
disclosing intelligence sources and methods or betraying those who
have trusted us perhaps at great personal risk. Thus, inevitably
public debate about special activities is a struggle in which the
American government as a whole must defend itself with both hands
tied behind its back. The result is likely to be not an informed
public but a misinformed public condemning its leaders on partial
information.

Finally, and perhaps most importantly, we must understand and
deal with an underlying structural problem of enhanced
Congressional activism triggering unintended confrontations with the
Presidency during national security crises when the Nation can least
afford to be immobilizing itself. In significant measure this
structural weakness contributed to escalation of the Iran-Contra
affair rather than damage limitation. During the 19S0s and 1960s
Congress acted with the Presidency to deter potential adversaries, in
resolutions such as the 1962 Cuban Resolution. In a post Vietnam-
Watergate setting, however. Congress has more frequently sought to
constrain American actions. Frequently these constraints, which have
hugely multiplied in the last two decades, have undermined rather
than enhanced deterrence. Certainly the lo-date double reversal of
Congress on support for the Contras is not a stable basis for a
coherent American policy or credible deterrence. Even more seriously
the pattern of Congressional activism has fueled potentially
catastrophic constitutional confrontations with the Presidency as
Congress has aggressively embodied in legislation, such as the War
Powers Act and the Intelligence Oversight Act, its views of
appropriate Congressional powers. Yet in each case its view differed

617

from the Presidential view ind the President cannot, either as a
matter of errective conduct of the Presidency or consistency with
his oath to uphold the Constitution, simply acquiesce in what may be
fell by the Executive Branch to be a usurpation of separation of
powers. In this setting it is not surprising that strongly committed
Executive Branch officials, however mistakenly, might seek to
interpret ambiguities in favor of Presidential prerogative and stable
policy. Nor is it surprising that real-world inadequacies and
ambiguities for protecting secrecy in current oversight mechanisms
for sensitive special activities would encourage a risky policy choice
in withholding prior notice from Congress. Most dangerously, a
continuation of Congressional activism in legislating Congress's
version of separation of powers in foreign policy»legislation that
constitutionally cannot alter the underlying constitutional reality-'
may some day trigger a direct constitutional clash between Congress
and the President in a national security crisis when the Nation has
no margin for error. Surely government under law requires a more
sensitive accommodation of separation of powers in foreign^ affairs
than Congress writing its own ticket. Congress should, as part of
the general introspection from the Iran-Contra affair, reflect on its
own contributing role. At minimum our Natio.". needs a more
effective legal structure to protect our most sensitive categories of
national security information from either Congressional or Executive
Branch leaks. Such reform could enhance broadened participation
both in policy formulation and oversight of sensitive special
activities. More broadly. Congress and the President should establish
a joint Executive-Congressional Commission appointed half by the
President and half by Congress to explore non>binding guidelines-as
opposed to rigid statutory constraiots-that both branches might
accept across a spectrum of foreign policy process iuues, from the
war powers to intelligence oversight reporting, to encourage the
Congressional-Executive consensus on procedures for interbranch
coordination our Nation must have for an effective foreign policy.
No governmental task is more imperative for our national security.

'John Norton Moore is Waller L. Brown Professor of Law and
Director of the Center for Law and National Security at the
University of Virginia School of Law. Formerly he served as
Counselor on International Law to the Department of State and
Chairman of the American Bar Association Standing Committee on
Law and National Security.

618

The Iran-Contra Hearings and
Intelligence Oversight in a Democracy

by
John Norton Moore*

From George Wtshington to Ronald Reagtn American presidents
have understood the importance of intelligence. Following the
surprise attack at Pearl Harbor and the American involvement in
global war. the nation built and has maintained a strong foreign
intelligence capability. Without such a capability, verification and
thus arms control would be virtually impossible, enhanced fear of
surprise attack would reduce stability and require higher arms
expenditures, the nation would be largely defenseless against foreign
intelligence operations, the national defense effort would be blinded,
and the nation would lose a range of options between diplomacy and
war.

But just as our democracy requires an effective foreign
intelligence capability, so too it requires careful oversight of that
capability. Covert activities, particularly, must be undertaken only
after a careful vetting to ensure that they are truly in the national
interest and are authorized according to law. Intelligence failures,
such as the recent Iran-Contra affair, must receive careful review so
that the same mistakes will not be repeated. And any allegations of
illegality or impropriety, of course, must be promptly investigated.

Intelligence oversight, however, is not like oversight of the
social security program or the Department of Agriculture that can
proceed fully in the open. Rather, it must respect the requisite
secrecy of the intelligence process. Failure to do so can severely
harm the nation's capabilities in intelligence.

No one can review the evidence to date in the Iran-Contra
affair without understanding that serious mistakes were made,
particulary, the repeated-but understandable-mistake made by
virtually all the democracies to seek to bargain with terrorists for
the release of hostages seized just for that purpose by radicals who
trample both democracy and human rights. That mistakes were made,
however, does not justify further mistakes in our process of
oversight.

619

In my judgement the nitionilly televised Iran-Contrt hetrings
are-and will be regarded by history-as a serious mistake in erforts
at intelligence oversight. The motivation ot the hearings and the
proressionalism or the distinguished panel of some of the Nation's
most able legislators is not in doubt and is not the issue. Rather,
the issue is whether publicly televised oversight hearings are the
best form of oversight of covert operations taking into account both
the need for erfective intelligence and effective oversight. The
answer is a clear no.

The Iran-Contra hearings are a bad precedent in intelligence
oversight for at least five reasons. First, to publicly reveal the
details of failed American intelligence operations— of which the Iran-
Contra affair is not the first and will not be the last—will have a
severe chilling effect on the ability of the nation to carry out
intelligence functions in the future. Will other nations be willing to
cooperate with the United States in secretive operations^ if they
believe such operations can become public knowledge? Will vital
sources of human intelligence become more difficult for the United
States to recruit? Will foreign intelligence services be as willing to
share information with the United States or to suggest possible
opportunities for United States intelligence? The answer to all these
and other such questions is surely negative for effective American
intelligence if other nations perceive that our process-or even
possible process-of oversight review of failed intelligence is to hold
nationally televised hearings relishing in the details of all aspects of
the operations.

Second, because of the difficulty of fully discussing covert
operations publicly**or they would not need to be covert—and the
inevitable need to protect sources and methods, any public debate is
likely to be distorted and one-sided in which the intelligence
community— and the Executive branch as a whole— may well be
unable to fully present the case for their actions. For this
inescapable reason it is as likely that public debate about failed
intelligence operations will misinform as that it will inform. The
broadside against the President's Intelligence Oversight Board that
emerged during the hearings is a good example. The Board was
created in the wake of the Church Committee hearings as a
mechanism for ensuring intelligence community compliance with law,
and particulary in recent years it has had an important impact.
Moreover, it seems to have been the only entity within the United
States Government to have even raised the legal issues during
continuation of the failed operations. For its effort, however, it and
its legal counsel were publicly pilloried (and not on the merits but

620

on an •ttack against the counsel's credentials). Even more wrongly,
the Nation has been presented with a distorted view of an important
check in the process or intelligence oversight.

Third, the hearings, while nominally in pursuit or legislative
oversight, in many respects have the appearance or a clockwork
orange trial by grand inquisitors for the titillation or a national
audience. While the constitutionally permitted purpose of
Congressional hearings is solely co support legislative function, the
overall hearings give a strong impression of greater interest in
demonstrating individual impropriety or wrongdoing. As such, the
hearings are dangerously close to an abuse of Congressional power.
Even more importantly, no court yet conceived has thought of
interrogation of those called before it by multiple accusers, some
with what could be regarded in other settings as a conflict of
interest in demonstrating wrongdoing. Nor does due process permit
preparation of the accusers case in secret or denial of the right to
cross-examine or make a full statement. Even more importantly, the
interrogation proceeds in an atmosphere of prejudgment about the
law. And the judging panel reveals startling asymmetries in
knowledge of the legal complexities of the case and opinions about
the law. Many simply assume that shredding of intelligence
documents proves criminality. Others make the assumption, without
legal analysis, that one or more of a confusing array of Boland
Amendments has been violated. Yet shredding does not prove
criminality, and there are very fundamental legal issues concerning
the relevant Boland Amendments, most particularly whether their
real ambiguities concerning scope of applicability were intended by
Congress to prohibit efforts at third nation or private support for
the Contras and whether any ambiguities should be and would be
interpreted in favor of continued Presidential power. Despite an
absence of findings about the law, judgments about witnesses are
solemnly delivered before a national television audience with no
opportunity for rebuttal. Despite the professionalism and integrity of
the Iran-Contra hearing panel and staff, nationally televised hearings
such as this one do present pressure for personal or partisan
advantage to which lesser legislators might succumb. If failed
intelligence operations are in the future to be tried by this new
televised star chamber, then we will inevitably destroy the careers
of fine Americans whose crime has been to misread an ambiguous
stream of congressional pronouncements or, indeed, even to do their
investigative duty as required by the law. As the Nation bitterly
learned in the McCarthy Committee hearings, trial by adversary
televised congressional hearings may destroy the reputations of fine

621

Americans at little gain in legislative knowledge. It is a precedent
we should carefully review and that Congress should limit.

Fourth, ir the Iran-Contra hearings are to provide broader
legislative investigation of compliance with legal constraints on
private sector support Tor competing factions in the Central
American War, then they should do so on an even-handed basis. It is
inevitable that an inquiry focusing solely on support for the Contras,
and ignoring the extraordinary efforts by and on behalf of the
Sandinistas and the FMLN guerrillas in El-Salvador, will have the
appearance of an ideological imbalance. If one is a fit subject for a
publicly televised national inquiry, it is hard to imagine the grounds
on which contending efforts are to be ignored in such an
investigation, if, of course, there is a genuine legislative purpose in
such hearings as opposed principally to a focus on allegations of
individual wrongdoing.

Finally, the displacement of the normal intelligence oversight
mechanisms established after the Church Committee hearings can
only weaken those mechanisms that must do the important job of
intelligence oversight on a day to day basis. This objection also
applies to investigation of failed intelligence operations by an
independent counsel. Our current intelligence oversight mechanisms
are workable and include the bipartisan House and Senate select
committees on intelligence, the Attorney General, and the President's
Intelligence Oversight Board. If we are to strengthen these agencies
in their oversight role they must be permitted to conduct the review
of failed operations and investigation of any illegalities or
improprieties. As long as that review includes review by a bipartisan
Congressional entity, there cannot be any serious concern that an
Administration will simply cover up its own failures. The public need
to know can be fully met by issuance of public reports where
evidence of illegalities or other improprieties should be revealed.
And certainly legislative facts needed for the legislative process can
be assembled in the existing bipartisan select committees as well as
in a public ad hoc committee. For the future, American Presidents
should simply neither confirm nor deny allegations concerning
covert operations and should refer allegations of improprieties or
illegalities in such operations to the normal oversight mechanisms.
And Congress, which fully participates in that process, should
endorse it as the appropriate mechanism.

No other Nation seems to have had the poor judgement to
review its intelligence failures completely in public. The Federal
Republic of Germany has a small Parliamentary Oversight Committee

622

10 provide intelligence oversight. Other democracies have similar
effective yet secret processes. Nothing inherent in democracy or our
desire for effective oversight requires that we periodically publicly
cannibalize our intelligence processes or subject those who have
served the nation to trial by television (the Tower Commission may
well be correct that even our two selfct committees should be
consolidated).

Underlying the mistake in investigating the Iran-Contra failure
by public ad hoc Congressional Committee is a more pervasive
problem. The framers intended that checks and balances apply to all
branches, Congress included. While it is not clear in the Irait-Conira
hearing that Congress has overstepped its legal bounds, it is
dangerously close to usurping both executive functions in
intelligence and judicial functions in assessment of any individual
wrongdoing. Yet there seem to be few real-world checks on growth
of legislative power in the foreign affairs field, and elsewhere
Congress has passed laws, such as the War Powers Resolurion. that
are. at least in part, clearly unconstitutional. The growing
confrontation across a broad range of foreign policy issues between
Congress and the Presidency is increasingly harming the foreign
policy effectiveness of the Nation. The problem is serious for
effective American foreign policy and is getting worse. As one
possible remedy 1 believe that the Congress and the President
should establish a Congressional-Executive Commission, half
appointed by Congress and half by the President, to review the full
range of issues in Congressional-Executive coordination in foreign
policy. Such a Commission should review not only the constitutional
underpinnings and legal issues but issues of appropriate constraints
on the exercise of Congressional power, particulary issues of
effectiveness and effect on deterrence, and modalities of enhancing
consensus between Congress and the President on a bipartisan basis.
Whatever the resolution of the broader range of issues we should
abandon the sad precedent of review of failed intelligence operations
by public ad hoc Congressional Committee.

•The writer is Walter L. Brown Professor of Law at the
University of Virginia School of Law and a former United States
Ambassador.

623

APPENDIX C

I' 5. Depa-trr<;::: ..' : -

jrncc of ihe AsM»wr

Cf f I »r. • '

u

The Honorable Lee h. Hamiiron

Chairman

Select Continittee to Investigate Covert Arms

Transactions with Iran
U. S. House of Representatives
Room H-419 Capitol
Washington, D.C. 20515

Dear Mr. Chairman:

In a letter to the Attorney General of September 23, 1987,
you solicited suggested changes in "law, policy or procedure*
which might help avoid another Iran/ Contra situation. We
appreciate this opportunity to comment and to suggest a change
which is not new, but which is especially propitious in view of
the Iran/Contra matter and investigation.

The Congress should take one step which would decrease the
likelihood of a recurrence. We believe that the creation of a
joint Congressional Intelligence Committee, such as that proposed
in both the 99th and 100th Congresses by Congressman Henry J.
Hyde, would go far toward eliminating the environment which night
contribute to a future Iran/Contra situation.

Reducing the total number of persons with access to
classified information and storing that information in a single,
secure repository would strengthen Executive branch confidence in
the Congress' legislative role in the intelligence process.
Congress, in turn, would clearly benefit from this increased
confidence by the receipt of timely and detailed reports of
intelligence activities, and a renewed ability for in-depth
cooperation.

Aside from the establishment of a joint intelligence
committee, the Department believes that the introduction of any
other legislative measures is unnecessary. I hope you would
agree that the Iran/Contra matter was an exceptional situation
which lends scant support to the proposition that a massive
revision of the intelligence statutes is required.

624

In addition, attempts to effect a wholesale revision of
these statutes would require tremendous time and effort with no
guarantee of beneficial results, as this is an area of
constitutional law which remains uncertain at the core. In
contrast, the creation of a joint intelligence committee is a
practical measure which could be implemented swiftly and with
obvious positive results. The Department of Justice is prepared
to assist in whatever way we can in working with the Congress to
establish such a committee.

Sincerely,

AJL.

John R. Bolton

Assistant Attorney General

625

n-Olb 0-87-21

APPENDIX D

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ministration has asked me to

cleared it with anyone in

.ons
le

about

the Publi
wa n t to s e

the preparation of your

and the Of fie
to the Office
Inter- Ame r i c a n
then assigned.

Senior Defense
from active d
the 20 months
speeches or. Ce

was the pri
widely-distr ibu
Central Ameri

t es

-3 of

of
Affa

at
i Of

Adv
uty
that
ntral
that
ncipa
ted
ca a

ablish my bona

f ides to comment
Public Diplomacy. I was an army

the Deputy Assistant Secreta
irs from June 1980 until Dec

the request of the Department
fice of Public Diplomacy, wh
isor to Ambassador Otto Reich un
and departure from government in
I was at the Department of State

America/ created the display of

President Reagan opened on Ma

1 author of the Administra

publications. The Soviet-Cuba
nd the Caribbea

on

he

!A0 ?.= --t

Colone
ry of
ember

of
ere I
til my

May 1

, I ga

captu

rch i:

tion's

Con.

1/
De
133:

:en3e

ota:

r
93
ve
re

:or
;he

etir
5. 0
ove
d wv.
1935
two

emci
ur i;

ne;

Book")

" -■ •

to Democracy

in

Centra'

also developed the
North and others in

n [the "Blue
Amer ica ( the
presentation that Lt

Silve;

r ♦-

now-famous slide .
government used extensively to brief th

Bcok*

:oi o:

; pub'

'he

■cr

The GAO Report, or Legal Opinion, makes the very serious charge

the Office of Public Diplomacy engaged in "prohibited, covert
.^anda activities designed to influence the media and the putlir
to support the Administration's Latin American policies". The
evidence supporting this accusation is dubious, the methodology of

that

'f-

the "investigation" questionable.

-vperi^i:
addr._^

626

. or. jreismen woulc encc

1 ^

and it
;e such a

surprising tnat ZtJ:

flawed ana'

errors

the report below, but I vie

like to comment on the dangerous underlying assumption of the CAC
finding, which appears tj be that the Executive Branch has no right
to inform the public of developments in the foreign policy sphere.

I.- a de.T.ocracy, it is 3 fundamental responsibility of the elcctif
leaders of the nation to kec^ the electorate informed of the dan^c-.;
facing the country and the responses being taken by these elected
leaders t3 solve such problems. If an Administration disseminates
false inf;r~3tlon to the public, that is indeed propaganda, and the
~ongr::ss and the ir.udia have a sole.mn responibil 1 ty t: d: all In
their power to put an end to such dishonest practices. But an
intensive effort to inform the public is both a right and a;.
obligation of any Administration, and it has been exerci_ud
frequently in the past. The GAC Report appears to be an attempt '::•
^^.T. «w w.t^w ..*...u:..c:t.w ..^..^/^wwj^ w^ U..C ^xcuUteive srancn.

A.'i excelle.nt example of an intense public diplomacy campaign
carried cut by the Executive Branch on a foreign policy prcbleai was i
that conducted by the Carter Administration on the Pa.nama Canal
Tr-aty. President Carter felt deeply about the issue, and decided to
,0 directly to the American people with his side of. the
controversial issue. It was a political success. Although many in
this country disagreed with the Carter policy, I do not recall
anyone in Congress calling on the GAO to investigate a "propaganda"
effort. The public was well-served by the national debate that
ensued, for the -\.T>erican people came to understand both the costs
and the benefits of the Treaty, and were better able to advise their
representatives in Congress of their position on the issue. That L;
the essence of democracy.

It was for the same ob jective--increasing public awareness of a
critical i^sue--that the Public Diplomacy Office was formed in J-1^-
1983. It was clear to those of us working in Central American
affairs that the public was not well-informed on the area, had
little knowledge of U.S. policy objectives in Central America, and
little awareness of the threat posed to U.S. security interests by
Soviet expansionism in the region. It was concluded that we in the
government were at fault, for we had failed to develop the means by
which we could communicate the issue of Central America clearly tj
the American people. Hence the decision to create an inter -agency
organization that would draw talent from throughout the Reagan
Administration, with a presidential mandate to get the story to the
American people of what was happening in Central America, "'"'=

^ t-

627

u

Given the criticism of the Office by the GAO, perhaps we did t^
90od a job, as there are apparently some in Congress whc wij:h tc
keep the public in the dark. Having travelled throughout thi^
country speaking on Central America, I can assure you that the
American people want more, n^t less, information about a region they
knuw intuitively could soon become a battlefield for their sons. The
respected Roosevelt Center for Ajnerican Policy Studies, in it- 1937
study. Trouble at our Doorstep. found that the American people
teliev-= thot r.eitl'.er thd government nor the .-edia are prcvidin;; thi:.r
with sufficient information upon which they can .T^ke ccmn-iOn so.-._o
judgements about Central America.

•- .-

The Congress has been unswerving in its declarations that 'J.
interests cannot be per.~itted to be threatened by a permanent Co. i
military presence in Central America. Having served in Vlet-.o.~,
certai.'.ly dc :.ot want to see young Amiericans fight and dio
Central America in the future because the Congress is unwilling
send arms to young Nicaraguans who are willing to fight for their
country, and thereby fight our battle for us.

The CAC Report apparently was inspired by the discovery of a memo
written In March 1335 by Jonathan Killer of our Office to Pat
Buchar;an in the White House, in which Miller spoke of a "White
Propaganda" campaign. Among the triumphs for the Office, according
to the memo, were the placing of an article by Dr. John Cuilmartin
cf Rice University in the Wall Street Journal, and arranging a
favorable story on the "Contras" by Fred Francis cf NBC. The CAC
concluded from this memo, apparently without checking with either
Gpilmartin or Francis, that this constituted "covert propaganda".

Had the GAC looked beyond the memo, the investigators would have
discovered that Dr. Guilmartin, as Lt. Col. Guiliiiar tin, had been one
of the United States Air Force's leading authorities on helicopter
doctrine and tactics, and that any newspaper would have been hap^^
to publish his expert opinion on the military implicatio.. ^f '.'.._
delivery of Mi -24 HIND D gunships by Moscow to the Sandinistac. As a
consultant tc the Public Diplomacy Office, he had dene b c.;p:rt
study for us on the subject, and submitted the Op-Ed piece to the
Journal on his own, with no help asked or required from us. Th=
allegation that we helped Fred Francis establish contacts with
"Contra" leaders is laughable. Fred is one of the best connected
reporters in Washington, with far better and more extensive co.'.tacto
with the the "Contra" leadership than anyone in the Public Diplwn.acy
Cfllce. He required no help from us.

Why did Miller include such statements in his now-celebrated mer>u
to Buchanan? He was probably exaggerating our accomplishments in u:.
effort to curry favor for the Office with the White House, ;.ut a:.
uncommon tactic in the bureaucratic battles of Washington. Jonathan
l.tfts a oardonic sense of humor, and he may have been "just kldJli.a",
as he told Ambassador Reich in October 1937 (See Washington Post.
Cctwber 11, 1937). Certainly, a .memo of this nature co-ld be
perceived as a "smoking gun", but it should have been the be gin.ii." j,
.'.w't the end, of the investigation trail. The GAO appears to presurr.e
guilt, then looks for "facts" to fit the a priori assumption.

628

Media accounts clai.-n that the State Department and Secretary of
State George Shultz were not
because It supposedly took
Council^ not the Department Of Ztate

creature^ and certainly had close, almoct daily contact with ^..w
y.TC . But we worked within the State Department, and no one in the

happy with the Public Diplomacy Office
orders from the National Security
The Office was an inter -a^jency

\ —

'ffice ever had any doubt b'.

-.at we worked for George Shultc.

The
about
tradi
dcmai
found
hcsti
Gentr
mount
and

re

n

W3.: ;
the

onal me a

r asentmen

reatio:

:he

. nr ormin

♦-V

ne

wanting

:y.

and

al
ed

Amer ica
to tel
bar. effo

At

n
1 t

O

te '^

th

fa
issu
he public t

to

^epartme
1 e work
ict the
1 e we r e

state of perpetua

^ ** T ^

-^ t •- ;

Secre
made

P«2

Otto R.3ic*

ta

sona

ry of S
t a poi
lly, some

tat

nt

wha

1 cr

woul

Amt

e by

of

neutr

isis in

d have

a 3 s a w o r

doing

swear

a rar i

on
0

g th

nfs

ing
Fo
ha

he t

aliz

the

be

to

an e
Ott

ty f

ffic

e pu

Bur

lev

re ig

ppy

ruth

e t

Wes

en a
Ven

nd r
0 i

part
e, f;

blic
eau

el,
n S

to

abo
he

tern
ppoi
ecue
un t
n a
he S

of some
for it 1

about for
of Public

however,
ervice Off

see an i
ut Nicarag
United Sta

Hemispher
nted to th
la if he
0 the NSC
s Ambassa
ecretary.

m
mpl
e ig
Aff

we
ice
nte
ua,
tes
e .
e p
ad

3h
dor

i cd
n al

?2par tment

that the

iairs - -the

3ir£--h3d beor.

found 1 i •■ *■ 1 ■=

rs working the-

n 3 1 v e c a rr.p a 1 3 r.

and of Soviet

by creating a

It ic doubtful

restigious and

displeased the

ultz, in fact,

to Venezuela

In closing, let me say that it would be a setback for our form of

participatory democracy

future President of either party is

precluded from telling the American people what threats his
Administration perceives, and what responses are being taken t; r.-i*;
these challenges. I hope your Committee encourages, rather then
discourages, the maximum flow of information to the public 3t:_t
Central America. Legislative muzzling of the Executive Branch will
weaken our democracy, which must be based on an informed cni
e'

Sincers'ly,

'^^^iX^ea^tt'

Lawrence L. Tracy
Colonel, U.S. Army [Re

629

APPENDIX E

0^—9 %. PASCtLL HOMOA. V1C| lintflMII

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100M0 JR. MflW MMH HfMffV j htOI UiWM

^Mtt. Tiiua -"*' couffTiA Nffw icraffv

LOUi fS 0*«iO *'*^ MeCOUUM 'LOWU

iSl ZS:^^.^ U.S. HOUSE OF REPRESENTATIVES — --o-o

« .o«>«|^ SELECT COMMITTEE TO INVESTIGATE 'SS:i*vrcS;r SS^^j^Ji^'cr-T.?"

w M^i^ilf^ (^i:^ »w »uwa COVERT ARMS TRANSACTIONS WITH IRAN

CASfV MIUJA. tTA/f DMKTON

UNITED STATES CAFITOL

WASHINGTON. DC 208 IS
(202) 22S-7902

July 23, 1987

MEMORANDUM

TO: Chairman Hamilton
John Nields

FROM: Robert A. Bermingham ^

RE: Allegations Re: Contra Involvement With Drug Smuggling

Synopsis

Our investigation has not developed any corroboration of
media-exploited allegations that U.S. government-condoned drug
trafficking by Contra leaders or Contra org«mizations or that
Contra leaders or organizations did in fact take part in such
activity. The Select Committee on Narcotics Abuse and the
Crime Subcommittee of the Judiciary Committee have been
conducting investigation in this area, but, to date, have not
developed concrete evidence. The Crime Subcommittee and the
Senate Foreign Relations Committee are continuing their
inquiries, as is the Special Counsel. It is recommended that
after coordination with Chairman Innouye, the Joint Committee
issue a statement to the above effect and pledge cooperation
with the Senate and House ongoing investigations.

Details

During the course of our investigation, -the role of U.S.
government officials who supported the Contras' and the private
resupply effort, as well as the role of private individuals in
resupply, were exhaustively examined. Hundreds of persons,
including U.S. government employees, Contra leaders.

630

- 2 -

representatives of foreign governments, U.S. and foreign law
enforcement officials, military personnel, private pilots and
crews involved in actual operations were questioned and their
files and records examined. Despite numerous newspaper
accounts to the contrary, no evidence was developed indicating
that Contra leadership or Contra organizations were actually
involved in drug trafficking. Sources of news stories
indicating to the contrary were of doubtful veracity. There
was no information developed indicating any U.S. government
agency or organization condoned drug trafficking by the Contras
or anyone else.

The scope of our investigation does not specifically
include determining whether the Contras have been independently
or individually involved in drug trafficking. The Senate
Foreign Relations Committee, particularly Senator Kerry; the
House Select Committee on Narcotics Abuse and Control under
Rep. Rangel; and the Crime Subconnittee under Rep. Hughes of
the Judiciary Committee, have been looking into this specific
subject for some time. They have travelled to Central America,
interviewed witnesses there and in Miami and have held
hearings. Rep. Rangel is quoted in the Washington Post,
7/22/87, as stating his investigation, which started in June of
1986 and includes reams of testimony from hundreds of
witnesses, developed no evidence which would show that Contra
leadership was involved in drug smuggling. His Committee is to
give its information to the Crime Subcommittee of the Judiciary
Committee which will continue to investigate whether U.S.
government officials deliberately ignored drug dealing by
individuals who carried supplies to the Contras. The Judiciary
has engaged a Miami-based investigator.

DEA and Justice have issued statements disclaiming any
concrete evidence of such activities by U.S. government
officials. Contra leaders or Contra organizations.

Dave Faulkner, Investigator, Senate Select Committee,
advised that the Senate investigation was also sxibstantially
negative with regard to Contra drug smuggling. On 7/21/87,
Faulkner and the writer conferred with Hayden Gregory, Counsel,
of the Crime Subcommittee of the Judiciary. He confirmed that
his committee has been and continues to investigate the
question of U.S. government -sponsored Contra organizations
being involved in drug smuggling. His investigation, including
interviews in Central America and Miami of many of the persons
named in the newspapers as suspects, has been inconclusive to
date. He confirmed that several of those involved have also
been questioned or deposed by the ongoing investigation by

631

- 3 -

Senator Kerry. Gregory confirmed the newspaper account that
Representative Rangel ' s committee is deferring to the Judiciary
in this matter. He also stated he has, to date, developed no
pertinent information above the level of "street talk".

During the course of our investigation, we examined files
of State, DoD, NSC, CIA, DEA, Justice, Customs and FBI,
especially those reportedly involving newspaper allegations of
Contra drug trafficking. We have discovered that almost all of
these allegations originate from persons indicted or convicted
of drug smuggling. Justice has stated that such persons are
more and more claiming, as a defense, that they were smuggling
for the benefit of the Contras in what they believed was a U.S.
government-sponsored operation. Typically, they furnish no
information which can be corroborated by investigation. In
addition to the above-mentioned negative file reviews,
interviews with employees of these U.S. agencies have also been
negative.

Contra leaders have been interviewed and their bank records
examined. They denied any connection with or knowledge of drug
trafficking. Examination of Contra financial records, private
enterprise business records and income tax returns of several
individuals failed to locate any indication of drug trafficking.

It is known that the Special Counsel is looking into this
area and that the FBI has pending investigations regarding
similar allegations.

Conclusion

It is felt that additional investigation of these
allegations is unwarranted in view of the negative results to
date, the questionable reliability of the accusers, the fact
that two Congressional committees are already deeply involved
in such investigations and that the matter is currently under
investigation by the Special Counsel.

632

REPRESENTATIVES

SENATORS

illTtCollum

Ly^^^

Michael DeWine

Members, House Select Committee to
Investigate Covert Arms Transactions
with Iran

Members, Senate Select Coimiittee
on Secret Military Assistance to
Iran and the Nicaraguan
Opposition

633

Section
Supplemental and Additional Views

Additional Views of Chairman Daniel K. Inouye
and Vice Chairman Warren B. Rudman

We wish to acknowledge the bipartisan spirit that
characterized our Committee's work and resulted in a
Report signed by all of the Democrats and a majority
of the Republican Members of the Senate Select
Committee. We wish also to recognize the outstand-
ing leadership of our distinguished colleague. Repre-
sentative Lee Hamilton, Chairman of the House
Select Committee.

Tragedies like the Iran-Contra Affair unite our
Government and our people in their resolve to find
answers, draw lessons and avoid a repetition. In inves-
tigations of this magnitude — which involve serious
questions relating to the proper functioning of our
Government — it is just as important to lay aside parti-
san differences and avoid unjustified criticisms as it is
to make the justified criticisms set forth in the Report.
In that spirit, we wish to recognize the cooperation
that we received from the White House throughout
this inquiry.

Once our investigation commenced, the White
House rose above partisan considerations in cooperat-
ing with our far-reaching requests and in ensuring the
cooperation of other agencies and departments of the
Executive Branch. We dealt primarily with three
Counsels to the President: David M. Abshire (Special
Counsellor to the President), Peter Wallison (White
House Counsel), and, for most of the period, Arthur
B. Culvahouse, Jr. (White House Counsel), and his
deputies, William B. Lytton III, Alan Charles Raul
and Dean McGrath. Our experience was the same
with all. They tried their best to accommodate our
demanding requests, to iron out differences, and to
meet our short deadlines in a spirit of cooperation and
good faith. Consequently, in compliance with our re-
quests, over 250,000 documents were produced by the
White House alone; additional large quantities of ma-
terial were produced by other Executive Branch
agencies and departments; and relevant personnel and
officials throughout the Executive Branch, including
Cabinet officers, were made available for interviews,
depositions, discussions, and assistance in facilitating
our work.

Although the House and Senate Select Committees
consolidated their investigations and hearings, the two
Committees nevertheless had their own separate
staffs, styles, requirements, perspectives and experi-

ence. Speaking for the Senate Committee's experi-
ence, we can state that, despite some differences and
some compromises, all of our requests to the White
House and the Executive Branch were fulfilled. The
White House pledged to cooperate with this investi-
gation; and it did.

One of our requests was for excerpts from the
President's diaries. Those of us who keep diaries ap-
preciate the intensely personal and private nature of
the entries we make in such books, confiding our
innermost concerns, aspirations and thoughts. We can
therefore understand the profoundly difficult and per-
sonal nature of a decision to share those private en-
tries with others. The President made that decision in
this investigation. Because of the importance we at-
tached to the President's diary entries, we asked for
them. Because of our respect for personal privacy, we
agreed not to publish or paraphrase them without the
President's consent.

At our request, and unlike the procedure followed
by the Tower Board, the White House Counsel per-
sonally reviewed all of the President's handwritten
diaries from January 1, 1984 through December 19,
1986, and represented to us that he had copied all
relevant entries. This procedure resulted in far more
complete production than the Tower Board request-
ed, and the results were important to our investiga-
tion. We were able to draw on the diaries in reaching
our conclusions; and we do not fault the President for
his decision that the entries themselves, none of which
alter the conclusions in this Report, should not be
paraphrased in this Report.

In addition to his own diary notes, the President
instructed all other Executive Branch officials to
make their relevant records and notes available to the
Committees. These included the contemporaneous
handwritten notes made by the Secretary of State's
Executive Assistant, describing, among other things,
blunt private conversations between the Secretary of
State and the President. As Secretary Shultz testified,
it was the President's decision that this material,
which played a significant role in our inquiry, be
made available to the Committees, even though, in
the Secretary's words, "I have always taken the posi-
tion in 10-1/2 years as a member of the Cabinet that
these conversations [with the President] are privi-

77-026 0

8/

22

637

Additional Views

leged, and I would not discuss them. This is an excep-
tion, and I have made this material available at the
President's instruction. . . ."

It has been asserted that the White House and a
number of other executive agencies on several occa-
sions delayed production of documents to such an
extent that materials could not be reviewed in time
for witness interviews or public testimony. Again,
that was not our experience, although we sometimes
set deadlines for production of documents that proved
impossible to meet. Further, it is a misconception that
the Committees did not receive access to Admiral
Poindexter's telephone logs until after Colonel North
had testified. The Senate Committee received access
to those logs approximately one month before Col.
North testified, and prior to the three sessions of
Admiral Poindexter's deposition commencing June 17.
Moreover, we were able to use the logs with Admiral
Poindexter at the June sessions of his deposition even
though the Independent Counsel objected, under-
standably, to our showing the logs to Admiral Poin-
dexter (as we did) during his examination.

There is one open matter, relating to a request by
the Committees for a computer "dump" of certain
data in the NSC's "PROF" message system. (See the
discussion under "Pending Request" in Appendix C;
and see the Additional Views submitted by Hon.
Peter W. Rodino, Jr., M.C., for himself and 6 other
Members of the House Select Committee.) We wish
to stress the following facts on that matter.

First, the request for the computer "dump" was not
made by the Committees until after the hearings
ended, in August. The request was accompanied by a
number of other, quite extensive demands, seeking,
among other things, a re-review of files that previous-
ly had been searched on behalf of the Independent
Counsel and the Committees, and setting a short
deadline for compliance. We wanted to leave no stone
unturned. The White House Counsel responded to all
of these requests in a September 4 letter which is only
quoted partially in Appendix C and in the Additional
Views of the 7 House Committee Members, but
which also stated:

All of the documents have been reviewed several
times by the FBI and we simply see no useful
purpose in going through this exercise again. . . .
We have fully complied with our responsibility
by identifying and providing all responsive docu-
ments

We are not trying to be obstructive in any way.
We have spent many thousands of man hours
over the last nine months responding to your
many requests for information. We have pro-

duced some 250,000 pieces of paper. We have
declassified almost 4,000 documents. We have fa-
cilitated the interviews, depositions and testimony
of hundreds of Executive Branch employees.

That requests framed so broadly drew objections
would not be surprising to any investigator; and we at
least anticipated that there would be good faith nego-
tiations to narrow the requests so that we would
obtain access to what we really wanted, but could not
precisely define without discussions with the White
House Counsel. That dialogue took place.

Second, after those discussions, the White House
Counsel agreed to permit the Committees to obtain
the deleted PROF messages pursuant to a computer
program that the Committees' experts were confident
they could create. The White House thus agreed in
September to give the Committees what they asked
for — the deleted messages. Unfortunately, the Com-
mittees' original computer experts were unable to de-
velop a computer program that would retrieve the
material. The Committees then engaged a new expert,
who believes it has now developed the appropriate
retrieval program. The White House cooperated with
the Committees' experts in providing information and
personnel to facilitate the development of the requisite
computer program; and the White House agreed to
produce the relevant retrieved entries even after this
Report is filed.

Third, as the Committees note in Appendix C,
"There is no assurance that the material extracted [as
a result of the "dump"] will be anything more than
fragments, and even the fragments may be unrelated
to any matters under investigation." A sample
"dump" performed by the White House pursuant to
specifications of the Committees' experts did not yield
any new information.

Fourth, because nobody has any reasonable expec-
tation that the computer "dump" will produce any
new information, no Member of the House or Senate
Select Committees requested or suggested that the
Report be delayed pending the outcome of the com-
puter "dump," although we delayed our Report for
other reasons. Nevertheless, in the interest of com-
pleteness, we have asked that the "dump" be pro-
duced after the Report is issued even if it yields, as
White House Counsel believes (based on information
from his computer personnel), only free-floating frag-
ments and "computer gibberish."

Finally, all of the Members of our Committee wish
to note that, in connection with the computer "dump"
request, as with all other of our requests throughout
the investigation, the record has been one of coopera-
tion by the White House and the Executive Branch —
a record which we hope will serve as precedent for
future Administrations.

638

Additional Views of

Honorable Peter W. Rodino, Jr.,

Honorable Dante B. Fascell, Vice Chairman,

Honorable Thomas S. Foley,

Honorable Jack Brooks, Honorable Louis Stokes,

Honorable Les Aspin,
and Honorable Edward P. Boland

We have all joined in voting for the joint Report of
the Select Committees, and wish to commend the
Chairmen and the staff for their extraordinary efforts
in assembling the voluminous factual information
gathered during our investigation and crafting it into
a fair and credible report. Obviously, it would have
been impossible to draft a report with which all the
Members of the Committees would have agreed in
every particular; the subject is far too complex, the
information subject to too many different shadings,
and the unresolved questions too numerous to expect
unanimity. Nonetheless, we wish to emphasize our
strong support for the Report in general and for the
work of the leadership of the Committees in produc-
ing a document that a majority of Members could
endorse.

We would emphasize, however, that the Report is
based solely on the documents, testimony, and other
information available to the Committees. Unfortunate-
ly, not all information requested by the Committees
was in fact made available, and this has deprived us of
material that quite possibly could resolve a number of
key issues.

Along this line, we are therefore submitting these
additional views in order that the public record be
absolutely clear with respect to the production of
materials by the White House. For, despite its repeat-
ed public assurances, the White House did not pro-
vide the Select Committees with all the documents
and information requested in the past months.' Of
paramount concern to us is the outright refusal of the
White House to provide certain critical computer
records possibly containing directly relevant informa-
tion on some of the remaining key unresolved ques-
tions of the Iran-Contra episode. Experts from Price
Waterhouse, hired by the House Committee, met with
White House communications specialists and, after
some study, concluded that more information could
be in the White House computer system that had not
yet been produced. Much of this information was

previously thought to be destroyed, but, according to
our experts, could still be retrieved.

White House Computerized
Documentation

On August 7, 1987, after public hearings were con-
cluded. Chairman Hamilton wrote to the White
House stating that our investigation was continuing
and requesting White House information stored in the
computer system.^ On August 31, 1987, the House
Select Committee sent a more detailed letter listing a
number of priority steps required in the review of
White House and NSC computer records.^ On Sep-
tember 4, 1987, White House Counsel Culvahouse
responded, stating that "We cannot and will not be
able to meet that [September 4] deadline" for produc-
ing the materials requested by the Committee on
August 31.* Culvahouse cited time constraints and
previous White House compliance with Committee
requests, and added that portions of the request had
"no apparent legislative purpose and appear to be
more appropriate for a prosecutor's request."^ Culva-
house concluded as follows:

In view of all of these factors, and with a due
regard for protecting sensitive national security
information unrelated to the Committee's investi-
gation, separation of powers principles and the
Constitutional prerogatives of both the Legisla-
tive and Executive Branches, I respectfully rec-
ommend that the Committee reconsider its re-
quests and focus on those tasks that both are
relevant to the performance of its legitimate legis-
lative function, and which, in view of the fact
that the Select Committees' report will be issued
next month, are possible to accomplish in a
timely fashion.^

Mr. Culvahouse's response flies in the face of the
President's promises of complete cooperation. The

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Additional Views

suggestion that the White House computer records
should not be produced in order to protect "national
security information" and because of "separation of
powers principles and Constitutional prerogatives"
[read: "executive privilege"] is completely without
merit' and raises legal arguments that have long since
been discredited.

It is for the Select Committees, not the White
House, to determine what documents and information
are "relevant" and needed to fulfill our "legitimate
legislative function." In this instance, the relevance of
the White House computer records simply cannot be
questioned. In its August 31, 1987, letter, the House
Select Committee requested that certain specific com-
puter "dumps" be performed by the White House in
order to retrieve information from the computer
system.* These included the following key materials
that were not produced:

1. PROF Notes

Admiral Poindexter testified that he had deleted
PROF messages that he wrote from his computer. As
the Committee's experts discovered, however, Poin-
dexter could have deleted his PROF messages from
his computer screen, and the messages would not
have been deleted from the system itself — only from
the user's screen. Therefore, although Poindexter
thought he had deleted the messages from the system,
he had not. Obviously, the messages that he purposely
deleted from the directory are of critical importance
to the Committees. Presumably, Poindexter did not
destroy irrelevant messages.

The Committees also discovered that the White
House reviewed all "live" PROFs only for North and
Poindexter, and conducted only a more limited
review of PROFs for other NSC staff. It is entirely
possible that two additional categories of messages
that were not provided are retrievable from the
system: (1) PROFs deleted by North and Poindexter
sent to others on the system; and (2) "live" or deleted
messages to or from users other than North and Poin-
dexter not discovered by the more limited review.

After the White House refused to "dump" all of the
live and deleted material from the PROF notes of the
principals in this investigation, the Committee sought
alternatives. Its experts attempted to devise a program
that would separate out the deleted materials and
retrieve them in a readable format. In order to write
the program, the experts asked the White House for
access to the NSC system in order to understand the
system and to facilitate the writing of the program.
Again, the White House refused, on national security
grounds.

That left the experts with no choice but to go to
outside system programmers to try to recreate the
system in order to write the program. Without the
on-site inspection of the White House system, and the
initial participation of an expert who actually worked
the system, what would ordinarily have taken only a
matter of hours or days took weeks to try to solve.
As of the time of this Report, a working program still
has not been completed; moreover, there is no guar-
antee that the finished program will actually function
in the White House system.

Therefore, although the Committee made a valiant
effort to retrieve PROF notes that could be critical to
the investigation, the lateness of the discovery that
materials could possibly be retrieved from the White
House computer, combined with the lack of White
House cooperation, made the Committee's task impos-
sible. As a result, the documentary record is not com-
plete and our conclusions are qualified.

2. Diskettes

Many critical documents, including the key diver-
sion memorandum, were typed on word processing
equipment that utilized diskettes. Fawn Hall stated
that she used these diskettes to alter some documents
on November 21, 1986. In fact, the diversion memo-
randum itself was found on Hall's diskettes. However,
the Committee never received any diskettes so that it
could run a complete print-out of all the documents
or data on them. A full print-out could have disclosed
all documents typed onto the diskettes, even if they
had been deleted from the user's directory. The origi-
nal diskettes are in the joint custody of the Independ-
ent Counsel and the White House. Although the
Committee apparently received a written inventory of
over 90 diskettes and relevant documents printed
from the diskettes, this production did not include
deleted material. Without that information, it is im-
possible to say that there were not other diversion
memoranda or other pertinent documents.

3. Other Systems

The Committee learned that some NSC employees
had access to other computer systems, including
microcomputers and a VAX minicomputer system.
Although the White House stated that the key NSC
employees either did not have these computer systems
or did not use the systems because they were so new,
the Committee did request a list of users and invento-
ry to determine whether the principals of our investi-
gation had access to these systems. The Committee
also requested a briefing on the NSC "fiashboard"
system that transmitted messages within the NSC.
These requests were not granted.

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Additional Views

Section III (Minority)

1. Because of President Reagan's personal promise that
the executive branch would fully cooperate with the Com-
mittees in their investigation, the Committees did not issue
subpoenas to any person or agency of the executive branch.
However, the White House and a number of executive
agencies either belatedly produced or withheld information
requested by the Committees. This delayed production, non-
production, and non-compliance with Committee requests
made witness interviews difficult, made it necessary that
some witnesses be re-interviewed, and complicated the
Committees' preparation for public hearings.

2. Letter from Lee H. Hamilton, Chairman, to Arthur B.
Culvahouse, Jr., Counsel to the President, August 7, 1987.

3. Letter from John W. Nields, Jr., to Alan Raul, Associ-
ate Counsel to the President, August 31, 1987.

4. Letter from Arthur B. Culvahouse, Jr., to John W.
Nields, Jr., September 4, 1987, at 2.

5. Id.

6. Id., at 3.

7. For example, all staff members of the Select Commit-
tees had the necessary security clearances to review all
documents relevant to our inquiry.

8. The computer experts employed by the Committee
estimated that it would take only one day to perform the
requested "dumps."

Peter W. Rodino, Jr.
Jack Brooks.
Edward P. Boland.
Thomas S. Foley.
Les Aspin,
Dante B. Fascell.
Louis Stokes.

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Additional Views of

Honorable Peter W. Rodino, Jr.,

Honorable Dante B. Fascell, Vice Chairman,

Honorable Jack Brooks,

and Honorable Louis Stokes

We support the joint report of the Select Committees
and are pleased that a bipartisan majority of Members
of the House and Senate voted to adopt it. In particu-
lar, we wish to commend the Chairmen of the two
panels for their fair and impartial leadership during
the investigation and for their efforts to produce an
objective report based on the facts we discovered. We
also believe it is important to take note of the pains-
taking, professional work of the staffs of the Commit-
tees over the past several months. They have done an
extraordinary job in preparing for and guiding us
through the public hearings, and in assembling the
massive amount of information the Committees gath-
ered into a comprehensive and readable report.

While we support the Committees' report, we are
including in these views some additional comments on
the difficulties caused by delayed document produc-
tion by the executive branch, on the Attorney Gener-
al's role in the Iran-Contra matter, and on NSC in-
volvement in criminal investigations and prosecutions.

Unresolved Questions, Missing
Documents, Unexplored Leads

Quite obviously, the Committees were not able defini-
tively to answer every question about the Iran-Contra
episode, particularly with respect to the roles of the
President and his top advisers. Many of these gaps in
the Report were beyond our control; the death of
CIA Director Casey, the destruction of key pieces of
evidence by Admiral Poindexter, Colonel North and
his secretary, and the failure of many witnesses to
recall central events deprived us of much vital infor-
mation and made it virtually impossible completely to
reconstruct what happened.

However, two other factors also affected our ability
to follow leads and strengthen the factual record.
First, setting a deadline by which our Report was to
be completed was a decision of enormous magnitude
and appreciably complicated our task. Second, be-

cause of President Reagan's personal commitment that
the executive branch would fully cooperate with the
Committees, we did not issue subpoenas to any person
or agency in the executive branch. However, the
White House itself and a number of other executive
agencies on several occasions refused to produce doc-
uments or delayed production to such an extent that
the materials could not be reviewed in time for wit-
ness interviews or public testimony.

For example, on January 20, 1987, the Select Com-
mittees initially requested all Department of Justice
documents relating to the Iran-Contra matter. After
that request, the Committees sent at least five addi-
tional letters to the Department prior to the Attorney
General's scheduled appearance on July 28, 1987,
seeking production of documents. Yet, many request-
ed documents were still withheld, and other material
was produced only in heavily redacted form. Still
other material was made available only within days of
Mr. Meese's scheduled appearance, making prepara-
tion for his testimony difficult. It was not until July
17, 1987— two months after the public hearings
began— that the House Select Committee was given
access to the Attorney General's unredacted logs and
calendars. At that time, the Committee was presented
with approximately five full boxes of materials that
the Department had previously refused to produce.
Among other items, the staff review revealed:

— A handwritten log of Mr. Meese's calls on
November 24, 1986, two days after his aides had
discovered the diversion memorandum and one
day after his interview with Colonel North. This
log, which had not been provided at all, included
phone calls at this critical time to Donald Regan,
the Vice President, Robert McFarlane, and John
Poindexter. A handwritten telephone log of Mr.
Meese's calls on November 26, 1986, was also
discovered, which had been withheld. Included
on it were the following phone calls: three with

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Additional Views

Director Casey, one with Donald Regan, one
with Ross Perot and one with Judge Webster.

— Other records of phone calls that were either
withheld or redacted included Mr. Meese's phone
calls with Admiral Poindexter, Colonel North,
Terry Slease, Ross Perot and others.

Even after the July 17 document review, entire
categories of Justice Department documents still had
not been produced. After the Committee yet again
requested the materials, the Department produced a
two-foot high stack of documents, in redacted form,
on Friday night, July 24, 1987, just four days prior to
Mr. Meese's testimony.

In late October 1987, the Department gave the
Committee access to certain relevant Drug Enforce-
ment Administration documents that had repeatedly
been requested — without success — over the previous
months. The Department did not advise the Commit-
tee in advance that most of the documents were in
Spanish and that a translator would be necessary.
Consequently, when a Committee counsel went to the
Department to review the materials, they could not
be read. And the Committees never received copies
of the documents or translations.

There were a number of potentially fruitful leads
that could not be followed because of delayed docu-
ment production and time constraint difficulties. For
example,

— Film producer Larry Spivey stated to the FBI,
and confirmed in his interview with the House
Committee staff, that in early 1985 North told
him that, during a meeting with Attorney Gener-
al Smith and Robert McFarlane, President
Reagan stated that Tom Posey, under investiga-
tion by the FBI for his Civilian Military Assist-
ance activities, should never be prosecuted and
was a "national treasure." Spivey also told the
House Committee that North told him in early
1985 that he (North) could go to jail for violating
the Boland Amendment so he was going to "lay
low" until Ed Meese became Attorney General.
As of the date of the filing of these views, these
statements had not been investigated.

— The Committees did not receive Admiral Poin-
dexter's telephone logs until after Colonel North
had testified. North could not be questioned
about the calls, rendering it impossible to investi-
gate completely all their conversations.

— As noted above, the Committees received
access to Mr. Meese's telephone logs only in late
July. A number of key individuals, whose names
were reflected on the logs, had already been
interviewed by that time, and following all the
leads generated by the logs would have required
re-interviewing witnesses. In the main, this was

not done. For example, Ross Perot called the
Attorney General the day after the diversion was
announced. Perot was never questioned about
that conversation.

— A complete set of Chief of Staff Regan's notes
were not reviewed by the Committees until Sep-
tember. They revealed a conversation between
Perot and Regan in December 1986 in which
they discussed the possible testimony of North
and Poindexter. By the time the Committees
learned of the notes, it was too late to investigate
the conversation.

These are examples of areas that Independent
Counsel Walsh and the standing Committees of the
House and Senate may wish to pursue.

The Actions of the Attorney
General

The Attorney General's actions in this matter take on
a particular importance because of his preeminent po-
sition in our Government. As the chief law enforce-
ment officer of our country, he bears a special respon-
sibility— not only to uphold and defend the Constitu-
tion, but also to assist the President in seeing that our
laws are faithfully executed. In order to discharge
that responsibility, the Attorney General must be in-
dependent, impartial, and aggressive in seeking the
truth.

Yet, when one reviews the Attorney General's con-
duct during the Iran-Contra episode, it is impossible
to avoid questions about his actions. Some of these
questions relate to the legal advice he rendered, some
involve his knowledge of the underlying events prior
to the time he began his November 1986 "inquiry,"
and some relate to the "inquiry" itself

Several areas are of particular concern:

The record indicates that the Attorney General's
legal advice on the 1986 Iranian arms sales was based
not on his extensive research, but only on his aware-
ness of a cursory 1981 William French Smith opinion
and limited reading of the relevant statute and annota-
tions. It was not until nearly a year after the President
signed the January 1986 Finding on the arms sales
that the Office of Legal Counsel was finally told to
prepare the legal memorandums on the sales and Con-
gressional reporting requirements. At that point, the
Department's work appeared to be more a justifica-
tion for what had already taken place than an inde-
pendent analysis of what the law required. Clearly,
the Attorney General owed the President a thorough
analysis of the legal issues involved in the arms sales
before the President moved ahead on his policy.

One also has to wonder about the fact that the
Attorney General expressed no surprise at, and asked
no questions about, the proposal to sell arms to Iran

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Additional Views

when he was presented with the draft January Find-
ing— as Colonel North testified. If he was unaware of
the 1985 pre-finding shipments — as he has claimed — it
is difficult to understand how the Attorney General
would make no comment or raise no questions when
confronted with the startling revelation that arms
were to be sold to Iran — an action in direct contradic-
tion to the President's oft-stated policy.

Mr. Meese insisted that he did not know of the pre-
finding arms shipments until November 1986. The
first he could recall being told about the shipments
was during a meeting at the White House on Novem-
ber 10, 1986, at which Chief of Staff Regan took
detailed notes. During that meeting, Secretary Wein-
berger warned: "what we say will be repudiated," to
which Attorney General Meese replied: "We are
saying only what we did and know has happened, no
violation of laws and policy." This statement was
made eleven days before the Attorney General began
his fact-finding inquiry. This certainly creates the ap-
pearance that the Attorney General had already
reached his legal conclusions before he even had the
facts.

Mr. Meese's November 21-25, 1986 inquiry was the
focus of considerable attention by Committee Mem-
bers during our public hearings. For this inquiry — a
task ordered by the President — Mr. Meese chose to
use friends and political allies rather than experienced
career investigators and staff members of the Depart-
ment's Office of Intelligence Policy and Review. As
Mr. Weld's deposition makes clear, the Attorney Gen-
eral also rejected a request by the head of the Depart-
ment's Criminal Division — which already had an in-
vestigation underway as a result of an independent
counsel request from the House Committee on the
Judiciary — to review the facts in this matter. Mr.
Meese failed to utilize the FBI and to take steps to
preserve relevant documents. In fact. Justice Depart-
ment officials did not even review all the materials
made available to them in NSC offices during the key
weekend. Mr. Meese informed senior White House
officials a day in advance of the impending document
review and immediately thereafter they destroyed rel-
evant files. Because of this, many of the most central
documents in this entire episode have been altered or
destroyed, almost certainly guaranteeing that we will
never know the complete truth about what transpired.
According to Colonel Earl's sworn deposition. Colo-
nel North told him that the Attorney General and he
had actually discussed whether North would have
"24 or 48 hours" before an investigation was begun.

Mr. Meese's essential response to these criticisms
was that he was not conducting a criminal investiga-
tion as the Attorney General, but a "fact-finding in-
quiry" as an "adviser to the President." Moreover, he
stated, he had no basis on which to believe there were
any criminal violations involved. We do not believe
that the factual record supports these assertions.

Mr. Meese cannot avoid his responsibilities as At-
torney General simply by calling himself something
else. He is the Attorney General. He was nominated
by the President and confirmed by the Senate for that
job. Mr. Meese's role as adviser to the President is
not separate from that as Attorney General — it is de-
rived from it. He remained the Attorney General
while he was conducting his inquiry for the President.
And it was necessary for those who were the subjects
of his inquiry to understand that they had an obliga-
tion to tell him the truth, precisely because he was
acting as the chief law enforcement officer of the
country. To the extent he conveyed a different im-
pression, he served neither the President nor his office
well.

The Attorney General's contention that he had no
reason to believe there was any possible criminality
involved is belied by the facts. Leaving aside the
possibility that, even prior to November 1986, Mr.
Meese may have had a far greater understanding of
the Iran-Contra matter than we have been led to
believe, the information that he possessed at the be-
ginning of the inquiry was more than sufficient to
require the involvement of the Criminal Division. For
example:

— Mr. Meese knew that the Criminal Division
was already conducting an inquiry into the in-
volvement of the Vice President, Secretary
Weinberger, CIA Director Casey, Admiral Poin-
dexter, and Colonel North because of a House
Judiciary Committee independent counsel request
made after the Hasenfus crash. All of these indi-
viduals were on Mr. Meese's list of proposed
interviews put together at the beginning of his
inquiry.

— Mr. Meese knew that efforts had been made to
submit false testimony to Congress. On Novem-
ber 20, 1986, the Attorney General was present
at a meeting of senior officials at the White
House at which CIA Director Casey's proposed
testimony to the Intelligence Committees was dis-
cussed. Later that evening, Mr. Meese learned
that the changes to Casey's testimony made at
that meeting were incorrect. This was not a mere
dispute over the facts; it was of sufficient import
that the chief legal officer of the State Depart-
ment threatened to resign if the testimony was
not corrected. On the evening of November 20,
the Department of Justice was told of documen-
tary evidence contradicting the proposed testimo-
ny, and no later than 8:30 a.m. on November 21,
the Department was advised of further informa-
tion suggesting that certain statements were false.
An experienced investigator would have at least
suspected a possible cover-up.

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Additional Views

— Notations included with notes of a meeting Mr.
Meese attended on the afternoon of November 2 1
indicate that Department officials discussed the
possible diversion of TOW missiles to the Con-
tras.

— Also on the afternoon of November 21, Mr.
Meese interviewed Robert McFarlane, and con-
cerns were raised about the legality of the 1985
arms shipments to Iran. These concerns should
have been heightened the next morning when
CIA General Counsel Sporkin told Mr. Meese
about the December 1985 finding retroactively
validating arms shipments, an action of dubious
legitimacy.

— On Saturday morning, November 22, Mr.
Meese interviewed Secretary of State Shultz. Ac-
cording to his testimony and the notes of his
assistant who was present at the interview, Mr.
Shultz expressed concern about the relationship
between the Iran arms sales and the Contras be-
cause of the involvement of Southern Air Trans-
port in both projects. The possibility of such a
relationship should have been reinforced in the
Attorney General's mind since he also knew that
(1) Colonel North handled both the Iran and
Contra accounts at the NSC and (2) Admiral
Poindexter, who was involved in the arms sales,
had previously called him to delay the Southern
Air Transport investigation on the basis of the
Iran situation.

— Finally, at lunch on November 22, Mr. Meese
learned of the diversion memorandum.

Despite this information — and additional evidence
the Attorney General received in the following
days — he still took no steps immediately to call in the
Criminal Division or preserve the relevant documents.
In fact, letters were not sent to the key agencies and
departments, including the White House, telling them
to segregate and protect their documents, until No-
vember 28 — six full days after the diversion memoran-
dum was discovered. In the interim, as the press had
already reported, Colonel North had destroyed cru-
cial NSC documents.

Mr. Meese also did not interview key witnesses
promptly, nor did he seek to preserve independent
recollections by preventing potential witnesses from
contacting each other to synchronize their versions of
events. Many key individuals were not interviewed at
all; others were interviewed, but, for unexplained rea-
sons, were not asked obvious — and crucial — questions.
Mr. Meese left in the middle of the North interview;
he interviewed Poindexter alone in his office for five
minutes, did not show him the diversion memoran-
dum, did not specifically ask him about the Presi-
dent's role or other key questions, and took no notes;
he interviewed Vice President Bush alone for a

matter of minutes and took no notes; he only spoke
briefiy with Secretary Weinberger by phone, and he
did not interview Director Casey because he said he
was certain Casey was not involved and thought he
already knew what Casey's answers would be to the
questions he never asked.

The President had directed the Attorney General
to find the facts. The American people expected the
facts. Neither was served by an inquiry that left key
questions unanswered.

Moreover, on several fronts, the Attorney Gener-
al's statements are not convincing. For example, Mr.
Meese testified that Director Casey was not involved
in the diversion, and that he and Casey did not dis-
cuss the diversion until November 25, at which time
Casey argued that all the information should be made
public.

Yet the Attorney General and Director Casey had
a close personal relationship. In the July 14, 1980,
edition of the Washington Star, Mr. Meese is quoted
as stating: "I discovered Casey." Mr. Meese and
Casey worked together in the Reagan presidential
campaign and Mr. Meese testified that he and Casey
were personal friends and that their professional and
social relationship brought them into contact fre-
quently. Mr. Meese's logs and calendars reflect nu-
merous calls and meetings with Mr. Casey over the
years, some at his home.

According to the testimony of Colonel North,
Casey (1) was aware of the 1985 HAWK shipment
roughly contemporaneously; (2) knew of the diversion
before the fact and may even have suggested it; (3)
was shown a diversion memorandum drafted by
North for Presidential approval as early as February
1986; (4) spoke to North "several times a week"; (5)
had "specific and detailed knowledge" of the Contra
resupply operation; (6) suggested to North that he
recruit Secord for the operation; and (7) told North
that someone senior to him would have to "take the
hit." Colonel North's testimony about Casey's knowl-
edge is supported by the deposition testimony of
Colonel Earl. It is also supported by the testimony of
Mr. McFarlane, to the extent that it was McFarlane's
impression that North and Casey met often and that
North seemed to be taking direction from Casey.

The Attorney General spoke to Casey and met
with him repeatedly during the key period of Novem-
ber 20-25, 1986. On November 20, they had a phone
call and later a meeting with others lasting at least 1
1/2 hours. On November 21, they had a phone call
after the Attorney General interviewed McFarlane.
On November 22, the day the diversion memorandum
was discovered, they had a morning phone call, an
afternoon phone call, and a one hour meeting at
Casey's home. The afternoon phone call from Casey
to the Attorney General came just six minutes after
North called Mr. Meese. On November 24, they had
a meeting, with a number of other senior officials. On

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Additional Views

November 25, they spoke by phone at 6:30 a.m., and
met at Casey's home immediately thereafter.

In view of the foregoing, it is difficult to believe
that Casey did not share with Mr. Meese any of his
apparently extensive knowledge about the 1985 arms
sales, the diversion, and Colonel North's activities at
any time throughout 1986 (including the key Novem-
ber inquiry weekend) until the morning of November
25, when, according to Mr. Meese, Casey told him
that Donald Regan had advised him of the diversion.
This is particularly hard to understand since Casey
knew Mr. Meese was conducting an inquiry about
these matters for the President. (The Attorney Gener-
al called Casey on November 21 to arrange inter-
views of CIA personnel as part of this inquiry.) One
also wonders how Mr. Meese could be so certain
Casey had no role in the diversion and how he could
conduct a complete fact-finding for the President
without even asking the Director of the CIA about
these subjects.

The Attorney General's press conference on No-
vember 25, 1986, also raises troubling questions. The
Attorney General stated that the President had not
known of the Israeli pre-Finding arms shipments to
Iran and that the proceeds of the arms sales had been
sent directly from the Israelis to the Contras; both
these statements were wrong and were contrary to
the information Mr. Meese had received during his
inquiry. A number of his other pronouncements at the
press conference were of dubious accuracy, and it
was at best premature — given the nature of his in-
quiry— for Mr. Meese to state categorically that nei-
ther the President nor any Cabinet official knew of
the diversion. Mr. Meese also made the following
statement during the conference:

I think every member of the Administration owes
it to the President to stand shoulder-to-shoulder
with him and support the policies that he has —
the policy decisions he has made as well as to
stand by him when something has happened
which the President didn't know . . .

The Attorney General is supposed to be an inde-
pendent and impartial enforcer of the law. How can
he, then, stand "shoulder-to-shoulder" with the Presi-
dent and tell other witnesses to do so, and still aggres-
sively and objectively seek and find the truth?

We would also note that Mr. Meese was unable to
answer many important questions posed by the Com-
mittees in his deposition. Although the Attorney Gen-
eral testified in deposition at some length, he respond-
ed that he did not know, could not remember, did not
recall, had no recollection, or some similar formula-
tion some 340 times.

Mr. Meese's failure to involve the Criminal Divi-
sion in the November investigation is also troubling.
Former officials of the Justice Department from both
this and previous administrations have emphasized

that it has been the Department's policy to bring in
career investigators and prosecutors in sensitive situa-
tions as quickly as possible to insulate the Department
from criticism.

Officials currently within the Justice Department
also believed that the Criminal Division should have
been involved more promptly in the November in-
quiry. As we have already noted. Criminal Division
head William Weld stated in deposition testimony that
he sought to involve the Division in the inquiry on
November 21. Although Mr. Meese was not present
at the November 21 meeting at which Mr. Weld
argued that the Criminal Division should be brought
into the fact-gathering regarding the arms sales, he
clearly was aware of Mr. Weld's feelings. In fact, on
November 24, after the diversion was confirmed, the
Attorney General called Mr. Weld and told him that
the Criminal Division had purposely been kept out of
the investigation. Another Department official — Asso-
ciate Attorney General Stephen Trott — stated in his
deposition that, had he known all the facts, he be-
lieved it would have been appropriate to involve the
Division as of the evening of November 20.

Because of the Attorney General's failure to act
promptly to preserve documents, to conduct thor-
ough interviews — and in some instances, any inter-
views— of the major actors in these events, we may
never know the answers to many of the key questions
that have been raised by this affair. Regrettably, in
the minds of many, the issue will always remain as to
why the questions were never asked.

NSC Involvement in Criminal
Investigations

We concur in the facts as set forth in Chapter 5 on
NSC involvement in criminal investigations, but there
are several additional issues that should be noted.
First, as the chapter explains, the NSC at several
points attempted to either interfere with an ongoing
investigation or initiate an investigation against those
perceived to be opposed to their activities. While the
chapter properly ascribes blame to the NSC for such
interference, it seems to absolve the law enforcement
agencies of any responsibility for accommodating the
NSC's requests. But the law enforcement agencies in
these cases are not entirely without responsibility.
During 1985-1986 there were numerous leads, both
from the media and from criminal investigative re-
ports, which indicated that North was involved in a
private Contra resupply organization. These leads
were never pursued until after the Hasenfus crash
when members of the House Judiciary Committee
requested that these allegations be investigated and
that an independent counsel be appointed. Further-
more, officials from the FBI, Customs, and the De-
partment of Justice went out of their way to provide
North with information regarding criminal investiga-

647

Additional Views

tions. (See e.g., the Kelso and Miami Neutrality Act
cases, etc.). North used this information to conceal
and divert attention away from his unlawful oper-
ations.

Our nation has painfully learned from past experi-
ence that a democracy cannot exist when those re-
sponsible for enforcing the law can be manipulated
for political purposes. Law enforcement officials must
be ever vigilant against attempts to use their vast
powers for such purposes. In these cases, some law
enforcement officials exercised questionable judgment
in allowing North and Poindexter to interfere with
criminal investigations.

In addition, there are several other facts that we
feel are important, which deal primarily with the
Kelso, Miami and Terrell investigations.

1. The Kelso Investigation

The significance of the Kelso section in Chapter 5
of the Committee report is not entirely clear from the
facts as stated in the chapter. In order to understand
why Owen and North were so concerned about
Kelso, one must understand just what Kelso was
doing and learning in Costa Rica.

During the summer of 1986, Kelso and another
Customs Service informant went to Costa Rica to
investigate a counterfeiting and drug ring. Later in
August, Kelso contacted the Customs Service and
agreed to be debriefed by them and the Secret Serv-
ice in Costa Rica.' The Secret Service agents left
Costa Rica before the debriefing took place. Howev-
er, two Customs agents went to Costa Rica and de-
briefed Kelso and his companion. They told Customs
that the DEA agents in Costa Rica knew the location
of drug laboratories and had been paid to conceal the
location of narcotics.^

The Customs agents then went to the DEA agents
in Costa Rica and told them what Kelso had said.
That night Kelso and his companion were arrested at
their hotel by the local police accompanied by a
DEA agent. They were questioned by the police and
the DEA. They had on their persons papers that
included the radio call signals of the DEA agents.^
After being questioned, Kelso was released and
driven to the Hull ranch by Costa Rican security
personnel.'' Hull asked Kelso to explain his activities,
which Kelso did. Hull called Costa Rican intelligence
officers, who came to his ranch to arrest Kelso. Shots
were fired and Kelso escaped.^

When Kelso returned to the United States, he
wanted to surrender to U.S. authorities. During those
negotiations, his attorney provided to the Assistant
U.S. Attorney tape recordings Kelso made while un-
dercover in order to demonstrate that Kelso was
working for U.S. intelligence agencies. (Kelso had
previously passed a polygraph examination on the
question of whether he worked for the CIA.^) These
tapes were provided only under the express condition

they not be sent to Washington, D.C. where, Kelso
feared, they could get into the "wrong hands".'

Meanwhile, Ambassador Tambs sent a complaint
about Kelso to U.S. Customs, which reached William
Rosenblatt, the Assistant Commissioner for Enforce-
ment.* Rosenblatt insisted on getting the Kelso tape
recordings from the local Customs agent, even though
the Assistant U.S. Attorney had told the agent that
the tapes could not be sent to Washington, D.C. Ro-
senblatt testified that he was not aware of that condi-
tion. However, the fact remains that he gave his only
copy of tape recordings made by an undercover
source to a total stranger — Rob Owen. Owen did not
tell Rosenblatt he worked for North or the CIA. He
told him he worked for a private organization.^

Not surprisingly, Owen never returned the tape
recordings. Instead he made two trips to Costa Rica
to meet with the DEA agents,'" When asked about
the incident during his deposition, Owen refused to
answer questions, claiming a questionable "attorney
work-product" privilege. Owen claimed that all of his
activities during the Kelso incident were attempts to
investigate allegations made against him in the Avir-
gon-Honey lawsuit. Even if this were true, there was
no legal basis for refusing to answer the Committee's
questions. Furthermore, if true, it would mean an
even more egregious misuse of the criminal investiga-
tive process. That is, if North and Owen were using
the Customs Service to provide them with criminal
case information in order that they might defend
themselves in a civil lawsuit, it was a flagrant abuse of
North's position at the NSC.

2. The Miami Neutrality Act Investigation

Due to the lack of time, the Committees were not
able to follow every lead, examine all of the docu-
ments, or interview other actors in the Miami Neu-
trality Act investigation (such as the defense attorney,
the targets and subjects of the investigation and
others). However, some additional information that
the Committees learned should be noted.

The chapter in the report omits a description of
how the investigation began. It actually began in Jan-
uary 1985 when the FBI in Alabama was investigat-
ing the activities of Tom Posey and the Civilian Mili-
tary Assistance (CMA). Plans had been made by
CMA to send a force of mercenaries to train Contra
forces and attack the Southern front of Nicaragua.
North wanted to keep on top of the situation.' '

In January 1985 a film producer, Larry Spivey,
called FBI Special Agent Michael Boone in Los An-
geles from a motel in Miami. '^ Spivey had just met
with Jack Terrell, Tom Posey, and others planning
the incursion. Spivey had earlier met with North.
North had also called Boone to warn him that Adolfo
Calero believed that Terrell was dangerous and his
invasion plot was untenable. Boone asked the FBI in
Miami to interview Spivey and Posey. '^

648

Additional Views

FBI Agent George Kiszynski interviewed Posey
and Spivey at the FBI office in Miami. During the
interview of Posey, Spivey called North from the
FBI office. Spivey told Kiszynski that North was
relieved that the FBI was now involved and in con-
trol of Posey, who had agreed to cooperate with the
FBI.''' Kiszynski's report of the interview was sent to
North, with the approval of FBI headquarters. There-
fore, the FBI knew as early as January 1985 of
North's connection to their investigation of the CMA
and Posey.

Two weeks later, Posey complained to Spivey that
the FBI was not giving him any guidance regarding
what to do. Spivey called the Alabama FBI agent
assigned to Posey and also called FBI Executive As-
sistant Director Oliver "Buck" Revell. Spivey told
them that they should not view Posey as a "target."
He said that North had earlier told him that during a
meeting with Attorney General Smith and Robert
McFarlane, President Reagan told them that Posey
and men like him should never be prosecuted and
called Posey a "national treasure". This statement was
included in the FBI report that was filed. '^

(Spivey also stated to the Committee that, in early
1985, North admitted he could go to jail for violating
the Boland Amendment, so he was going to "lay
low" until Ed Meese was confirmed as Attorney Gen-
eral.'® Time did not permit the Committees to inves-
tigate Spivey 's claim.)

3. The Terrell-Robinette Investigation

The section in the Committee report regarding Ro-
binette's investigation of Terrell and subsequent FBI
cooperation amply illustrates North's attempts to in-
volve the FBI in an investigation of those whom he
perceived to oppose his activities. However, the sec-
tion fails to mention that North and Poindexter sent a
memorandum to the President complaining about Ter-
rell.

On July 17, 1986, North sent a memorandum to
Poindexter claiming Terrell was conducting an
"active measures" campaign against the Contras. '^
North asserted Terrell was the source of Congression-
al and media reports against the Contras. He also said
the FBI believed Terrell might be involved in a plot
to assassinate President Reagan. Poindexter told
North to write a memo to forward to the President,
which he did on July 28, 1986.18

The memo to the President stated that Terrell was
the source of anti-Contra allegations and was a coop-
erating witness in the Miami Neutrality Act investiga-

tion involving gun-running, narcotics smuggling and
assassination plots. North failed to mention that it was
actually the pro-Contra forces that were being investi-
gated for these activities. North concluded the memo
by saying: "Since it is important to protect the knowl-
edge that Terrell is the subject of a criminal investiga-
tion, none of those with whom he has been in contact
on the Hill has been advised."'^

4. Tlie Public Integrity Investigation

After the Hasenfus crash, a majority of the Majori-
ty Members of the House Committee on the Judiciary
wrote to the Attorney General requesting a prelimi-
nary investigation to determine if an independent
counsel should be appointed to investigate claims that
North, Poindexter, Casey and others illegally assisted
the Contras.^" This investigation was assigned to the
Public Integrity Section of the Department of Justice,
a section composed of career prosecutors with sub-
stantial experience in investigating allegations against
public officials.

These attorneys canvassed the Department of Jus-
tice, FBI and Customs to determine what investiga-
tions involving the Contras were pending. Neither the
FBI nor Customs revealed their numerous contacts
with North in various criminal investigations. It is a
question the appropriate committees of Congress
should pursue more fully.

More fundamentally, however, the Public Integrity
investigation is important in evaluating the Attorney
General's November 1986 weekend inquiry. The At-
torney General admitted that he was aware of the
Judiciary Committee independent counsel request and
of the Public Integrity investigation. Yet, he inter-
viewed and investigated the activities of North, Poin-
dexter, and Casey without ever informing the career
prosecutors who were already investigating these in-
dividuals. It is standard prosecutorial practice not to
interview the target of an investigation until all the
facts are known. It is also standard practice to check
with other prosecutors to see what evidence they may
have on the targets before interviewing them. Most
importantly, it is not standard practice to question the
targets of another prosecutor's investigation without
first checking with that prosecutor, so as not to inter-
fere with an ongoing investigation. The Attorney
General disregarded these tenets when he did not
include any of the career prosecutors, who were al-
ready investigating North and Poindexter, in his
weekend inquiry.

649

1. Rosenblatt Deposition (9/25/87), pp. 47-48.

2. Rosenblatt Deposition (9/25/87), pp. 71-72; Memoran-
dum of DEA documents (10/28/87).

3. Memorandum of DEA documents (10/28/87).

4. Memorandum of DEA documents (10/28/87).

5. Memorandum of DEA documents (10/28/87); Owen
Deposition (10/1/87), Exh. 1.

6. Interview of Bruce Black, AUSA, (10/28/87).

7. Interview of Bruce Black, AUSA, (10/28/87).

8. Rosenblatt Deposition (9/25/87), p. 44.

9. Rosenblatt Deposition (9/25/87), p. 58.

10. Owen Deposition (10/01/87), p. 21; Memorandum of
Owen Deposition of 10/01/87.

11. Owen Deposition (10/01/87), pp. 11-14, FBI teletype
of Jan. 1985 from Miami (2-6961) to Director file 2-211-3.

12. Letter and enclosure to Sen. Boren from FBI Direc-
tor Webster (4/22/87) re: Neutrality Matters-Nicaragua.

13. Id.

14. Interview of Spivey (10/28/87).

15. FBI teletype (HO 2-211-4) interview of Larry Spivey
(01/13/85); interview of Spivey (10/28/87).

16. Interview of Spivey (10/28/87).

17. Memorandum from North to Poindexter (07/17/86)
N45918-19.

18. Memorandum from Poindexter to the President,
N45896.

19. Id., at N45897.

20. EM- 1 3.

Peter W. Rodino, Jr.
Jack Brooks.
Dante B. Fascell.
Louis Stokes.

650

Additional Views of Senator David L. Boren and
Senator William S. Cohen

Introduction

As the work of the Iran-Contra Committees comes to
a close, it is important to focus on the future and, in
particular, on how to strengthen Congressional over-
sight of intelligence activities. This issue has been a
matter of great concern to us since becoming the
Chairman and Vice Chairman of the Senate Select
Committee on Intelligence in January.

In order to go forward constructively from this
point, we believe it is essential that all the information
developed with respect to CIA's involvement in this
affair should be included in the final Report. This is
important both to the Intelligence Committees in
Congress and to the Director of Central Intelligence
in order to be clear as to what happened, to evaluate
effectively what should be done as a result, and to
determine ways to avoid similar problems in the
future. Accordingly, we provide the following supple-
mental facts and observations regarding CIA assist-
ance to the Nicaraguan resistance as well as the
Agency's role in the Iran initiative.

Moreover, it should be noted that the Iran-Contra
Committees also developed information concerning
the CIA which did not pertain directly to the Iran-
Contra affair, but which raises concerns for the Intel-
ligence Committee. It is our intention to pursue these
matters consistent with our oversight responsibility.

Assistance to the Nicaraguan Resistance

According to information received by the Commit-
tees, certain CIA personnel in two Central American
countries provided support for the Contras and their
private benefactors in a manner contrary to both
Agency policy and restrictions imposed by law. Fur-
thermore, in some cases CIA officials failed to pro-
vide adequate direction and supervision, to make cer-
tain that these kinds of activities would not take
place. In other instances, certain CIA officials with-
held information from inquiries undertaken after the
Iran-Contra affair had become public including those
undertaken by the Agency itself to determine if any
CIA personnel had been used improperly.

The Report refers briefly to certain types of infor-
mal assistance by CIA personnel in one Central
American country in the delivery of lethal aid to the

Contras during 1986, when such CIA assistance was
not authorized by law or by official Agency policy.
According to information available to the Committees
from the CIA, this assistance included numerous oc-
casions in which lethal aid was transported on CIA
helicopters to Contra elements in the field. These
deliveries were approved at least at the level of the
CIA base chief, who was in charge of providing law-
fully authorized forms of communications, intelli-
gence, and humanitarian assistance to the Contras.
Other CIA personnel at the base were also involved,
but did not alert higher authorities until after the Iran-
Contra affair became public. The CIA Deputy Direc-
tor for Operations (DDO) and the Chief of the CIA
Central American Task Force (C/CATF) testified
that they did not authorize these helicopter deliveries
and did not learn of them until 1987.

There is also conflicting evidence as to whether
certain CIA officials acted promptly enough when
first told of the problem. Further study by both the
oversight committees and the Agency itself of the
effectiveness of the CIA command and control system
is clearly in order.

Extensive activities by a CIA chief in Central
America, Tomas Castillo, during 1985-86 to support
lethal air deliveries by private Contra benefactors —
including his role in the acquisition of an airstrip and
his direct secure communications with the private
benefactors and Lt. Col. North — are covered in the
Report. What is not fully discussed, however, is the
responsibility of certain Agency officials for supervi-
sion and control of his activities. At the very least,
there seems to have been a serious failure of commu-
nication between the station chief and his superiors
regarding certain activities he undertook that were
contrary to official Agency policy. Regardless of
whether CIA officials gave confusing guidance or the
station chief disregarded instructions, the outcome
was a breakdown in the process of supervision and
accountability.

Of equal concern is the testimony by the station
chief and the Deputy Director for Operations with
regard to the station chiefs failure to respond fully to
subsequent Executive branch inquiries. The station
chief stated that he limited his responses because of
guidance he believed he had received from the DDO.

651

Additional Views

The DDO denied giving such guidance. In either
case, the result was the withholding of information by
a senior CIA officer from crucial internal inquiries
conducted within the Executive branch.

Furthermore, certain CIA officials admitted that
they evaded questions asked by Members of the
Senate Intelligence Committee when they testified
under oath during the Committee's preliminary in-
quiry into the Iran-Contra affair in December, 1986.
While the White House was urging all officials to
testify fully and completely before the Committee's
preliminary inquiry so that the entire matter could be
resolved promptly, these CIA officials who appeared
as witnesses withheld information about Lt. Col.
North's role in providing support for the Contras.
Whatever may have been the circumstances before
November 25, 1986, there could be no excuse for
denying such information to the Committee after
North's role in the diversion became public.

The DCI has made it clear that he will seek to
strengthen command, control, and accountability
within the CIA — and the oversight committees should
also be active and vigorous in that effort. Senior CIA
officials must develop and implement mechanisms that
keep field operations under control and that provide a
clear chain of responsibility for sensitive decisions.
That was not always the case in the administration of
CIA relations with the Contras in Central America
during 1985-86. Cooperation and trust are essential to
insuring a positive long-term relationship between the
Executive and Legislative branches in this area of
vital national importance. By strengthening our own
internal Senate Intelligence Committee procedures for
the safeguarding of sensitive information, we are
making a concerted effort to contribute to rebuilding
trust. The Agency, for its part, must never fail to
provide full and truthful information to the Commit-
tee sufficient for it to conduct effective oversight.

The Iran Initiative

Somewl -it different concerns are raised by the CIA's
role in t e sale of arms to Iran, treated at length in
the Com» ittee's Report.

The CxA's initial involvement in support of the
November 1985 arms shipment, as the Report points
cut, had not been authorized by a Presidential Find-
ing, itself a violation of the Hughes-Ryan Amend-
ment. The Deputy Director correctly called for a
stop to this activity and had a draft finding prepared
and sent to the White House. Nonetheless, the CIA
continued to provide assistance to the project in the
absence of a signed finding, confirmation of which
came several weeks later in a telephone call to the
Deputy Director. In fact, no CIA official ever asked
to see, or was shown the December 5, 1985 finding,
which purported to provide retroactive authority for
its earher activities. There clearly is a need to

strengthen the internal procedures by which the CIA
assures itself of the authenticity of a Presidential order
before proceeding to provide support to covert oper-
ations.

Relatedly, in their investigation of this part of the
story, the Committees found serious fiaws in the
Agency's recordkeeping system. Messages which
were crucial to establishing accountability for this
misconduct could not be located or reconstructed.

The CIA's later involvement in the U.S. arms sales
to Iran was, of course, authorized in the Presidential
Finding of January 17, 1986, but neither the Finding
nor covering memorandum clearly defined CIA's
role, nor did they mention the role contemplated for
the NSC staff In fact, the CIA's involvement in this
covert initiative was hardly typical. While a few offi-
cials in the CIA bureaucracy were aware of the oper-
ation, it was not treated as part of the Agency's
covert action infrastructure, subject to its own inter-
nal reviews and constraints. Indeed, as the Report
makes clear, the CIA did not control the operation.
Rather, it was the NSC staff that made the operation-
al decisions. The CIA's participation was in large part
confined to acquiring weapons from DOD, and trans-
ferring them to the Secord organization. In most of
the meetings with the Iranians, the CIA representa-
tive was a retired annuitant who was there primarily
because he spoke Farsi and could be used as an inter-
preter. The CIA did not set the agenda for the meet-
ings, nor did it have the final say as to what the U.S.
terms and conditions for the arms sales would be. On
the contrary, the views of CIA professionals, who
objected to using Ghorbanifar, objected to providing
intelligence to Iran, and worried about the security of
the operation, were largely ignored in the process.

Perhaps being relegated to a secondary role in the
execution of the Iran initiative caused CIA career
officials to maintain a "hands-off, leave-it-to-them" at-
titude. Indeed, it is clear from the record that Direc-
tor Casey supported the Iran arms sales and apparent-
ly agreed with the NSC staffs control of them. The
January 17, 1986 finding included direction that Con-
gress not be advised of the initiative, and there was
no subsequent reconsideration in the context of the
statutory requirement for notice "in a timely fashion."
Questions were not raised either about the NSC staffs
control of the operation or about working through
individuals who were viewed with concern by CIA
career officials. This was reflective of a larger pattern
expressing, but not pressing, concerns about actions
taken or decisions made throughout this affair. For
instance, when Director of Operations Clair George
told Director Casey he refused to handle Ghorbani-
far, the Director assigned a non-DDO officer — an an-
alyst— to the task. According to his own testimony,
George raised no objection.

There is no question that the relationship between
intelligence professionals at CIA and their political

652

Additional Views

superiors is one of inherent tension. It is difficult to
raise concerns about initiatives to which the DCI is
committed. Indeed, the Iran initiative seems to sug-
gest that career officials were reluctant, unduly sup-
pressed, or ineffective in bringing their concerns to
the attention of management. In any case, the over-
sight committees, as well as the new Director of Cen-
tral Intelligence, will have to ask whether institutional
restructuring is desirable to assure that CIA profes-
sionals will not be placed in circumstances in the
future in which they find it difficult to raise concerns,
either internally or with the oversight committees.
Finally, in the area of analysis, the Committees'
Report mentions several cases in which intelligence
was misrepresented or otherwise misused to support
policy positions. Questions also remain concerning the
May 1985 memorandum by the National Intelligence
Officer for the Near East and South Asia, which
outlined policy options including the sale of arms to
Iran, along lines similar to those previously presented
to U.S. policymakers by financier Adnan Khashoggi

and former CIA official Theodore Shackley, both of
whom were influenced by Ghorbanifar. Several con-
tentions of that memorandum were used to support
the draft National Security Decision Directive, which
raised the possibility of arms sales to Iran, later reject-
ed by the Secretaries of State and Defense. Less than
a year later, a second intelligence community estimate
effectively reversed the conclusions of the 1985
memorandum.

While this later intelligence estimate corrected the
shortcomings in the first, it is nevertheless of concern
that the earlier analysis may have ignored available
evidence to support a particular policy goal. This is
not clear from the Committees' record. What is clear,
however, is that intelligence analysis must not be
driven by policy. It is a fundamental responsibility of
the oversight committees to ensure that the institu-
tional processes by which analytical judgments are
made are independent and objective.

David L. Boren.
Bill Cohen.

653

Additional and Separate Views of
Senator Howell T. Heflin

This Report should be viewed clearly for what it is —
a consensus report. I do not agree with all of the
language in the Report, nor do I agree with all of its
conclusions and recommendations.

At the beginning of the hearings, I stated that we
were beginning a process of investigation, of affirma-
tion, and of restoration. The investigation and affirma-
tion have been completed, we should now finish the
process of restoration.

The Congressional investigation into the Iran-
Contra Affair is concluded with the publication of
this Report. The investigation has been long, contro-
versial, though, at times uplifting. While the two Con-
gressional Committees have finished their tasks, the
Independent Counsel is still investigating this matter.
It is the responsibility of the Independent Counsel
and, ultimately, the courts, to determine whether any
criminal laws were violated. This was not the Com-
mittees' task.

I believe that the very essence of a democracy is an
informed electorate. Clearly, the hearings have ful-
filled this role. They have served to educate the
American people about the strategic importance of
the Middle East and the dangers we are facing in
Central America. Additionally, the investigation and
the hearings have confirmed my support for a demo-
cratic outcome in Nicaragua and have strengthened
my resolve to see an end to the Soviet and Cuban
presence and the Marxist expansion in Central Amer-
ica.

While I agree with most of the recommendations in
the Majority Report, I would urge the Congress and
the President to consider two additional recommenda-
tions:

1. The creation of a small joint House and Senate
Intelligence Committee, which would include as per-
manent members the assistant leaders of the House of
Representatives and the Senate. Such a Committee
would not only further enhance secrecy, but also
could promote a better relationship between the Ex-
ecutive and Legislative branches and between the two
Chambers of the Legislative branch; and

2. The Chairman of the Joint Chiefs of Staff should
be made a statutory member of the National Security
Council. The hearings revealed the fact that the
Chairman of the Joint Chiefs of Staff, our nation's top
military officer, was not notified of the Iran arms

sales. Even more alarming are contentions that there
was neither an adequate evaluation of the impact of
the arms sales on our own military arsenal and pre-
paredness nor an adequate determination of the effect
of the arms on the Iran/Iraq War. I believe that the
presence of the Chairman of the Joint Chiefs of Staff
would better ensure adequate evaluation of the effect
of National Security Council actions on our nation's
security.

I agree with the following language contained in
Senator Trible's Statement of Additional Views:

The essence of the Iran-Contra Affair lay in the
decision by a few within the National Security
Council Staff to embark on a self-destructive
journey into the privatization of foreign policy.
The pitfalls associated with this departure from
long established principles of government are
well chronicled in the report. The main lessons
are: that a President's staff, no matter how well
intentioned, must always be accountable; that a
President who is deceived and from whom infor-
mation is intentionally withheld is a President
betrayed; and that truth, trust and respect for the
rule of law and the Constitution are indispensable
to the success of our free society.

I also agree with the following statement in Senator
Trible's Additional Views;

The argument that this President failed to honor
his Constitutional duty to "take care that the
laws be faithfully executed" and failed to create
an environment where the rule of law governs
goes too far.

In regard to affirmation, I believe that the hearings
have reaffirmed once again two fundamental truths
upon which our republic is founded:

1 . That a nation of laws does not permit officials of
the government to act above the law; and

2. That a nation of laws does not permit official
acts outside the law.

While I do not believe that the Committees have
the power or ability to address questions of guilt or
innocence regarding any particular individual, I be-
lieve that it is entirely right and necessary for the

655

Separate Views

Committees to make it clear that no one is above the
law, and that the ends do not always justify the
means.

It is my sincere hope that these hearings have dem-
onstrated the urgent need for a bipartisan foreign
policy for Central America. While the Founding Fa-
thers wisely established a system of government
which had natural frictions and conflicts between the
branches built into it; nevertheless, the Executive and
Legislative Branches must learn to work together. We
must do so on matters generally, and we must do so
especially regarding Central America. The United
States of America cannot afford another enemy like
Cuba in the western hemisphere, particularly in Cen-
tral America.

Many questioned the wisdom of holding these hear-
ings. I believe that once again the doomsayers were
proven wrong. The hearings demonstrated that Amer-
ica's system of government draws its strength from
openness and truth. As long as those two cornerstones
of our government are preserved, our democracy
shall persevere and triumph.

While our search for the truth was not flawless,
and this Report is not without its imperfections, we
can feel some sense of accomplishment in that we
now know much more about the Iran-Contra Affair
than before we began. In addition, important national
policies have been aired, debated, and critiqued. If,
indeed, we made these contributions, then our efforts
have not been in vain.

Howell Heflin.

656

Additional Views of Senator David L. Boren

A project of this kind involves hundreds of people
and hterally thousands of hours of work. This report
represents a good faith attempt to accommodate the
views of the many individuals involved and to reflect
a consensus as to the facts and conclusions of the
elected officials responsible for this process. Not sur-
prisingly, with eleven Members of the United States
Senate and fifteen Members of the House of Repre-
sentatives the final product cannot completely satisfy
everyone involved on each particular point. Never-
theless, I support this Report and accept generally its
concepts.

While accepting generally this Report, I cannot say
that I accept every statement contained in the Report,
nor can I say that I would represent each fact or
conclusion in precisely the same way. For example,
three points should be noted as illustrations. Others
could be cited as well.

First, there is a section of the report relating to
alleged improper propaganda activities engaged in by
the Department of State. In my opinion, this matter
was not sufficiently focused upon in testimony taken
by the full Committees to merit reaching final conclu-
sions. As a member of the Senate Committee, I do not
feel comfortable with conclusions being stated in the
Report primarily on the basis of inquiries made by
only a portion of the staff rather than upon testimony
heard by the elected members.

Second, while I do not dispute that certain criminal
laws may have been violated, I do not believe that
these Committees are the appropriate forums in which
to determine, even by implication, whether and which
criminal laws have been broken and by whom. An
independent counsel has been appointed to address
these matters and they are presently pending in the
courts. I believe that these issues properly should be
pursued through the judicial process without com-
ment by the Congress.

Third, I am concerned that the Report may imply
that secrecy in all circumstances is wrong. While no
one believes more strongly than I that government
should be open and accountable to the people, there
remain certain sensitive activities of the government
which must be kept secret to protect our national
security. The taxpayers have invested significant
amounts of money to develop inteUigence sources and

methods which are necessary for our protection as a
nation. The amount of information and activities
which are classified should be held to the absolute
minimum necessary for national security. It should be
emphasized that such necessarily secret undertakings
can and must be subject to appropriate and vigorous
oversight by and accountability to elected officials.
However, it would be unwise to conclude that in all
cases secrecy is wrong. To the extent that this Report
might be taken by some to imply otherwise, I would
respectfully disagree.

Finally, I would like to share some thoughts which
I hope will be of benefit to public officials and Mem-
bers of Congress should there ever be a need to
conduct a similar inquiry in the future.

These comments are certainly not meant to be criti-
cal of the leaders of the current Committees. They
have worked diligently and effectively under very
difficult circumstances. Some of the most thoughtful
lessons learned from the entire proceedings have been
drawn and communicated to the American people by
Senate Chairman Inouye, House Chairman Hamilton,
Senate Vice Chairman Rudman, and House Ranking
Minority Member Cheney. They have my respect and
appreciation.

Let us hope that we have learned enough from the
mistakes of the past that future committees of this
kind will not be required. If history does repeat itself,
however, I believe that some modifications should be
made in the process.

First, the Committees once merged were too large
and unwieldy to maintain an appropriate pace and
focus for their work. While there are definite draw-
backs to joint committees, if circumstances necessitate
the creation of such a committee to avoid duplication
of effort and friction between the two houses, then
that committee should be much smaller.

Second, the Committees should have conducted
their inquiry with greater focus upon the broader
policy questions and constructive lessons to be
learned and with less time focused upon the kind of
examination more appropriate to criminal prosecu-
tions in a courtroom. Congressional committees by
their nature are structured to conduct policy inquiries
as opposed to criminal prosecutions. By having legal
counsel conduct so much of the questioning of wit-

657

Additional Views

nesses, an adversarial courtroom atmosphere was
sometimes established which was not appropriate.
Members of the Committees were carefully chosen by
the leaders of the two houses to reflect a balance in
terms of policy, ideology, and party. The benefit of
that balance is lost when one or two staff attorneys
conduct as much or more of the questioning than the
elected members of the Committees. Attention be-
comes focused upon a contest between attorneys or
between the Committees and the witnesses instead of
upon the valuable lessons that can be drawn from the
testimony to help our country in the future. For ex-
ample, once the questioning of Col. North finally
turned to the elected members of the Committees, the
tone of the proceedings changed markedly from that
which had been established in the first few hours of
his direct examination.

Third, I believe that the activities of the Commit-
tees did not focus sufficiently upon the need to end
the underlying mistrust between the two branches of
government. It is imperative that we rebuild the con-
cept of bipartisan partnership in foreign policy and
key national security areas. Writing more rules and
regulations will not be sufficient to prevent a recur-
rence of damaging tragedies of this kind unless we
also act to restore mutual respect and trust between
the members of the two branches of government and
both political parties.

We must now concentrate on confidence building
measures which will help bring us together. America
must once again speak to the rest of the world with a
single voice when our vital national interests are at
stake. Each branch of government is to blame for the
continuing polarization and escalation of mistrust. The
Congress must understand the need for decisiveness
and continuity in foreign policy that can only come
from allowing the President as Commander in Chief
sufficient freedom to act. Five hundred and thirty-five
Members of Congress cannot act as President or as
Secretary of State. At the same time, the President
must realize that while he may initiate policies, he
cannot and should not be able to sustain them under
our system without the support of the Congress.
Unlike a parliamentary system in which the Cabinet is
itself a part of the same unified institution as the
legislature, our system of separation of powers de-
mands a high level of cooperation and mutual trust
which has been dangerously eroded in the last two
decades. America will not continue to exert influence
as a great nation in world affairs if we do not rebuild
that cooperation.

As I continue to exercise my own personal respon-
sibilities as Chairman of the Senate Select Committee

on Intelligence, the testimony which I have heard as
a member of these Committees has challenged me to
do all that I can to repair that eroded trust. I person-
ally will work as hard as possible to make certain that
the Senate Intelligence Committee safeguards all in-
formation entrusted to it and demonstrates its commit-
ment to a process which will lead to greater candor
between the oversight committees and the intelligence
agencies. At the same time, I will work to make the
oversight process more systematic, to strengthen it
and to make it more effective. While the clarification
of some laws and rules may well be needed, effective
and alert Congressional oversight is the key to appro-
priate accountability in the conduct of classified ac-
tivities.

In retrospect, the country would have gained more
from the hearings if the Committees had focused
more of their time on broader policy questions rather
than spending so much time on factual details which
should and ultimately will be determined by the
courts. Such a process would have also included time
for careful consideration of the reflections and sugges-
tions of leading scholars, statesmen, and public offi-
cials, both past and present.

As I stressed at the beginning, these comments are
not meant to stand as criticisms or second guessing. It
is always easier to see in retrospect what should have
been done. This Senator certainly does not claim the
foresight to have avoided all mistakes. These remarks
are offered solely as reflections of one Senator upon
the experience which all of us have collectively
shared.

In citing areas where I think the process could
have been improved, I certainly do not mean to de-
tract from the many valuable insights gained by these
Committees and reflected in this Report. In the bi-
centennial year of our Constitution, the Report impor-
tantly reaffirms our commitment to the rule of law.
The hearings have clearly dramatized the grave
danger posed to our republic and to the democratic
process when private citizens or public officials, even
those who may have good intentions, seek to subvert
the legal process and substitute their own judgments
for the rule of law. If from these hearings and from
this Report, we all gain a better understanding of our
Constitution and a deeper commitment to its princi-
ples, then the time, and effort devoted in this under-
taking will have been fully justified. I truly believe
that, especially with the passage of time, the work of
these Committees will be judged to have made a
contribution to that worthy goal.

David L. Boren.

658

Supplemental Views of
Senator James A. McClure

In his opening statement before the Committee, Col.
North testified, "It is sort of like a baseball game in
which you [Congress] are both the player and the
umpire. It's a game in which you call the balls, and
the strikes, and where you determine who is out, or
who is safe. And, in the end you determine the score
and declare yourself the winner."

Today, it appears that what Col. North predicted is
exactly what happened. For many reasons, I have
decided that I cannot agree with the Majority, which
has indeed declared itself the winner. Therefore, I
have joined seven of my colleagues in filing dissenting
views which I believe are more objective than the
committees' report. However, there are some addi-
tional points which I would like to make briefly.

Most important, what do we know today that we
didn't know a year ago, when the Iranian arms sale
and the funds diversion were first made public by the
Administration? What do we have to show for the
months of effort and millions of dollars of taxpayers'
money that we have spent? We have identified more
of the individuals involved and spent countless hours
going over their respective role. We have plotted the
intricate financial arrangements and reviewed thou-
sands of written documents, recorded conversations
and witnesses' testimony.

Certainly, we know many more of the details, but
we have really only shown that President Reagan was
forthcoming and honest when he told the American
public that he was unaware of certain of his staffs
activities. As Secretary of State Shultz told the Com-
mittees, the essential facts unearthed by Attorney
General Meese and his investigators remain the essen-
tial facts today.

Then why all the concern? What is the justification
for a select committee? These questions lead me to
my second point.

Throughout the investigations, and in the Commit-
tees' report, we are told that the Iran-Contra oper-
ations and the subsequent investigations are the result
of a breakdown in trust between the executive and
the legislative branches. There is some truth in this,
but it is not the truth the majority has in mind. The
truth is that the only reason the committees were
created is that the Congress did not trust the Admin-
istration when the Administration itself made public
the story of the Iran initiative and the diversion of

funds to the Contras. Not content to believe the Re-
publican Administration, Congressional Democrats
used their total control over the legislative branch to
try to prove that the Administration had willfully
worked to break the law, undermine the Constitution,
and subvert the democratic system. A year after the
President and Attorney General Meese went before
the American people with their revelations, we know
that none of that was true. Yet at the conclusion of
the investigation, the majority of the committee is still
unwilling to admit that Ronald Reagan told the truth
and that its hopes of destroying the Reagan Adminis-
tration have vanished.

Another issue that came up during the hearings that
should be addressed is the oft repeated saying, "It's a
sin to tell a lie."

I hope, and I believe, that I have as much respect
for the truth and as much contempt for a liar as any
member of the Committees. I must confess, however,
that I was sickened by this oft repeated canard. Of
course, truth is preferable to falsehood and lying is
not the usual pursuit of honorable persons. It may be
important to repeat that truism, but it is equally dis-
honest to comdemn others without any attempt to
relate the facts to the circumstances. Would you lie to
save the life of your wife or child? If a gunman
entered your home and demanded to know if there
was anyone else in the house would you honestly say,
"Yes, my wife is upstairs in bed and my little girl is
asleep in her room"? If a robber in the street demands
all your money, are you honor-bound to reveal the
cash in another pocket? Just who is being hypocritical
in piously saying of Colonel North, "But he lied?"

The last issue deals with the charge made by the
majority that the activities investigated by the Com-
mittee were un-American assaults upon constitutional
government. That the majority is entitled to their
opinion is undeniable — that they are mistaken in that
opinion is arguable. This country of ours was born
out of conflict in which there was difference of opin-
ion. Nathan Hale died a patriot and a hero in our
eyes. In the eyes of the British he was a traitor and
executed for treason. If our revolution had failed, that
"majority" opinion would have been reversed. So it
makes a difference what you stand for as well as how
you stand up for it.

659

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Persian Gulf and in Centr.T a '^'^""'^ '" 'h.

660

Additional Views of
Congressman William S. Broomfield

In my view, the Congressional Iran/Contra investiga-
tion went on too long and yielded few results. Since
Attorney General Meese publicly announced the
Iran/Contra connection nearly a year ago, there have
been hearings by several Congressional committees, a
full-scale investigation by the Senate Intelligence
Committee, and partial investigations by other com-
mittees. The President's Special Review Board
(Tower Commission) was formed last December and
reported in February. The Select Committees were
formed in January and conducted public hearings and
other proceedings through September.

Prior to formation of the Select Committees, I em-
phasized that the Committees' true role was to garner
the facts, get those facts out to the American people,
and recommend corrective action if necessary. I also
stated my reservations about the length of time for
which the Committee were formed, the absence of a
specific budget figure, and the absence of adequate
security procedures. My fear was that the Committees
would embark on an open-ended and unfocused inves-
tigation that would wander beyond its legitimate ob-
jectives yet fail to perform its proper mission. This
fear has been realized.

What do we have to show for all the activity in
Congress? The consensus appears to be that — aside
from unearthing considerable detail — the Committees
made little progress in resolving even the factual
issues. The basic outlines of the story have not
changed much since the Attorney General's an-
nouncement, no less the Tower Commission's exten-
sive report.

The Select Committees created the television image
of a trial, with a focus on factual detail — primarily
inconsistencies in the accounts of participants which
would tend to disparage them or implicate senior offi-
cials, especially the President. Members of Congress
should have tried to be as objective as possible on the
factual issues. It was inappropriate for the Committees
to pursue its investigation in such an adversarial
manner. The lengthy, confrontational and prosecuto-
rial questioning techniques by counsel were more ap-
propriate for the courtroom than a Congressional
hearing.

As a result of this approach, the Committees' hear-
ings left many factual issues contested. Even more

disappointing, however, was that the Committees de-
veloped little if any record to support improvements
in national security decisionmaking. The institutional
issues were not systematically explored. This was a
major failure of the Committees and should be ac-
knowledged as such. Instead, the Majority is content
to convey a vague impression that something is
wrong without having undertaken the effort to clarify
it.

Rather than dwelling on some sensational factual
revelations, the hearings could have been a more
useful vehicle for public education and participation
by stressing legal, organizational and political issues.
It was in these conditions, after all, that the Iran/
Contra affair was born.

Policy Errors

As the President admitted soon after public revelation
of the Iran/Contra matter, mistakes were definitely
made by the Administration. These included major
errors in policy and serious mistakes in implementa-
tion.

The President ultimately authorized the arms trans-
actions with Iran that were aimed at release of the
U.S. hostages in Lebanon and ostensibly at establishing
contacts with so-called moderate elements in the Ira-
nian government. While the President must bear some
of the blame for the policy errors, he himself never
acted beyond his Constitutional power or statutory
limitations on national security activities.

However, the President was the recipient of flawed
advice and was not well served by several key aides.
Two National Security Advisors as well as the Direc-
tor of Central Intelligence were primary proponents
of the erroneous policy that led to arms-for-hostages
dealings with the Iranians. At the same time, key
policy advisors such as the Secretaries of State and
Defense made insufficient efforts to dissuade the
President from pursuing this ill-advised policy.

The present investigation has not revealed that the
President was fully aware of the numerous indications
that the policy pursued by the NSC staff was in error.
The President realized the risks but had realistically
decided to proceed in the face of those risks. As the
Tower Commission concluded over eight months ago,

661

77-026 0

87 - 23

Additional Views

the President's main fault was his overwhelming pro-
pensity to focus on the plight of the U.S. hostages.
Beyond this, the President simply trusted his staff at
the NSC and did not pursue the details of implemen-
tation sufficiently.

Mistakes in Implementation

The most serious institutional problems which arose
in the Iran/Contra affair were those which occurred
in the course of implementing the policy on Iran. It is
these practical mistakes that — even more than the
flawed policy of dealing in arms with Iran — have
caused such a furor with the public and in Congress.

Officials charged with executing the Iran program
dealt with middlemen of questionable trustworthiness.
They dealt with Iranian representatives who were
hardly moderate and who may in fact have had direct
links to terrorism. They recruited certain individuals
of dubious reputation to provide private support for
the operation, and created a structure that encouraged
an emphasis on private profit as well as public serv-
ice.

The ultimate mistake in implementation was, of
course, the decision to divert proceeds from the Iran
arms sales to support the Nicaraguan freedom fight-
ers. There is absolutely no evidence that the President
was aware of this action and all witnesses agree that
the President was not informed. There is also no
concrete reason to suspect that the President was
knowledgeable of the diversion plan.

The genesis of this mistake is still unclear. The
Israeli official Amiram Nir may have been its original
proponent, as may Manucher Ghorbanifar. North
himself certainly proved a receptive audience, and
Poindexter plainly did not think this matter through
in terms of its professional, political and legal signifi-
cance.

In this as well as related policy questions, the Presi-
dent's staff did not brief him sufficiently, seek his
advice and the advice of other trusted senior advisors,
nor obtain his permission. In the final analysis, they
did not protect the President from the consequences
of a runaway operation.

The Committees knew from May 2, 1987 that there
were no grounds to believe that the President had
anything to do with the diversion of funds to the
Nicaraguan resistance but decided to keep the public
in the dark until Admiral Poindexter testified nearly
three months later. It is especially unfortunate that the
Committees did not adhere in this respect to their
main objective of getting the full story to the Ameri-
can people.

Potential Improprieties and
Illegalities

I cannot accept the Majority's speculations concern-
ing the extent of secret NSC staff operations as part
of an "off-the-shelf, self-sustaining" covert capability.
But I also feel that we should not understate the
range of potential improprieties and illegalities com-
mitted by Director Casey, Admiral Poindexter, Lt.
Col. North and their private associates, as well as
certain other government officials. As I stated earlier,
the President did not exceed his Constitutional and
statutory prerogatives but unfortunately the actions of
certain subordinates are not clear on this point.

Potential improprieties and illegalities were present
in the Iran program from its inception. It still remains
unclear whether the President was requested or in
fact consented to Israeli transfers of U.S. arms to Iran
in summer 1985. CIA support for the November 1985
shipment of HAWK missiles to Iran was provided
without a prior Presidential Finding, despite the fact
that the President's Executive Order on Intelligence
Activities No. 12333 specifically includes such oper-
ational support activities within the scope of covert
action legally subject to the Finding requirement.

During implementation of the Iran program under
the January 1986 Finding as well, numerous question-
able operational decisions were made. Despite the fact
that the form of transaction with Iran was essentially
a sale, prices paid by the CIA to the Defense Depart-
ment for U.S. weapons were established under the
Economy Act, which governs interagency transfers of
inventory. As a result, third parties were permitted to
retain large profits resulting directly from the sale of
U.S. arms. While the issue of ownership of these
profits will ultimately be settled in court, I believe
that the fact that such profits were being made avail-
able to individuals who were not in a strictly arms-
length transaction with the U.S. government at least
should have created a real concern for all those in-
volved or aware of the nature of the operation.

Some of the most disturbing actions occurred in
connection with North's activities in support of the
Contras. It is indisputable that both McFarlane and
Poindexter countenanced the misrepresentation to
Congress of North's role. In McFarlane's case, this
was accompanied by his understanding that the
Boland amendment then in force applied to the NSC
staff

But perhaps the clearest examples of questionable
activity occurred in connection with the NSC staffs
reaction to the unfolding disclosures of the Iran trans-
actions. Actions were apparently taken to muddy the
waters with respect to whether the President had
authorized the summer 1985 Israeli transactions as a
U.S. -supported covert action under the National Se-
curity Act or whether they occurred without any
form of Presidential authorization and in violation of

662

Additional Views

the Arms Export Control Act. Similar efforts were
made with respect to the November 1985 shipments,
particularly through Poindexter's destruction of the
December 1985 Presidential Finding. Finally, there
was the well-known shredding of voluminous official
records.

Consultation with Congress

I cannot agree with the Majority that the President
was necessarily obliged under the Constitution and
current law to notify Congress prior to completion of
the operation. At the same time I find it difficult to
understand how the Administration could have con-
tinued to pursue such a risky and politically sensitive
operation for so long without some form of consulta-
tion with Congress. Certainly some way could have
been found to inform Congressional leaders without
compromising security.

As Ranking Republican Member of the Foreign
Affairs Committee, the indispensability of some form
of consultation has become very clear to me. While
the President may withhold notification of important
operations overseas, he does so at his own peril. This
peril is exemplified by the reaction that we have expe-
rienced to the revelations in the Iran/Contra affair.

There were at least three key areas of activity by
the NSC staff, occasionally with CIA or other U.S.
government support, that the President should have
consulted upon in some appropriate way with Con-
gress. These are the Administration's basic policy re-
garding Iran, the overall implementaiton of the Iran
initiative, and the nature of Executive branch support
for the Nicaraguan resistance.

The President should not have been advised to "go
it alone" in these sensitive areas. While the President
is entitled to undertake certain unilateral actions
under his Constitutional prerogatives — and there is
absolutely no reason to believe that the President ever
intended anything other than actions that were within
his Constitutional powers — he should, except in
highly exceptional circumstances, consult with Con-
gressional leaders on sensitive policy matters.

Constitutional and Institutional
Ramifications

I cannot share the Majority's view that the Iran/
Contra affair illustrated a profound Constitutional
crisis. What it does show, however, is that the institu-
tions of government in the area of national security
need careful attention. As I noted above, this issue of
institutional process never received systematic consid-
eration during the hearings.

In the course of implementing the Iran and Nicara-
gua programs, the NSC staff turned to a concept of
covert action that had been substantially revised in
the aftermath of the intelligence investigations of the

1970's. This is the notion that "plausible deniability"
in national security matters should apply primarly to
Presidential decisionmaking. In connection with the
Contra program and certain other programs such as
the public campaign against Qaddaffi, the NSC staff
tried to do two things which ultimately cannot square
with our democratic institutions and values: first, to
conduct secret activities more or less openly and oc-
casionally even in the glare of publicity; and second,
to preserve deniability in covert operations only for
the President and not the U.S. government as a
whole.

The concept of plausible deniability pursued in con-
nection with policies on Iran and Nicaragua connects
to undesirable past tendencies in U.S. national security
operations. This does not amount to a Constitutional
crisis, but neither is it merely an affair of personalities.
It was the system in the NSC as well as the people
who caused the problem.

Congressional Responsibility

Congress cannot escape responsibility for the institu-
tional conflicts that led to excessive secrecy by the
elements in the Administration that were pursuing the
Iranian initiative. To a considerable degree. Congress
also failed to perform its Constitutional duties with
respect to important national security matters. Con-
gress insisted on oversight of intelligence in the mid-
1970's but by 1985 the oversight process became po-
litically charged with respect to Nicaragua policy.
Beginning with the dispute over the mining of Nicara-
guan harbors which unfolded during 1984 there were
increasing leaks and public discussion of intelligence
information that had been reported to the oversight
committees.

With respect to Nicaragua, Congress sent a con-
flicting set of signals on how far it would support
measures intended to counter Sandinista subversion in
Central America. Successive Boland amendments and
related legislative actions made the statutory frame-
work for action against the Sandinistas vague, shifting
and inconsistent. Congressional vacillation on foreign
policy matters, especially relating to Central America,
should demonstrate to every American that Congress
itself must share much of the blame in the Iran/
Contra affair.

Legislative Recommendations

Despite the obvious need for a more systematic struc-
ture for Presidential approval of covert action and
sufficient Congressional notification of related findings
and activities, the legislative recommendations con-
tained in the Majority report do not amount to a
unified approach. The ultimate issue of the extent of
the President's prerogatives to order covert action
without informing Congress cannot of course be com-

663

Additional Views

pletely resolved through legislation. But it remains for
Congress to clarify the exercise of its own powers in
this area through clear and precise legislation, which
is currently lacking.

Congress should consider enacting comprehensive
requirements that Presidential Findings authorizing
covert action be made in writing prior to the outset of
operations, and that such Findings would apply to
covert activities by any agency or instrumentality of
the U.S. government — not just the CIA. Consider-
ation should also be given to permitting the President,
in extraordinary circumstances, to notify only the four
leaders of Congress — the Speaker and Minority
Leader of the House of Representatives and the Ma-
jority and Minority Leaders of the Senate — of sensi-
tive intelligence activities, rather than the Congres-
sional leaders as well as the chairmen and vice chair-
men of the intelligence oversight committees, as at
present. This approach would not impede the exercise
of the President's prerogatives to withhold all notifi-
cation in an emergency situation. I have introduced
legislation on these subjects, H.R. 3611, which is dis-
cussed in the Minority views.

A major omission in the Majority report is the
absence of a recommendation in favor of creating a
joint intelligence oversight committee. Such a recom-
mendation was contained in the reports of the Tower
Commission and, before that, of the Vice President's
Task Force on Combatting Terrorism. To reestablish
trust and confidence between Congress and the Ad-
ministration on the issue of secret intelligence oper-
ations, it is essential to limit the access to information
on Capitol Hill and to distinguish the intelligence

oversight functions from normal legislative oper-
ations. For this reason, I fully endorse the joint intelli-
gence committee proposed by the Minority.

Further, in making its recommendations, the Com-
mittees did not cast a sufficiently critical eye at Con-
gress itself Any recommendations by the Committees
in this area could not easily have been ignored. The
Committees could, for example, have recommended
specific improvements in the security of classified in-
formation, including its handling, staff clearances, and
strengthened sanctions against security violations. The
absence of comprehensive recommendations in this
regard is a serious deficiency in the Committees'
report.

Finally, I wish to note my apprehension about the
Majority's recommendation that further inquiries
should be undertaken by Congressional committees
with related jurisdiction. Additional revelations will
undoubtedly occur in the coming months as a result
of proceedings initiated by the Independent Counsel
and other bodies. There is a real danger that — during
an election year — some in Congress my seek to ex-
ploit such disclosures for partisan political purposes.

It is time we got past the Iran/Contra affair and
onto the important issues on the national security
agenda. Having failed to propound a vision for future
relations between the Executive and Legislative
branches in the national security area through this
investigation. Congress must now try to play a more
constructive role on the issue facing the nation in the
Persian Gulf, Central America and elsewhere.

William S. Broomfield.

664

Supplemental Views of Senator Orrin G. Hatch

Much has been said in the foregoing reports about the
Constitutional roles of Congress and the President in
foreign affairs. I concur with the views of my fellow
Republicans in our minority report on that subject,
and offer the following supplementary remarks.

The framers of the Constitution anticipated a Con-
gress with significant powers and with a checking
function on the President. But the framers also cre-
ated a chief executive with real power. It is, I believe,
a common misperception that the framers, in creating
the Presidency at the Constitutional Convention, were
driven only by a desire to avoid the tyrannical power
of the English kings. Such was not the case in the
American colonies by the year 1787. It is true that the
abuses of power of the English monarchs had been
the principal impetus for the colonists to flee Eng-
land, and to later fight the Revolution; and the dicta-
torial excesses of King George III were well under-
stood and sought to be avoided by the framers. But
when the Constitutional Convention convened in
Philadelphia, the delegates were more concerned
about the ineffectiveness of the Continental Congress,
and about the lack of any coherent foreign policy for
their fragile new nation, than they were about the
abusive power of kings. John Jay's Federalist Paper
No. 64 is an especially informative summary of the
manner in which the framers viewed the power of the
President in foreign affairs.

As finally written, the Constitution provided for a
Congress, a chief executive, and a judiciary, each
with considerable authority. In the field of foreign
affairs the President was specifically empowered to
negotiate treaties, receive ambassadors, and command
the military. His authority was checked, but not evis-
cerated, by the other branches of government. The
President was expected to take the lead role in for-
eign affairs. Just as in other areas of the Constitution,
such as the Senate's duty to advise and consent on
Presidential appointments. Congress's role in foreign
affairs was primarily one of advice, consent and de-
ciding whether to appropriate money. It was the
President's duty to propose treaties and recommend
other aspects of American foreign policy. He was
given the requisite power to act, so that the country
could follow his lawful lead. To be sure, the system
required a great deal of cooperation and communica-

tion between the two branches, but it also contemplat-
ed the President's being given the opportunity to de-
velop a consistent and coherent policy.

One of the chief lessons, and reminders, of the
Iran/Contra experience is that our modern presidents
need the power envisioned by the framers. This is
true both as a matter of constitutionality and practi-
cality. We simply must have a system where the
President is given reasonable latitude to develop our
country's foreign policy. He cannot be second-
guessed and curtailed by Congress at every turn, as I
believe President Reagan has been in his honest ef-
forts to implement foreign policy objectives in the
Middle East, Central America, and elsewhere around
the world.

Presidential elections should emphasize the candi-
dates' views on foreign affairs. Once elected, the suc-
cessful candidate should be given the opportunity to
propose and implement his program, consistent with
the concomitant powers of the other branches of gov-
ernment. Such is the basis of democracy, of our con-
stitutional form of government, and of common sense.

Consider, for example, the so-called Boland amend-
ments and their effect on President Reagan's attempts
to formulate a coherent foreign policy in Central
America. In contrast to President Reagan's consistent
policy of support for the Nicaraguan freedom fight-
ers. Congress enacted an inconsistent series of amend-
ments. From 1982 to 1987, Congress changed its col-
lective mind virtually every other year— offering sup-
port one year and withdrawing it the next — with no
consistency even among the Boland amendments
themselves. By holding the Reagan Doctrine hostage
to the Boland amendments, I believe Congress used
its power over the purse in an irresponsible manner;
and in doing so acted against the national interest.

Based on my tenure in the United States Senate, it
seems to me that the simple good sense of giving the
President the chance to do his job has escaped the
legislative branch in recent times. The rush by Con-
gress to micromanage the country's international af-
fairs from South Africa to Cambodia to arms control
negotiations has hindered any effective development
of a consistent approach to our international prob-
lems. Congress is not designed, by staffing or func-

665

Supplemental Views

tion, to either take the lead in proposing foreign
policy, or to prevent the President from doing so.

Congress has a legitimate constitutional role to play
in foreign affairs. Congress has the power of the fed-
eral purse and can refuse to fund any program the
President proposes. Indeed, it should refuse to finance
any operation it finds to be unlawful or clearly against
the national security interests of the United States; but
the spirit of our Constitution requires that Congress
also allow the President some freedom to develop a
lawful strategy in international affairs — even if some
members of Congress may have misgivings about it.
Otherwise, we have no chance at a coherent foreign
policy. Undue interference forces the President and
his advisors to be more secretive than they should be,
which creates even more problems both at home and
abroad.

I believe the unnecessary interference by Congress
into foreign affairs contributed significantly to the
poor judgments, concealment from Congress, improp-
er privatization, and other shortsighted decisions of
the Iran/Contra affair. The activities of the executive
branch that the majority report condemns with such
vigor could in the main have been avoided by a
return to the system envisioned by the Framers where
the President is given the power to act openly and
confidently in the international arena. If he fails, he
will have to account to the people. If he succeeds, he
may be reelected. But for the system to work, he
needs to be given the latitude to try.

There are no doubt those who will see my remarks
as an overly simplistic solution to the problem. I
agree the solution is simple, but it is also practical and
constitutionally required. It is the complexity of the
current quagmire that causes many of the problems. I
fully believe that if Congress would give the Presi-
dent more freedom to do his job, we would see less
inclination toward covert operations and the so-called
secret wars that every modern Administration has
been accused of conducting. The lack of a coordinat-
ed foreign policy effort between the two branches
forces the executive branch into its own available
resources, rather than seeking overt support from
Congress, to carry out its policy objectives.

We simply cannot maintain consistency and respect-
ability abroad with 535 Secretaries of State, who also
happen to serve in the United States Congress. The
United States President — of any party — must be given
the tools to effectively carry out his policies in for-
eign affairs. In my opinion, we would do well to learn
from the Iran/Contra investigation that communica-
tion will achieve more than confrontation, and that
partisan politics should not be played in the all-impor-
tant area of foreign affairs.

With respect to the recommendation of my Repub-
lican colleagues to establish a joint Senate-House In-
telligence Committee, I have some concerns. My
mind is not yet made up on the issue. I need to study
the proposal in more detail before endorsing the con-
cept at this point.

Orrin G. Hatch.

666

Supplemental Views of Congressman Henry Hyde

One unanticipated benefit of the Iran Contra hearings
was the surprising emergence of so many strict con-
structionists among members of the Joint Investigat-
ing Committee. It is heartening to see the ranks of
those devoted to law and order increasing, notwith-
standing the selectivity of their devotion.

In earlier days, we were conditioned to favor ap-
peals to "the higher law" over mere statutory expres-
sions, depending on who made the appeal and the
degree of left-ward tilt to their cause.

We have seen high minded demonstrators trespass
on military installations, splash animal blood on draft
records, illegally picket within 500 feet of the South
African Embassy, conduct sit-ins to obstruct C.I. A.
university recruitment, and deliberately violate our
immigration laws to provide sanctuary to a chosen
few.

These acts of civil and criminal disobedience are
routinely applauded by many who turn a cold shoul-
der, a blind eye and a deaf ear towards such appeals
when made by, for example. Fawn Hall on behalf of
her former boss, Lt. Col. Oliver North.

Ms. Hall's testimony that "sometimes you have to
go above the written law . . ." has been much re-
marked in the press, but we are less often reminded
that she was echoing Thomas Jefferson, who on Sep-
tember 20, 1810 wrote to John Colvin:

A strict observance of the written law is doubt-
less one of the high duties of a good citizen, but it
is not the highest. The laws of necessity, of self
preservation, of saving our country when in
danger, are of higher obligation. To lose our
country, by a scrupulous adherence to written
law, would be to lose the law itself, with life,
liberty and property and all those who are enjoy-
ing them with us; thus absurdly sacrificing the
end to the means.*

The selective availability of "the higher law" is but
one of the anomalies underscored by these hearings,
and has particular relevance to any study of the scope
and applicability of the various Boland Amendments.

A dominant theme of these hearings has been vigor-
ous condemnation of those who allegedly violated the

•Writings of Thomas Jefferson, n. 28 at p. 279.

letter or the spirit of the Boland Amendments, or who
lied to Congress or were not forthcoming in their
testimony about Central American policy. The ration-
ale for these transgressions — the need for secrecy to
protect lives, the sensitivity of negotiations with Iran
about hostages, combined with the notorious inability
of Congress to keep a secret — were summarily reject-
ed by most of the committee's members. We were
regularly reminded of some bedrock propositions, in-
cluding the President's duty under the Constitution to
see that the laws are faithfully executed, that we are a
government of laws and not of men (most especially
in this bicentennial year) and that the end cannot
justify the means.

These propositions — true enough — deserve a less
facile application to the complex events involved in
these hearings. All of us at some time confront con-
flicts between rights and duties, between choices that
are evil and less evil, and one hardly exhausts moral
imagination by labeling every untruth and every de-
ception an outrage.

In assessing how helpful the axiom is that "the end
doesn't justify the means," I suggest consideration of
the dilemma facing President Harry S. Truman on
August 6, 1945.

Four months earlier, the invasion of Okinawa cost
151,000 American and Japanese lives. The resistance
was suicidal, and the Joint Chiefs of Staff believed if
this World War was to end, Japan itself would have
to be invaded. The best military estimates anticipated
a loss of one million American lives and no one could
guess how many more million Japanese lives. The
President had no options that could be called good,
but the stark choices before him required a decision:
to drop the atomic bomb on Hiroshima (and, indeed,
Nagasaki) and thus end the war or to invade the
Japanese homeland at a cost of untold millions of
lives.

We all know Truman's decision, and for myself I
believe it was the right one. But to those who think it
was morally wrong and seek to indict Mr. Truman, I
suggest, rather, they blame those in the Japanese gov-
ernment who forced this decision on him.

What has this to do with the Iran Contra affair?
The circumstances and the actors are different but the

667

Supplemental Views

moral dilemma is the same — or, as Lt. Col. North put
it, "Lies or Lives."

Former Virginia Governor Charles Robb correctly
summarized Congress' vacillating Nicaraguan Contra
policy when he called it "playing with people's lives."
New York Times correspondent James Le Moyne
echoed that sentiment when he wrote recently that
". . . it is difficult not to conclude that it has been
hypocritical, immoral and deeply damaging to the
United States to send men to kill and to die for six
years on half promises and sporadic assistance." Le
Moyne concluded his October 4, 1987 article in the
New York Times magazine with these observations
by Donald Castillo, an ex-Sandinista who Le Moyne
believes is "one of the Contras' most able political
analysts: 'You North Americans have great values,
but you need to learn to define and apply them . . .
you have been generous to us — and you have also
utilized and manipulated us as part of your domestic
political agenda . . . But have you been aware that
you're playing with the life and blood of a people and
a country?' "

To those many who grew impatient with we few
who insisted on discussing policy, I suggest that a
fundamental reason for our differing perspectives on
the purpose of these hearings may be the differing
view we take towards the seriousness of the threat
that Marxism-Leninism poses to peace, freedom, secu-
rity and prosperity in the world. Those of us who not
only take this threat seriously but also try to do some-
thing about it are often considered to exercise a "cold
war mentality." This is a grave sin indeed in the
liberal catechism. But our view of the urgency of the
situation was well stated by Professor George
McKenna of the City College of New York who
wrote in the New York Times of June 5, 1987:

"While Congress fiddles, the world burns. In the
1960's there were four openly proclaimed Marx-
ist-Leninist regimes in the third world; today
there are 16. Two Soviet client states are right at
our doorstep, and they are working relentlessly
to add another four to the Soviet fold: El Salva-
dor, Guatemala, Honduras and Costa Rica. The
Reagan Administration's 'crime' is that it tried to
stop this process, just as the Roosevelt Adminis-
tration tried to stop the expansion of another evil
empire in the summer of 1940."

There are other contentious issues these hearings
have emphasized — none more important than the
proper constitutional roles of the President and the
Congress in the formulation and execution of foreign
policy. Senator George J. Mitchell of Maine and I
have exchanged a series of letters on this subject,
which I characterize as the struggle between the Con-
gressional supremacists and the Presidential monar-
chists. Actually neither characterization is accurate, as
each has a vital role which cannot exclude the other.

But defining these boundaries is (to use Simon Boli-
var's phrase) like plowing in the sea. Nonetheless a
better understanding of the President's constitutional
authority and that of Congress is essential if we are to
ever develop and manage a successful foreign policy,
regain the confidence of our allies and deserve the
respect of our adversaries. The renewed focus on this
"invitation to struggle" is one of the positive things to
emerge from these hearings.

I will not burden these views with the arguments
and citations I have made in my correspondence with
Senator Mitchell, except to assert my general conclu-
sion that the Founding Fathers intended to vest the
general control of foreign affairs in the President —
subject of course to the specific checks set forth in
the Constitution. Citing United States v. Curtiss- Wright
Export Corp. 299 U.S. 304, 319 (1936), the Tower
Commission's report correctly asserted: "Whereas the
ultimate power to formulate domestic policy resides
in the Congress, the primary responsibility for the
formulation and implementation of national security
policy falls on the President." (PV-1)

There have been many elements of unreality about
these hearings. But the most serious breach of reality
has had to do with why we held them in the first
place. What was it, really, that brought us to create
these select committees? Some will argue that it was a
concern for Constitutional process; and well we
should have been concerned. But to leave the matter
there obscures what seems to me a crucial substantive
issue, a real and deep division that has led to this
exercise.

That division, to be simple, accurate and blunt, can
be stated thus: there are Members of the House and
Senate who do not believe that communism in Cen-
tral America is a grave threat to peace and freedom
that requires an active and vigorous response from the
United States; there are Members who concede the
threat in the abstract, but wish to do little about it
beyond talking; and there are Members who acknowl-
edge the threat and wish to challenge it, forthrightly,
through the variety of instruments proposed by the
National Bipartisan Commission on Central America.

In real political life, the first two categories of
Members — those who see little or no threat, and those
who see the threat but cannot gather themselves to
challenge it — work together. Their alliance, as curious
as it may seem in the abstract, is what accounts for
the baroque dance of the Boland Amendments. This
strange alliance between the unbelieving and the be-
lieving-but-unwilling has made a mockery of our for-
eign policy: we have had one policy one year, and
another policy the next.

This has reinforced the tendency of insecure Latin
American leaders to say one thing in private and
another in public. This strange alliance of political
convenience and/or confusion has further strength-

668

Supplemental Views

ened anti-anticommunism here at home. One shudders
to think of what it has taught the Soviets.

Whether one traces this triple division to that all-
purpose whipping boy, "Vietnam," or whether one
finds longer historical lines feeding it, it remains a
desperately debilitating fact of our national life. When
Members of the Congress of the United States look at
the same situation and see radically different things —
or, seeing the same thing, differ utterly on what, if
anything, is to be done about it — we are in far deeper
trouble than the issue of Constitutional propriety.

My side of the argument — those who both see the
communist threat in Central America and wish to
address it through economic, humanitarian, and secu-
rity assistance to that region's democrats — carries its
share of the blame for the impasse we have reached.
We have somehow failed to convince those who see
the threat we see that there are ways to address that
threat which serve the ends of peace, freedom, and
justice. Our failure to make this argument successful-
ly— a failure, I say in all candor, that has plagued the
White House as well — has created circumstances in
which those who neither see nor wish to act have co-
opted some of their more prescient colleagues. The
result has been the kind of schizophrenic Congression-
al policy that we have been enduring these past
months.

Meanwhile, whatever its own failures of persuasion,
the Executive has had to act. At the other end of
Pennsylvania Avenue, there is precious little of the
luxury of ambiguity. One must act (always, one hopes
and prays, wisely), for not to act, in this world, is
itself an action. Sins of omission, according to classic
moral theory, can be as grave as sins of commission.
The Executive has not sinned, largely, on the omis-
sion side of the ledger (save in its unwillingness to
make its case to the country in and out of season).
Conversely, we have seen ample evidence of the
ways in which the Executive has acted that can be
legitimately criticized. But there is a luxury we in-
dulge here. For the sake of Constitutional propriety,
we must, on occasion, indulge it — this luxury of res-
trospective wisdom. But it should be a rare indul-
gence. It can lead to policy confusion and indeed
paralysis. Indulge the luxury of retrospective wisdom
too promiscuously, and we inevitably fall into sins of
omission — which can be as bad, indeed, worse, than
the sins of commission. Neville Chamberlain was a
good and decent man, and an ambiguist. The Czecho-
slovaks paid the price for his sins of omission in 1938.
His countrymen paid for the next six years, as did
most of the free world.

Moreover, we have had a disconcerting and dis-
tasteful whiff of moralism and institutional self-right-
eousness in these hearings. Too little have these com-
mittees acknowledged that the Executive may well
have had a clearer vision of what was at stake in
Central America. Too little have we acknowledged
that our own convolutions have made the task of the

Executive even more difficult. Too little have we
confessed that there is real reason to be concerned
about the Sieve on Jenkins Hill — the unending leaks
which everyone on these committees know exist, and
few are willing to take steps to address effectively.
That the Executive is a major source of leaked infor-
mation is a sad truth, but in no way diminishes our
own responsibility. No one doubts that the Executive
has done some very stupid things in this affair. But
one would have liked to have seen some modest ac-
knowledgment of Congressional reponsibility for our
present policy impasse.

In nearly thirteen years of service in the House, it
has seemed to me that the Congress is usually more
eager to assert authority than to accept responsibility;
more ready to criticize rather than to constructively
propose; more comfortable in the public relations
limelight than in the murkier greyness of the real
world, where choices must often be made, not be-
tween relative goods, but between bad and worse.
These are not the characteristics that give one confi-
dence in the Congress as a policy-making instrument
for America's inescapable encounter with an often-
hostile world.

These unsavory character defects are not endemic
to this institution. One cannot walk into the old
Senate chamber, and travel back, in the mind's eye, to
the days when that chamber was filled with the likes
of Webster, Calhoun, Clay, Davis, Benton, Houston,
Cass, Seward, Chase, and Douglas, and think that the
United States Congress cannot do better than it has
done in matters of foreign policy over the past ten
years. The question is not institutional; it is, in the
deepest sense, personal. It has to do with the quality
of mind and spirit we bring to our deliberations. It
has to do with whether we are playing to the galler-
ies, or to conscience and duty.

We ought to acknowledge that questions of Consti-
tutional propriety have been engaged by these hear-
ings. But we must also acknowledge that there is a
deep division in our national legislature over a basic
question in world politics. We have, in these hearings,
obscured rather than illuminated that division. I bring
it to the surface here, not to bait anyone, but in the
conviction that only an honest delineation of our dif-
ferences can lead us beyond posturing to genuine
debate. Without that kind of debate, we will continue
to flounder in the world, at precisely the historical
moment when the tide seems to be shifting in favor of
the forces of democracy.

History will not look kindly on us if we miss the
opportunities to advance the twin causes of peace and
freedom that are before us: in Central America, and
throughout the world.

So, as we debate ends and means, let's not obfus-
cate the deepest ideological and moral issue of our
time, which is the contest between freedom and tyr-
anny in the world. To dismiss that contest as the

669

Supplemental Views

fantasy of an over-heated Cold War mentality is not
the act of a morally or politically serious person.
Those who see the scalps of General Secord, Robert
McFarlane, Admiral Poindexter, and Lt. Col. North
as the sure and quick path back to post- Vietnam neo-
isolationism are going to reap the whirlwind before
this century is out. By all means, let's get our house in
order and use means to conduct the great contest in
the world that don't corrupt our own democratic
processes. But let's not make the argument over
means a Trojan Horse by which neo-isolationism and
a«//-anticommunism resume dominant positions in our
policy debates.

The resurgence of isolationism in our contemporary
culture is easily traced.

In the 1970s, several key ideas, developed during
Vietnam, came forward in American pubUc life and
got lodged in the teaching centers of our culture — the
religious leadership, the universities, the prestige
press, the popular entertainment industry.

A new form of isolationism arose. It did not teach,
as traditional isolationists did, that America should
avoid the world because we would be corrupted by
it. No, the neo-isolationism of the post-Vietnam era
taught that America should stay out of the contest for
power in the world because we corrupted the world.
What happened when America acted in world affairs?
"Vietnam," was the sole answer. No reference to the
war against Hitler; no reference to the Marshall Plan
and the reconstruction of Japan; no reference to
NATO or the Alliance for Progress. No, what hap-
pened when America "intervened" in the world was
"Vietnam."

And so, paradoxically, the very same people who
taught us that the world was "interdependent," also
teach us that "intervention" is a very bad thing. This
neo-isolationism, as many political commentators have
noted over the past decade, has become deeply en-
grained in the Democratic Party.

We were also taught, in the post-Vietnam period,
that anti-communism was culturally passe, historically
fallacious, and an inappropriate criterion for guiding
U.S. policy. Anti-communism, too, had gotten us
"Vietnam." Those who taught this theme were not, in
the main, pro-Leninist (as the Old Left was in the
1930's). Rather, they were anr/-anticommunists. As
such, they were willing to give an extraordinary bene-
fit of the doubt to a whole host of Third World
communists, each of whom was, in turn, going to get
right what Lenin and Stalin had fouled up: Fidel
Castro, Ho Chi Minh, Salvador Allende, Maurice
Bishop, Mengistu Haile Mariam, the Angolan
Eduardo Dos Santos and, finally, Daniel Ortega and
the Nicaraguan Sandinistas.

The miserable record of these tyrants speaks for
itself, and there is no need to belabor it here. But
what we ought to note is how this a«r/-anticommun-
ism was challenged by the people of the Third World.
Wherever, in the past decade, people have been given

the choice among traditional authoritarianism, a Len-
inist "new order" and democracy, they have, without
exception, chosen democracy. They chose democracy
in El Salvador, Honduras and Guatamala. They have
chosen democracy in Portugal and Spain. They chose
democracy in Argentina and Brazil. They chose de-
mocracy in the Philippines. They are trying to build
democracy, under great pressure, in the northern
provinces of Mexico today. I have no doubt that the
great mass of the people of Chile, given the choice,
would opt for democracy.

And some people, many of whose leaders had been
in the forefront of the revolution against Anastasio
Somoza, still wish to choose democracy for Nicara-
gua. That is what, tragically, our ann'-anticommunists
cannot see.

A third idea let loose by the Vietnam debacle was
the notion that military force can never serve the
ends of peace, security and freedom. Now those who
live in a society of laws should, to be sure, be very
careful about the circumstances in which they take up
the sword. But in a world persistently hostile to
deomcratic values — a world in which men will starve
their opponents to death for political power (as in
Ethiopia), or torture them in ways that would defy
the imagination of Dante (as in Cuba), or stupefy their
minds with drugs (as in the USSR) — it seems odd, at
the very least, to assert that the world's principal
democratic power should unilaterally reject the use of
armed force on all occasions short of the invasion of
Long Island.

This teaching was challenged, in a fundamental
way, by the successful U.S. action in Grenada — a
military intervention for which the people of Grenada
expressed overwhelming gratitude. This teaching was
being challenged by our support for the Afghan re-
sistance. And this teaching was being challenged by
the policy we adopted in the 99th Congress of direct
military support for the Nicaraguan democratic resist-
ance. Considerably more was, and is, at stake, then,
than the fate of Daniel Ortega and Adolfo Calero.
What was at stake in the Nicaragua debate — and what
remains at stake today — is this key teaching in the
creed of those who had become accustomed to the
high moral ground in the U.S. foreign policy debate
since Vietnam — that American military force cannot
serve the ends of peace in the world.

Of course, there remain specific questions of legal-
ity that have to be clarified. The Courts will wrestle
with these questions for years to come, as the Inde-
pendent Counsel proceeds with his indictments and
prosecutions. But, there also are questions of the way
in which our foreign policy-making apparatus
works — or doesn't work.

Beneath these questions of legality and structure,
however, there is an even more fundamental argu-
ment being engaged here. // is ihe question of Ameri-

670

Supplemental Views

ca's role in the world, and indeed whether we shall have
any.

As we argue over "intervention" and "interdepend-
ence," neo-isolationism is being challenged — some-
times skillfully, sometimes clumsily — by the Reagan
Administration. That is an important part of what we
are arguing about in this affair. The Administration
has forthrightly told the leadership of the communist
world that the United States proposes to emerge from
the paralysis and self doubt of the Carter era of "mal-
aise" and to re-enter, vigorously, the war of ideas: the
on-going battle for the hearts and minds of men and
women all over the world. We have tried to be,
again, the party of liberty in the world. This has been
disconcerting, to say the least, to those who have
been taught for almost a generation that America was
not on the side of history. However, adequately or
inadequately, the Administration has challenged this
genteel form of surrender, and has reasserted the idea
that history is of our making, if we have the wisdom,
will and strength for the task. And that is part of
what we're arguing about in this affair.

There is an argument over the appropriate use of
military force being engaged here. The Administra-
tion has made plain — in Grenada, in Libya, in Angola,
in Cambodia, in Lebanon, with the Afghan resistance
and the Nicaraguan democratic resistance — that it be-
lieves that in certain situations armed force can serve
the ends of freedom, justice, security and ultimately,
peace. Its exercise of that power has been both skillful
and, to be candid, less than skillful. But beneath the
specific cases to be argued there is the more funda-
mental point of whether we as a nation are going
to eschew the discriminate and proportionate use of
armed force for anything other than direct self-de-
fense.

We ought to admit, frankly, that we are, as a
nation, deeply divided at these basic choice points. It
is one of the great failures of the Reagan Administra-
tion that it has not forced these questions out into the
open of our public life so that they could be debated

civilly and frankly, rather than surreptitiously. Per-
haps the providential paradox of our present situation
is that these absolutely fundamental questions have
been brought to the surface anyway, chiefly through
the testimony of Lt. Col. Oliver North.

And so, beneath the legal and structural arguments;
beneath the policy debate; even beneath the challenge
to the post-Vietnam orthodoxy that I have so briefly
sketched here — there is an absolutely basic question
being engaged in the debate over this affair. And that
is the question of America. This is not an argument
over anyone's patriotism. But survey research has
clearly demonstrated that many of America's most
influential opinion-shapers and values-teachers re-
spond negatively to the question, "On balance and
considering the alternatives, do you consider Ameri-
can power a force for good in the world?" Note the
modesty of the question. And yet many of our most
prestigious commentators and analysts, many of our
most influential scholars, bishops, and rabbis, answer
in the negative.

Their teaching has had a profound, and I think
debilitating, effect on our public life and our foreign
policy for almost a generation. That teaching has
gotten itself lodged, to a degree difficult to imagine,
in the Congress of the United States and among mem-
bers of both parties. It is a teaching of despair: per-
haps humane despair, perhaps a despair tinged with a
sense of the ironic and the contingent in human af-
fairs, but despair nonetheless.

Others of us reject that counsel of despair. We do
not claim to have all the answers when the complex-
ities of policy are engaged. We know full well that
mistakes have been made by this Administration, and
some acting in the name of this Administration.

But we also know that these were mistakes made
because of a judgment that, on balance and consider-
ing the alternatives, American power can be a force
for good in the world, and that in the hierarchy of
values freedom towers above all others.

Henry J. Hyde.

671

Additional Views of Senator William S. Cohen

The Iran-Contra Affair was a significant departure
from the constitutional processes which normally con-
trol the operations of the Government. While the
affair was an aberration in this sense, it also demon-
strated a recurring problem which has afflicted Ad-
ministrations of both parties — albeit without such bi-
zarre, unseemly, and far-reaching results.

When an Administration adopts objectives whose
goals, however defensible, are at odds with actions
taken by the Congress, or with its own publicly ac-
knowledged positions, it embarks on a perilous
course. Subordinates of any President are motivated
primarily by a desire to carry out his wishes, what-
ever the obstacles. Without an appreciation of the
balance between the branches, such subordinates may
be ignoring the law, even if it means taking actions
which violate publicly stated U.S. policy.

Normally, there are enough checks and balances
within the governmental framework that such anoma-
lies are detected and corrected early on. In the na-
tional security area, however, where secrecy is neces-
sarily a tool of the trade, there is a greater potential
that secrecy will neutralize the normal checks and
balances of government. This was clearly demonstrat-
ed in the Iran-Contra Affair.

Part of the responsibility to ensure this does not
happen rests with the President. He must provide a
framework within the executive branch, particularly
within its national security community, which ensures
the participation of lawyers, policy and budget over-
seers, foreign policy and defense experts, as well as
those with a particular perspective on Congress, in
the formulation and implementation of policy. Secre-
cy can never be permitted to preclude or in any way
constrain the advice needed by the President to make
decisions crucial to the United States.

Similarly, secrecy can never justify eliminating
Congress as a "check and balance" upon the power of
the Executive. The Constitution makes no distinction
in terms of those matters which affect the national
security and those which do not. Congress itself rec-
ognizes that some matters cannot be disclosed to the
public without also disclosing them to our adversar-
ies, thereby effectively negating whatever benefit or
advantage to the U.S. which might otherwise accrue.
So, Congress has established a framework for dealing

with such matters outside public view, while at the
same time bringing the public's perceptions to bear
upon the problem at hand. When Congress is not
informed or is misinformed, when it is advised of
actions long after they have occurred, the system of
checks and balances is arrested. Democratic govern-
ment, in effect, deteriorates toward dictatorship.

Ultimately, of course, the secrecy surrounding the
Iran-Contra Affair was stripped away, first by the
press and then by the investigations which followed.
Exposure was inevitable, particularly in a world
where information is so readily accessible and instant-
ly communicated. Technology has miniaturized the
globe. An event in a remote village can reach our
eyes and ears in a matter of seconds. The existence of
a free and vigorous press ensures that attempts to
abuse or misuse governmental power and processes
will ultimately be uncovered. Once exposed, the proc-
esses of government will intervene to bring about
needed corrections. Thus, there is a certain inevitabil-
ity created by our constitutional system, which guar-
antees both a free and probing press, and a resilient
governmental framework capable of restoring the bal-
ance of constitutional power once it has been skewed.
Indeed, this is the genius of our system and the es-
sence of our democracy.

With respect to the Report itself, any effort of this
magnitude, covering a subject of this breadth and
complexity, necessarily represents a compromise. It is
particularly true in this case, with a Report which
purports to represent a majority of both the Senate
and House Select Committees. Notwithstanding the
give-and-take which attended the preparation of this
Report, I believe it is, for the most part, faithful to
the record before the Committees, and also, for the
most part, is fair in terms of its assessment of the
events described.

I do not agree, however, with all that is included in
it. Indeed, it is doubtful that any member supporting
this Report would contend that there are not a
number of inaccuracies, omissions, or unsubstantiated
contentions in these pages. There are also numerous
places where the narrative unfairly characterizes, and
draws unduly sinister conclusions from, the facts
before us. It was not necessary to pulverize the facts
in order to make the points at issue here. Overstating

673

Additional Views

an argument frequently serves only to undermine its
legitimacy.

In addition to these general reservations, I feel
obliged to comment specifically upon three portions
of the Report where my objections go beyond what I
perceive as isolated cases of factual inaccuracies or
unfair characterizations. The first involves the discus-
sion of criminal violations in the chapter entitled
"Rule of Law." Although the Committees make an
effort to explain why they feel compelled to comment
upon violations of criminal statutes, I believe it is
inappropriate for the Committees even to appear to
pass judgment in terms of whether those involved in
the Iran-Contra Affair were guilty of criminal viola-
tions. I would have preferred the Committees limit
their discussion to violations of the Constitution and
civil statutes, and simply list those criminal statutes
which may have been violated by the events which
occurred. By stating that the Committees believe such
statutes were, in fact, violated, the Report intrudes
upon matters more appropriately left to the courts and
the Independent Counsel.

I also question the inclusion of portions of the
chapter concerning the National Security Council
staffs involvement in law enforcement investigations.
Those portions dealing with the actions of the Assist-

ant United States Attorney in the Miami Neutrality
Act investigation; a former Central American official;
and the Customs inquiry concerning its undercover
source (Kelso), do not, in my view, demonstrate any
improper actions either on the part of the NSC staff
or the other executive branch officials who are identi-
fied. Perhaps they are included here to reflect the
extensive investigative effort expended by the Com-
mittees. Those efforts did not, however, produce
proof of malfeasance. Nonetheless, they are described
at length in a manner which implies by innuendo
what was not established by the evidence. Only one
of these three incidents was mentioned tangentially at
the Committee's hearings (i.e., the Miami Neutrality
Act investigation). None deserves memorializing to
the extent they are treated here.

Finally, I question the inordinate attention devoted
in the Executive Summary to the Office of Public
Diplomacy and its activities in support of the Admin-
istration's policies. This matter received only passing
mention at the Committees' hearings, and equally
scant mention in the text of the Report. The promi-
nence given to it in the Executive Summary is far
more generous than just.

Bill Cohen.

674

Supplemental Views of
the Honorable Bill McCollum

In good conscience I could not sign the majority
report of this Committee because there are just too
many things with which I disagree. While I have
signed the dissenting views prepared by House Minor-
ity Staff, there are areas where my interpretation of
evidence and testimony presented to us differs and I
have some additional views which I feel compelled to
set forth here.

The Iran/Contra hearings gave Americans a unique
look inside a Presidential Administration. They also
gave a sobering look at the results of the unwilling-
ness of a President to have a Constitutional show-
down with Congress over his powers, a lack of trust
among people in our government, and a lack of a
clearly defined and effective policy for combatting
terrorism and rescuing hostages.

Partisan bickering was the most distressing thing
about the hearings. It got in the way of our purpose,
which was to bring out the facts, to determine the
President's credibility, and, finally, to recommend law
and policy changes that reach far beyond these hear-
ings.

The cloud hanging over the President on the issue
of his credibility was removed. The President told the
truth when he said he did not know of the diversion
and that his knowledge of various aspects of the affair
was limited. Of course, the buck stops with the Presi-
dent, and he must accept responsibility for the errors
and omissions of his appointees.

Clearly, mistakes were made by the Administration.
However, critics during these hearings went to ex-
cesses. Some were highly partisan, others just over-
zealous. At times, members and counsel were unfair
to witnesses.

Despite eloquent statements of objectivity, from the
very beginning some members of both parties seemed
gleefully intent upon "getting the President" and
condemning the Administration for things they pre-
judged to have been wrong. At times, this prosecuto-
rial fervor reached a fever pitch, which the media,
wittingly or unwittingly, participated in. This was
particularly evident as the Committee approached the
testimony of Lt. Col. North, Admiral Poindexter, and
Attorney General Meese.

In the end, the essential facts did come out. The
Committee heard hours of testimony, took about 200
depositions, and saw countless exhibits. Even with

this, we will never know all the details. The Director
of the Central Intelligence Agency, Bill Casey, fell ill
and died before we could get his testimony. There are
a number of significant unresolved conflicts in the
testimony of witnesses. My impression is that, for the
most part, the witnesses were very credible and truth-
ful with us. Most of the discrepancies in testimony
probably rest with the simple and understandable dif-
ferences in recollection of events that occur with the
passage of time.

To analyze the results of the hearings, it is best to
separate the Contra resupply policies from the Iranian
arms initiative. The only connecting links were the
diversion and the fact that Lt. Col. North and Gener-
al Secord were involved in both.

When Congress stopped funding the Contras, the
President was determined to keep them alive through
private support until he could get Congress to re-
enact aid. The Boland Amendment not only cut off
money, but purported to restrict any agencies en-
gaged in intelligence activities from any type of sup-
port of the Contras. The President quite correctly
turned to the National Security Council (NSC) to
coordinate private fundraising and resupply. There
was nothing illegal about this, but because Congress
was kept in the dark, the whole policy became an
easy target for criticism and charges of illegalities that
echoed throughout these hearings.

The President made a major error of judgment in
failing to confront Congress over the Boland Amend-
ment and forcing a Constitutional showdown over the
foreign policy powers of the President. It is unclear
whether Boland applied to the NSC. But if it did
apply to the NSC or to the President, Mr. Reagan
should have said the amendment was void because it
unconstitutionally restricted the powers of the Presi-
dency, and he should have proceeded to openly and
publicly fundraise for the Contras with the American
people and with foreign countries, pending the re-
sumption of the Congressionally approved aid for the
Contras. Instead, the view prevailed that an open
confrontation with Congress on this posed too great a
threat to renewed Contra aid, and a secret policy of
NSC-directed fundraising and resupply of the Contras
was undertaken. If the President had been willing to
confront Congress over this issue, probably there

675

Supplemental Views

would have been no diversion and there may have
been no hearings.

It is also obvious that the fundraising and resupply
operations were carried out in inefficient and often
inappropriate ways because of the secrecy, and Con-
gress was misled, which exacerbated the growing lack
of trust between the Administration and Congress.

The lesson is clear: secret operations are sometimes
necessary, but secret policy in a democratic govern-
ment never works.

One footnote to the resupply operation concerns
the Role of the CIA. While I generally agree with the
discussion of this in the minority report I am con-
cerned that the superiors of a Central American sta-
tion chief, Tomas Castillo, did not receive some criti-
cism I think they deserve.

In my view Director of the Directorate of Oper-
ations, Clair George, the Latin American Division
Chief and the Chief of the Central American Task
Force, failed to give Castillo clear and concise policy
guidelines for dealing with the resupply operation in
the context of Boland restrictions, and they either
negligently failed to catch, or intentionally over-
looked, breaches by Castillo of guidelines they later
said they thought they had given him.

It appears to me that when questions about the CIA
role began to surface these superiors hung Castillo out
to dry, and even in their testimony tried to cast him
as much more of a loose cannon than I believe he
was. They blamed him for all the breaches of policy
they perceived to have occurred and accepted none
of the responsibility when the time came for an ac-
counting. Such behavior severely damages if not de-
stroys the respect that must flow from operational
men in the field to those in top positions at the CIA.

There were no violations of law by Castillo or the
CIA in connection with his role during the resupply
operation and no real harm resulted from any
breaches of CIA policy, but the manner in which his
superiors conducted themselves in this whole matter
is disturbing.

Putting the pieces together, here is how the Iranian
initiative came about. Recognizing the strategic im-
portance of Iran, some analysts in our government
suggested efforts to reestablish a relationship with the
government of Iran or friendly elements inside Iran, if
any could be found. The NSC made contact with the
Israelis, who already had some type of relationship
with elements in Iran. From whatever source, Iranian
or Israeli, came the added inducement that not only
could we explore new openings to Iran in this matter,
but also might be able to get our hostages in Lebanon
released.

With our blessing, the Israelis made arms shipments
in September and November 1985. The Israelis asked
our help with the November shipment. We provided
the CIA proprietary aircraft and North and Secord
got involved in routing the planes through some Eu-
ropean countries. It turns out the Hawk missiles were

not what the Iranians thought the Israelis had agreed
to provide and the mission turned into a fiasco.

Despite the failure of the November effort, CIA
Director Casey and newly appointed National Securi-
ty Advisor John Poindexter became strong advocates
for pursuing the contacts with Iran. Over the objec-
tions of Secretary Shultz and Secretary Weinberger,
they won the President. Being sorely aware of leaks
from the House and Senate Intelligence Committees,
they did not trust any part of Congress to maintain a
secret and decided to keep all of this from Congress.
Because of their hostility to the idea and because of
leaks of sensitive matters from their agencies, particu-
larly from the State Department, they decided to
keep Shultz and Weinberger in the dark on the initia-
tive.

Initially, the CIA was to run the operation. Howev-
er, Casey's top lieutenants didn't want to have any-
thing to do with Ghorbanifar or Secord and appear to
have opposed the whole idea. Rather than give the
assignment to his reluctant lieutenants, it appears
Casey gave the operation to North.

In short, Casey didn't trust his lieutenants. Casey
and Poindexter didn't trust Shultz and Weinberger.
Casey and Poindexter didn't trust the Intelligence
Committee of Congress.

A lot of this lack of trust came directly from the
astounding number of leaks in recent years of highly
sensitive classified information from sources both in
the Administration and Congress.

Simple public disclosure of classified information
can be just as damaging to our national security as
selling secrets to the enemy. In recent years, leaks
from both ends of Pennsylvania Avenue have been far
too common. No amount of legislation can complete-
ly stop this, but I think there would be fewer leaks
and greater trust if Congress created one small Joint
House/Senate Intelligence Committee and passed
laws such as my bill, H.R. 3066, to make it a felony
crime for any officer or employee of the Federal
Government to leak any classified information.

Another thing these hearings have demonstrated is
the serious lack of an effective and acceptable
counter-terrorist policy, especially one to deal with
hostage-taking situations such as we have in the
Middle East. If the President had been presented with
a reasonable alternative for getting our hostages back,
he probably would not have pursued the Iranian arms
initiative the way he did.

Although Secretary Shultz and Secretary Wein-
berger have been publicly praised for their good judg-
ment and counsel it does not appear that they tried to
provide a viable alternative to the President. In re-
sponse to direct questioning. Secretary Weinberger
adamantly refuted Admiral Poindexter and Robert
McFarlane's testimony that neither he or Secretary
Shultz offered an alternative by saying that he had
indeed offered the President alternatives for getting

676

Supplemental Views

our hostages back. However, he indicated that the
alternatives were "too sensitive" to discuss in pubHc
session and said that he would happily discuss them
with the committee in closed session. When efforts
were made to arrange such testimony the Secretary
refused to cooperate and the committee decided to
stand by its policy of not issuing subpoenas to compel
the testimony of cabinet officials. Based on the testi-
mony of CIA witnesses it appears unlikely that Secre-
tary Weinberger presented any workable suggestion.

Although we have highly trained special operations
forces, we couldn't use them to rescue our hostages in
Lebanon because we didn't have sufficient intelligence
information to conduct operations. This is sad evi-
dence of a CIA greatly weakened in the 1960s and
1970s. Congress and the Administration need to re-
double efforts to rebuild the CIA.

If we can locate and arrest terrorists, as was done
recently in international waters by the FBI, we should
be willing and able to act against the terrorists in such
a way as is calculated to bring about the twin goals of
getting our hostages returned and deterring future
hostage taking. Shouldn't we consider some strong
approaches such as special operations raids on terror-
ists' camps or possibly taking terrorists hostage? At
the very least, we need to see special operations laws
passed by Congress last year implemented.

In spite of these obvious institutional failures, the
majority report reaches the conclusion that the mis-
takes unearthed in our hearings came about because
the President put the wrong people (political appoint-
ees) in office and that there was really nothing of
significance wrong with our system that contributed
to these mistakes. In the majority's view none of this
would have happened if the President had relied on
"career professionals" who would have adhered to
regulations and institutional procedures. I find this
shallow conclusion not only misses the mark on the
role that leaks of classified information and the ab-
sence of an effective hostage-taking policy played in
all this, but it misses the big problem that we have
with an entrenched civil service bureaucracy that
frustrates to the extreme elected and appointed offi-
cials trying to carry out national security policies.

It is clear from the testimony that time and again,
faced with the frustrations of inefficiencies and of
opposition from an entrenched bureaucracy, Director
Casey, Admiral Poindexter, Colonel North and others
chose to go outside the normal systems within the
departments and agencies of our government to get
the job done. In doing so they made some mistakes.
To the majority, going outside the system at any time
is an unforgivable mistake and a demonstration of the
weakness and incompetence of an elected or appoint-
ed official. At no time does the majority acknowledge
that there is a major problem with any system which
is so inefficient or frustrating that it drives good men
to take the drastic step of going outside the system.

Director Casey is not the first head of the CIA to be
driven up the wall by roadblocks put in the way of
carrying out policies by "career" civil servants who
were bent on having their way regardless of the
views at the top. A few quotes from the book
Secrecy in Democracy by Admiral Stansfield Turner
demonstrate this point:

"Early in my tenure as head of the CIA I realized
that managing the Agency was unlike any manage-
ment experience I ever had or any I studied at Har-
vard Business School. Here are some matters that
brought me to that conclusion.

". . . Almost the entire personnel system was also
considered to be out of the director's purview. Major
appointments, such as chiefs of station were being
made without my approval. Once, when I requested
the heads of the three operating branches to submit to
me a list of their most promising, versatile people in
top pay grades, I had a near-rebellion on my hands. I
wanted to consider these people for special assign-
ments outside their branches to broaden and develop
their potential for top agencywide leadership posi-
tions. The branches were indignant that I considered
interfering with 'their' people's careers . . . When the
first annual budget came to me for approval, every-
thing had been decided. The three branches expected
me to rubber-stamp what they wanted.

". . . From what I could discern these were all
practices of longstanding. As I began to express con-
cern that I was not consulted on decisions in these
areas and others, many became defensive and cautious
about volunteering information to me.

". . .The last thing these three (the branch chiefs)
want is for the DCI to become a strong central au-
thority . . . What they had in mind was someone who
would fight the political battles for them with the
White House, with Congress and with the public, but
would leave them the management of the Agency and
its operations.

"... I wondered whether there was something in
the nature of the profession, instead of the personal
disposition of these men, that made tight control un-
desirable to them ... To prevent one branch from
intruding into another's territory, they had established
as complex a maze of bureaucratic procedures as I
have witnessed anywhere in government.

". . . There were many reasons why I could not
accept the system. I felt it my responsibility to assure
the American public that I knew what the CIA was
doing and how it performed ... I felt personally
responsible for prevention of any repetition of the
kind of error the old system failed to prevent."'

' Stansfield Turner, Secrecy and Democracy: The CIA in Transi-
tion. (1985), Chapt, 15, pp. 183-188

677

Supplemental Views

While "career" mindsets and other inefficiencies will
always exist in a civil service bureaucracy (and I do
not advocate eliminating civil service), a major study
should be undertaken of the structure of our national
security policymaking and implementation apparatus
in each office, agency and department of our govern-
ment dealing with national security matters for the
purpose of making recommendations to the President
and Congress on how to streamline the system and
assure the least bureaucratic resistance possible in the
implementation of policies directed by those appoint-
ed by the President. In matters of national security it
is essential that problems of bureaucracy be reduced
to the bare minimum.

In the final analysis, no matter the motives and
good intentions, mistakes were made: the decision to

trade arms to the Iranians and deal for hostages; the
diversion of Iranian arms profits to the Contras; the
decision by Admiral Poindexter to keep the diversion
from the President; the misleading and untruthful
statements to Congress; and the lying to the Attorney
General and altering and shredding documents last
November.

Criminal prosecutions may flow from some of
these, but most who viewed these hearings would find
trials and criminal sanctions inappropriate. It is time
now to put these matters behind us and to bring
something positive out of all of this. The recommen-
dations contained here and in the dissenting views of
the minority are a good place to start.

Bill McCollum.

678

Additional Views of Senator Paul Trible

I have joined the majority of my colleagues in this
Report because its interpretation of the facts, the law,
and policy considerations in most instances squares
with my own. I am not, however, in accord with the
majority in every particular, nor do I assess the roles
of our institutions in precisely the same way.

The essence of the Iran-Contra Affair lay in the
decision by a few within the National Security Coun-
cil Staff to embark on a self-destructive journey into
the privatization of foreign policy. The pitfalls associ-
ated with this departure from long established princi-
ples of government are well chronicled in the Report.
The main lessons are: that a President's staff, no
matter how well intentioned, must always be account-
able; that a President who is deceived and from
whom information is intentionally withheld is a Presi-
dent betrayed; and that truth, trust and respect for the
rule of law and the Constitution are indispensable to
the success of our free society.

Moreover, the Report vividly demonstrates the
folly of placing public policy in the hands of private
citizens motivated in part by profit. Since Old Testa-
ment times, man has been admonished that he cannot
serve two masters. Yet the decision to permit Secord,
Hakim and their confederates to negotiate in the name
of the United States, while permitting their Enterprise
to reap huge profits, frustrated our nation's policy
goals, embarrassed our government and confused our
allies. I recall the shocking irony when Oliver North
realized during his testimony that while he was send-
ing desperate Prof notes detailing his anguish over the
plight of the Contras, over $4.8 million was collecting
interest in Secord and Hakim's secret Swiss accounts.

Time and again during our deliberations in the Iran-
Contra Affair, we return to one central theme — our
Nation's lack of foreign policy consensus. Whether
one looks at the Administration ignoring established
foreign policy channels or at a Congress writing am-
biguous prohibitions on use of appropriated funds the
reason is the same: our inability to agree on the ap-
propriate role of America in the world.

This sharp disagreement — the breakdown in a bi-
partisan approach to foreign policy — has lead to con-
frontation, misunderstanding and created an atmos-
phere of suspicion that is the enemy of coherent and
thoughtful decision making.

The Majority Report fails to acknowledge the re-
sponsibility of Congress in all this. We have blamed
others and not ourselves. The report fails to address
adequately the inconsistency of Congressional policy
toward Central America, the failure of the Intelli-
gence Committees to monitor sensitive activities
closely, or Congressional refusal to accept the conse-
quences of terminating aid to the Nicaraguan Demo-
cratic Resistance. Yet these elements contributed mas-
sively to a climate in which the Iran-Contra Affair
could happen. None of this justifies what occurred,
but it does put events in a wider perspective.

I am also troubled by the sweeping character of the
indictment of the President.

Certainly all Presidents are responsible for what
happens on their watch. However, there is absolutely
no evidence that President Reagan knew about the
diversion of funds to the Contras. The President's
judgement on the sale of arms to Iran can be faulted,
but there is no evidence of wrongdoing on the part of
the President.

The argument that this President failed to honor his
constitutional duty to "take care that the laws be
faithfully executed" and failed to create an environ-
ment where the rule of law governs goes too far.
It is as though the majority seeks to assign blame
where there is no culpability. The fact that the Presi-
dent's subordinates chose to keep something secret,
does not indicate dereliction of duty by the President.
Nor is the argument that the President should have
known more persuasive. Contending the President
should have known what is purposefully withheld
from him is to require omniscience. We demand much
from our chief executive but that seems to me far too
much to ask.

It is also important to recall that time and again the
Regan Administration has demonstrated a commit-
ment to democratic principles, to truth, and the for-
mulation of foreign policy within proper boundaries.
Its successes are dramatic and overshadow the Iran-
Contra Affair.

We have seen a resurgence of freedom and democ-
racy in Central America, the liberation of Grenada,
establishment of democracy in the Philippines and a
significant movement now toward freedom in Korea.
The Reagan Administration has won support for anti-

679

Additional Views

Communist freedom fighters in Afghanistan and
Angola. And we are on the verge of a breakthrough
for substantial reductions in nuclear arms.

While the acts revealed at our hearings cannot be
tolerated in our free society, my strong feeling of
disapproval of what occurred in this affair is balanced
by my belief that from January 1981 to the present,
this Administration has achieved success by means
that conform tot he requirements of our law, our
Constitution and our political tradition.

I came to and leave this investigation as a supporter
of the goals and policies of this Administration and
President Reagan, a strong believer in the need to
oppose Soviet expansion in Central America, and the
necessity for covert activities provided they are con-
ducted through proper channels and consigned to the
proper hands.

Paul Trible.

680

Section IV
Appendix

Appendix

Organization and Conduct of the Committees'

Investigation

The investigation of the Iran-Contra Affair by these
two Select Committees was one of the more far-
reaching that Congress has conducted in recent dec-
ades, extending to many offices and agencies of the
U.S. Government, to Government and commercial
activities throughout the United States, and to events
in a number of foreign nations. This account of the
investigation describes how the Select Committees
gathered the evidence and developed the record on
which their Report is based.

The Establishment of Two
Congressional Committees

The 100th Congress launched this investigation of the
Iran-Contra Affair as one of its first actions after
convening in January 1987. On January 6, the Senate
established the Select Committee on Secret Military
Assistance to Iran and the Nicaraguan Opposition.'
The following day, the House established the Select
Committee to Investigate Covert Arms Transactions
with Iran.^ Both Chambers directed their respective
Select Committees to conduct an extensive investiga-
tion and to submit legislative recommendations. The
Resolutions in both Chambers had bipartisan sponsor-
ship and were adopted by roll call votes of 416 to 2
by the House and of 88 to 4 by the Senate.

The Select Committees' investigations were not the
first look that Congress had taken at the sale of arms
to Iran in 1985 and 1986, the diversion to the Nicara-
guan Resistance (or Contras) of some of the proceeds
of those sales, and related events. Several standing
committees, including the House Permanent Select
Committee on Intelligence and the Senate Select
Committee on Intelligence, conducted preliminary in-
vestigations of these events and issued reports of their
findings in December 1986. The two new Select
Committees assumed the jurisdiction of several Con-
gressional Committees and were charged with under-
taking a comprehensive investigation of U.S. Govern-
ment agencies and individuals involved in transferring
arms to Iran and in diverting funds to support the
Contras.

The Senate Select Committee had 11 Members:

Chairman Daniel K. Inouye (D-Hawaii)

Vice Chairman Warren Rudman (R-New Hampshire)

George J. Mitchell (D-Maine)

Sam Nunn (D-Georgia)

Paul S. Sarbanes (D-Maryland)

Howell T. Heflin (D-Alabama)

David L. Boren (D-Oklahoma)

James A. McClure (R-Idaho)
Orrin G. Hatch (R-Utah)
William S. Cohen (R-Maine)
Paul S. Trible, Jr. (R-Virginia)

The House Select Committee had 15 Members:

Chairman Lee H. Hamilton (D-Indiana)

Vice Chairman Dante B. Fascell (D-Florida)

Thomas S. Foley (D-Washington)

Peter W. Rodino, Jr. (D-New Jersey)

Jack Brooks (D-Texas)

Louis Stokes (D-Ohio)

Les Aspin (D- Wisconsin)

Edward P. Boland (D-Massachusetts)

Ed Jenkins (D-Georgia)

Dick Cheney (R-Wyoming)
Wm. S. Broomfield (R-Michigan)
Henry J Hyde (R-Illinois)
Jim Courier (R-New Jersey)
Bill McCollum (R-Florida)
Michael DeWine (R-Ohio)

683

Appendix

A Joint Investigation

Even as the two Select Committees began work inde-
pendently, the idea of a joint investigation arose. With
the support of Vice Chairman Rudman and Ranking
Minority Member Cheney, Chairmen Hamilton and
Inouye resolved problems arising from the fact that
the two Committees worked under different mandates
and represented Chambers with different procedures
and traditions.

The result of these negotiations was a series of firsts
for the Congress: the first joint investigation conduct-
ed by two separate Committees, one of the House and
one of the Senate; the first joint hearings held by two
such Committees; and the first time that Committees
of the House and Senate had ever submitted a com-
bined report to their respective Chambers — including
the names and views of Members of both Chambers.

Before the Committees agreed to share resources
and work together on many aspects of the investiga-
tion, they had already set up separate offices and
assembled separate staffs. The Senate Select Commit-
tee occupied the ninth floor of the Hart Senate Office
Building. It appointed Arthur L. Liman, a senior part-
ner of the New York law firm of Paul, Weiss, Rif-
kind, Wharton & Garrison, to serve as Chief Counsel.
Supervising the investigation with Mr. Liman were
his law partner Mark A. Belnick (Executive Assistant
to the Chief Counsel) and Paul Barbadoro (Deputy
Chief Counsel), who had served both as Assistant
Attorney General of the State of New Hampshire and
later as Legal Counsel to Senator Rudman. The Exec-
utive Director of the staff was Mary Jane Checchi.
Lance I. Morgan served as Press Officer and assisted
substantially with the preparation of this Report and
in other Senate Committees" work. The Senate Com-
mittee staff included Associate and Assistant Coun-
sels, experienced investigators, experienced account-
ants detailed from the General Accounting Office,
computer experts, and security and administrative of-
ficers. At the height of the investigation, the Senate
staff totaled 54 people.

The House Select Committee worked in a vault-like
office under the dome of the Capitol. The Committee
appointed John W. Nields, Jr., a senior partner in the
Washington, D.C., law firm of Howrey and Simon, to
serve as Chief Counsel. W. Neil Eggleston, an Assist-
ant U.S. Attorney in New York, was appointed
Deputy Chief Counsel, and Robert J. Havel, Director
of Public Relations for the Association of Trial Law-
yers of America, was chosen as Press Liaison. Chair-
man Hamilton appointed Casey Miller as Staff Direc-
tor. Assisting the Committee was a staff of 45 that
included attorneys, investigators from the Department
of Defense, the Federal Bureau of Investigation, and
the Office of Special Investigations of the General
Accounting Office; security and administrative offi-
cers; and associate staff from standing House commit-

tees and Members' offices. Specialists from House In-
formation Systems provided expert computer assist-
ance and analysis capability.

Minority Members of the House Select Committee,
led by Representative Dick Cheney, appointed
Thomas R. Smeeton, Republican Counsel to the
House Permanent Select Committee on Intelligence,
as Minority Staff Director; George W. Van Cleve,
Committee Counsel to Representative Cheney, as
Chief Minority Counsel; and Richard J. Leon, a
Senior Attorney in the Justice Department's Tax Di-
vision, as Deputy Chief Minority Counsel. They di-
rected a Committee staff of nine and an Associate
staff of six, who assisted Minority Members in prepar-
ing their contributions to the Report of the Commit-
tees.

The division of labor within the Committee in-
volved all staff members. Security staff, technically
assigned to the Majority, served both Majority and
Minority Members and their staffs. The work of in-
vestigators, technically assigned to the Majority, was
available to Members of both the Majority and Mi-
nority. The Committee's staff was responsible for all
preparations for the hearings, notably in developing
the briefing and exhibit books. Overall, approximately
12 people worked primarily for the Majority, while 9
worked primarily for the Minority.

Organization of the Investigation

The Congressional investigation of the Iran-Contra
Affair was undertaken and conducted directly by the
the two Chairmen, the Senate Vice Chairman, the
Ranking House Minority Member, and Members of
the two Select Committees. They decided on the lines
of inquiry to pursue, directed Chief Counsels and staff
in obtaining documents and developing evidence,
chose witnesses to be deposed or to testify at the
hearings, prepared questions for witnesses, read depo-
sitions, and reviewed the record. They met regularly
for briefings and to exchange ideas and information,
discuss the evidence, and provide ongoing direction
to the Chief Counsels and staffs. Several Members
focused individually on certain areas of the investiga-
tion. Members also selected the themes to be empha-
sized in this Report and they decided which matters
were relevant for inclusion in the Report.

The Chairmen organized the respective Commit-
tees' attorneys and investigators into teams that con-
centrated on different areas of the inquiry. Flexibility
was nevertheless preserved so that staff members
could be employed as needed.

When the Senate and House Committees agreed to
combine their investigations and hearings, the Chair-
men agreed that staff members from both would work
closely. The investigative teams consisted of both
Senate and House Committee staff members who met
regularly with the senior staff members of both Com-

684

Appendix

mittees. Members, Counsel, and/or investigators from
both staffs attended interviews and depositions.

Primary responsibility for potential witnesses was
divided between the two Committees, an allocation of
responsibility that continued throughout the witnesses'
appearances at the public hearings. Thus, for example.
Vice Adm. John M. Poindexter was designated a
"Senate witness," meaning that Senate Committee
Members and staff had primary (but not exclusive)
responsibility for preparing him and that Senate coun-
sel took the lead in examining him at the public hear-
ings. The House, on the other hand, had primary
responsibility for Lt. Col. Oliver L. North.

Under the direction of the Committees and of indi-
vidual Members, investigative teams assembled docu-
mentary evidence before proceeding with full scale
interviews or depositions. Documents were obtained
from Government agencies through written requests
and from private parties by cooperation or subpoena.
From the White House, the Department of State, the
Department of Defense, the Central Intelligence
Agency, the Department of Justice, other Govern-
ment offices, and private parties, the Committees col-
lected more than 300,000 documents totaling more
than 1 million pages, all of which were reviewed and
analyzed by the staffs and many of which were en-
tered into the Committees' computerized database.

Unsworn interviews and sworn depositions were
the other principal investigative tools. The combined
staffs conducted about 250 interviews and deposed
about 250 people. The Committees dispatched Mem-
bers, attorneys, and investigators throughout the
United States and abroad to gather information and to
interview and depose individuals.

The activities that the Committees investigated
were shrouded in secrecy and it was in the National
interest that the facts be found and publicly exposed
as rapidly as possible. The Committees proceeded ex-
peditiously with their investigation, which began in
January and continued through October. An impor-
tant part of the Committees' responsibilities was to
present the testimony of the participants at open hear-
ings so that the public could learn directly from the
witnesses the facts that had been withheld and con-
cealed for over two years. At the same time, the
Committees were guided by a resolve that before
public hearings commenced they should conduct as
thorough an examination of documents and witnesses
as possible. Although the process produced over
300,000 documents and more than 500 interviews and
depositions, nothing could restore the documents that
had been destroyed before the investigation began;
nor could any amount of investigation compel wit-
nesses to recall what they professed to have forgotten
or overcome the death of CIA Director William
Casey. The Committees set their own timetable,
taking into account the Independent Counsel's man-
date and his strenuous objections to early grants of
use immunity to key participants. The public hearings

were originally contemplated for late February, but
did not commence until May, when the Committees
concluded they were ready to begin the first phase.
But the investigative work continued even when the
public hearings were in progress and after they ended.

Security

Security was a major concern for both Committee
offices because much of the investigation involved
closely held secrets of the U.S. Government. To un-
tangle the web of events that stretched from the
Middle East to Central America, the Committees'
Members and staffs first had to cull through top
secret information about covert operations, some of
which involved foreign governments. From the
outset, the Committees adopted and enforced the
highest standards of U.S. Government security proce-
dures.

To ensure that documents and information were
handled properly, every staff member was required to
obtain a top secret security clearance. Procedures for
granting security clearances to House Committee staff
represented a significant advance in clearing staff of
Congressional investigations. Procedures respectful of
the separate constitutional functions of each branch
were worked out among Chairman Hamilton, Attor-
ney General Meese, and the Honorable David M.
Abshire, the Special Counsellor to the President, and
were set forth in a letter to Ambassador Abshire from
Chairman Hamilton on February 19, 1987. Under
these procedures. Chairman Hamilton would submit
to the Department of Justice the name and back-
ground information on each individual whom he was
considering for clearance. The executive branch, usu-
ally through the Federal Bureau of Investigation,
would conduct the standard background investiga-
tions and would submit the results and any recom-
mendation to Chairman Hamilton. When he was satis-
fied that the individual met the requirements for clear-
ance, he would inform the individual and the Depart-
ment of Justice, which would provide an indoctrina-
tion briefing on security. The individual would then
execute both a briefing acknowledgment and a non-
disclosure form developed by the House Committee.
(See letter from Chairman Hamilton to David M.
Abshire, Special Counsellor to the President, 2/19/
87.) In order to expedite the Committee's work, At-
torney General Meese agreed to recommend that cer-
tain staff be cleared pending completion of their back-
ground checks.

The offices of each Committee were designed and
managed to ensure security. Offices were fitted with
storage vaults accessible only to specially designated
staff through an alarmed, combination-locked door. In
side these vaults, documents were kept in individually
locked security safes approved for this purpose by the
National Security Agency and the Central Intelli-

685

Appendix

gence Agency. Security personnel were on duty
whenever offices were open.

Committees' Members and staffs could request doc-
uments on a need-to-know basis, and security staff
maintained duplicate records verifying the time and
date of each transfer of a document and the name of
the person who requested it. The Senate Committee
offices also contained a sophisticated "clean room"
that was secure from outside interference — including
emissions of electronic devices — and was used for the
most sensitive interviews and discussions.

House Official Reporters with the requisite security
clearances recorded classified depositions, which were
conducted in secure facilities and attended only by
Members and other individuals with the requisite se-
curity clearances.

Computers and other electronic office equipment
were protected from emission interception through
technical security measures meeting "TEMPEST"
standards. TEMPEST security ensured that no elec-
tronic signals would reach beyond the confines of the
offices. Telephones were also designed with a "posi-
tive disconnect" system so that they could not be
used as listening devices. Secure telephones were in-
stalled for conversations between the Committees and
the White House.

Public Hearings

The public hearings opened on May 5, 1987, in the
Senate Caucus Room of the Russell Senate Office
Building. The location of the hearings alternated
weekly between the Senate Caucus Room and the
House Foreign Affairs Committee Room, Rayburn
House Office Building, Room 2172. The Committees
took testimony from 28 witnesses during 40 days of
joint public hearings — from May 5 to August 3 — and
took private testimony from 4 witnesses during 4 days
of closed hearings (a total of approximately 262 hours
of testimony). There were 1,092 exhibits presented
during the public hearings.

Pursuant to a rule formally adopted by both Com-
mittees, the location of the hearings determined which
Committee's rules governed. When hearings were
held in the Senate Caucus Room, the Senate Commit-
tee's rules applied and Chairman Inouye presided;
when the hearings took place in the House Foreign
Affairs Committee Room, the House Committee's
rules applied and Chairman Hamilton presided.

The hearings were transcribed by the House Offi-
cial Reporters, who produced transcripts on a "split-
rush" basis for the staff and the media. The Reporters
typed transcripts of the morning sessions by mid-after-
noon of the same day and of the afternoon session by
mid-evening, without verifying the transcripts against
tape recordings of the testimony. These transcripts,
therefore, contained some errors in transcription,
which were corrected later.

The Committees considered it important also to
preserve a visual record of the Hearings. According-
ly, they arranged for the Hearings to be videotaped
by the Senate Recording Studio, which produced one
tape for archival purposes and one additional tape for
use by each Committee.

Immunity

In their respective authorizing Resolutions, the Com-
mittees were empowered to compel testimony over
Fifth Amendment objections by obtaining a court
order immunizing a witness against the use of com-
pelled testimony in criminal prosecutions. This limited
immunity is commonly known as "use immunity."
Although it does not bar criminal prosecution of the
compelled witness, use immunity imposes on the pros-
ecutor the burden of demonstrating that the prosecu-
tion's evidence is not based on or derived from infor-
mation obtained during the immunized testimony. The
Committees were mindful of this burden on the Inde-
pendent Counsel in deciding whether to obtain immu-
nity orders for particular witnesses.

Other factors also influenced the Committees' deci-
sions on immunity, including the Committees' need
for evidence from a particular witness, the extent to
which the witness' testimony was likely to be proba-
tive, and whether any alternative sources of the same
evidence existed. The Senate Committee voted to
compel testimony through use immunity for 26 wit-
nesses and the House Committee for 26 witnesses.

Proceedings Relating to Swiss Bank
Records

One of the key considerations in assessing whether
to grant use immunity for Albert Hakim, who had
asserted his Fifth Amendment privilege, was the
extent to which the Committees could otherwise
obtain records of the secret Swiss bank accounts in-
volved in the Iran-Contra Affair. Those records were
critical to a key aspect of the Committees' investiga-
tion: following the money trail.

The relevant bank records were protected from dis-
closure by Swiss bank secrecy law. The Committees
initially hoped to overcome this obstacle by applica-
tion to the Swiss authorities pursuant to a treaty be-
tween the United States and Switzerland. After dis-
cussions with the Department of State and research
by the staff, however, the Committees concluded that
the Swiss would take the position that the Commit-
tees were not criminal investigative authorities and
were therefore not covered by the Treaty.

The Committees next endeavored to reach an
agreement whereby the Independent Counsel would
make copies of the bank records available to the
Committees once he obtained them pursuant to the
Treaty. The Independent Counsel, jjecause he be-

686

Appendix

lieved that any such agreement would prejudice his
own chances of obtaining the records, dechned.

The Committees also sought to obtain the records
by compelhng Richard V. Secord to execute a waiver
of his secrecy rights under Swiss law pursuant to a
procedure approved in U.S. v. Ghidoni, lil F.2d 814
(11th Cir.), cert, denied, 469 U.S. 932 (1984), and
other cases. Secord, however, successfully challenged
the Senate Committee's order compelling him to exe-
cute such a waiver. When Secord subsequently
agreed voluntarily to provide evidence to the Com-
mittees, he claimed that he had no relevant Swiss
bank records and that all such records were under the
control of Hakim. Accordingly, the Senate Commit-
tee decided not to appeal the district court's decision,
and the case was withdrawn.

The Committees decided that, to obtain the critical
financial records, they would have to obtain an order
of use immunity for Hakim. After the order was ob-
tained. Hakim produced his records, and equally im-
portant, assisted in interpreting them through his com-
pelled testimony. The evidence thus obtained was in-
dispensable to the Committees in tracing the flow of
money in the Iran-Contra Affair.

Proceedings Relating to Oliver L. North

Given Lt. Col. Oliver L. North's Fifth Amendment
objections when subpoenaed, the only way to obtain
his testimony was to compel it through a grant of use
immunity. The Committees' decision to grant him use
immunity was not an easy one. Because North was a
principal target of the criminal investigation, the Inde-
pendent Counsel strenuously urged the Committees to
forego any grant of immunity to North. At the same
time, it was clear that the Committees' failure to
obtain North's testimony would leave the record in-
complete.

After weighing the need for North's testimony
against the arguments of the Independent Counsel, the
Committees decided to strike a balance. They de-
ferred obtaining an immunity order and compelling
North's testimony until the latter stages of their inves-
tigation; in return, the Independent Counsel agreed
not to exercise his right to obtain a 20-day deferral of
the immunity order for North after the Committees
filed their application. (A similar agreement was
reached with the Independent Counsel, for the same
reasons, regarding the compelled testimony of Poin-
dexter.)

On June 15, 1987, the U.S. District Court for the
District of Columbia issued an immunity order com-
pelling North to testify. Thereupon, the Committees
again subpoenaed North to testify and produce docu-
ments. North, through counsel, vigorously objected
and argued that, despite the immunity orders, he
would be severely prejudiced in his defense of any
subsequent criminal charges were he required to testi-
fy unconditionally in private and public sessions.

North's counsel maintained that compelling North's
testimony at such a late stage deprived North of the
full benefits of use immunity and thus unfairly
stripped him of a criminal defendant's most important
right — to remain silent.

North's counsel demanded, inter alia, that the Com-
mittees agree to limit North's testimony to a maxi-
mum of 3 days and not to recall him under any
circumstances. He demanded also that the Committees
agree not to require North to produce documents
until immediately prior to his appearance for testimo-
ny. If such demands were not met, North's counsel
informed the Committees that he would advise his
client to disobey the subpoenas and defend against
criminal contempt charges.

The Committees were thus confronted with another
difficult decision. Criminal contempt proceedings
could take years to complete and, even if successful,
would not necessarily result in obtaining North's testi-
mony. The penalty for criminal contempt is imprison-
ment, not compulsion of the recalcitrant witness' testi-
mony. Although civil contempt proceedings do
coerce testimony from the witness, serious statutory
questions arose as to whether the Committees could
successfully mount civil contempt charges against
North, given his status as a Government employee. ^
Although the Committees firmly believed that
North's legal arguments were without merit, it was
not clear that the jury in a criminal contempt case
would agree. Furthermore, certain of North's argu-
ments were persuasive to the Committees as a matter
of fundamental fairness to an individual facing likely
criminal prosecution.

Accordingly, the Committees again struck a bal-
ance. The Committees decided to restrict North's pri-
vate testimony, in advance of his public appearance,
to a single session limited to the subject of the in-
volvement and knowledge, if any, of the President
regarding "the diversion." Also, the Committees reaf-
firmed their intention to try to complete North's
public testimony in 4 days and not to recall him for
further testimony unless extraordinary developments
created a compelling need therefor. It should be
noted that the Committees had not recalled any wit-
ness prior to North's appearance, nor did they after-
ward. Robert McFarlane testified for a second time,
following North's appearance, only at his own re-
quest. (The Committees declined to commit to limit
North's testimony to 4 days. His public testimony
actually continued for 6 days, and he was not recalled
thereafter.) The Committees rejected all of North's
other demands.

The Committees' decisions regarding North's testi-
mony were made to accommodate the legitimate con-
cerns expressed by his counsel without sacrificing the
Committees' power or the integrity of the proceed-
ings. As a result. North appeared in response to the
Committees' subpoenas, produced his notebooks and

687

Appendix

other relevant documents, and submitted to extensive
questioning.

The Committees' Use of Computer
Technology

The quantity and breadth of material to be analyzed
by the Committees necessitated the use of computer-
ized databases to facilitate the storage, organization,
and retrieval of information.

The Committees' primary use of the computers,
beyond word processing tasks, was to compile a
number of databases containing the materials obtained
in the investigation. Because of the large volume of
information and documents involved and the wide
range of issues addressed by the investigation, it was
essential to develop systems that would enable the
Committees to store and retrieve these materials in a
prompt, efficient, and useful manner. Two general
needs were addressed. The first was the need to ex-
tract from the vast amount of material available the
documents or information pertinent to a particular
witness or a particular inquiry. The second need was
to locate specific documents or information from
among the many thousands of documents and the
numerous transcripts in the Committees' files.

The Senate Committee staff accepted responsibility
for the computer filing of documents and gave copies
of its codes and documents to House Committee staff
The House Committee staff also operated a computer-
ized document retrieval system. To facilitate filing
and retrieval, each page of each document was as-
signed a Senate code number prefaced by one or two
letters indicating the source of the document.

Later, a text-oriented database product was added
that allowed document summaries to be searched.
The addition of a full-text search capability made
possible more complex queries.

Declassification

Before any classified documents were publicly re-
leased, they were submitted by the Committees to the
White House for review by a Declassification Com-
mittee composed of representatives from the affected
executive departments. The declassification process
worked smoothly. There were no major disagree-
ments, compromises were struck where necessary,
and the Committees were generally satisfied with the
outcome. The members of the Declassification Com-
mittee, led by Brenda Reger of the NSC staff, were a
dedicated group of professionals, who processed volu-
minous materials rapidly, sometimes in just a few
hours or overnight (including weekends), so that they
could be used at the hearings or included in this
report. The Declassification Committee also expedited
clearance of this Report itself on a chapter-by-chapter
basis reviewing over 2,100 pages of typescript and
devoting more than 2,000 hours to the task. The

result of this effort was public disclosure of critical
facts with due regard to considerations of national
security and U.S. foreign relations.

The declassification procedure involved sending
documents to the White House with a request for
declassification. The Declassification Committee re-
viewed the documents, redacting information that
could not be declassified. For this Report, the Declas-
sification Committee then discussed with the Commit-
tees' staffs ways to resolve any problems with classi-
fied information, so that an entirely unclassified
Report could be published.

The House and Senate Committees together submit-
ted more than 4,000 documents to the White House
Declassification Committee. A computerized control
system was developed at the Select Committees to
keep track of which documents had been declassified,
which were in the process of declassification, and
which remained to be declassified.

Fund-Tracl(ing System

Following the "money trail" — the sources, move-
ments, and locations of funds involved in the investi-
gation— necessitated the establishment of separate spe-
cialized databases. Two closely related files were cre-
ated. The first identified all relevant bank accounts;
the second contained the detailed transactions. Data
were first entered into the bank account file to be
used to verify transactions. Each account was verified
to flow from a known account to another known
account. After the bank account file was prepared,
specific transactions were entered into the second file.
All monetary amounts were typed twice; the program
monitored the entry to ensure that the two entries
were identical. The accounting firm of Price Water-
house provided professional accounting services to
the House Committee, and the General Accounting
Office provided similar services to the Senate Com-
mittee.

Special-Purpose Systems

During the course of the investigation, several addi-
tional computer systems were developed to fill more
specialized needs. A simple database was prepared to
list all exhibits used in public testimony, including the
date each was entered into the official record. Sub-
poenaed telephone records of several witnesses were
entered into a database, permitting a variety of data-
base searches including chronological listings, lists of
calls to a particular location, and frequently called
numbers.

The hearings transcript database was one of the
more useful databases. All testimony was entered in
this database, which could be scanned by key word
and could print out all transcript references to a par-
ticular event or person. The House Committee staff

688

Appendix

could also search a chronology of events, as well as
all material produced on its word processors.

Staff members of the House Information Systems
group and the Senate Computer Center were particu-
larly helpful in establishing and managing the data-
bases and in assisting with computer and word proc-
essor operations generally.

Cooperation from the President

The Committees received cooperation from the White
House. The President did not claim executive privi-
lege, and he directed pertinent executive departments,
including the White House, to make available all rele-
vant documents and personnel. The President also
made available his personal biographer for interviews
and relevant extracts from his personal diaries, pursu-
ant to an agreement between the Committees and the
White House. The President declined, however, to
permit the Committees to make reference to his diary
extracts in this Report.

Pending Request

Relevant PROF messages that had not been deleted
as of November 15, 1986, were produced by the
White House to the Committees. However, in August
1987, after the Committees' hearing, the Committees'
computer experts informed the Committees of a possi-
bility that PROF notes deleted from the NSC com-
puter might still be retrieved. When a sender or re-
ceiver of a PROF message deletes a message, he de-
letes only the computer's ability to call the message
up to the computer screen. The message itself is not
actually deleted. Deletion of the message itself occurs
when the user writes a new message over the old
message in his "user space." The selection of which
portion of the user's space is occupied by the new
message is made randomly by the computer. (Each
user has his own limited amount of user space.) The
computer has the ability to print out a "dump" of all
data stored in selected user areas, i.e., both the "delet-
ed" messages which have not been written over and
the "live" messages.

On August 31, 1987, the Committees made a writ-
ten request for a number of things including a com-
plete "dump" of the PROFs user areas for North,
Poindexter, Robert McFarlane, and Don Fortier. Ac-
cording to the Committees' computer experts these
dumps could be printed in less than a day. The White
House initially rejected the requests by letter dated
September 4, 1987 on grounds of "separation of
powers principles, and Constitutional prerogatives."
Specifically with respect to the computer "dump" it
stated that the requested information would be irrele-
vant and would involve highly sensitive national secu-
rity matters. The White House also said it believed
the chances of obtaining any usable information to be
extremely remote, i.e., that all or substantially all of

the deleted messages had been written over, and that
it would take too much time to perform the "relevan-
cy and classification review" of the dumps. The
dumps would be thousands of pages long, and the
White House contended that most if not all of which
would consist of "live" messages already reviewed.
Since there is no way of telling from the face of the
dump which messages are "live" and which are not,
the entire dump would have to be reviewed. The
White House refused to review the dump itself on the
ground that it would take too much time, and de-
clined to permit the Committees to review it on na-
tional security grounds.

The Committees did not agree. They pursued the
matter further, and prevailed on the White House to
print out a sample portion of a "dump" for one of the
users. The White House informed the Committees
that it contained only live material that had already
been reviewed. The White House reasserted that it
would not perform complete dumps, but agreed to
print out dumps containing only the deleted material
if a computer program could be written which would
separate the "deleted" data from "live" data which
had previously been provided to the Committees.

The White House declined to permit the Commit-
tees' experts to have access to the NSC computer
system to perform this task on national security
grounds, but on several occasions the White House
cooperated, and has stated that it will continue to
cooperate, by making NSC and White House person-
nel available to provide information concerning the
system so that such a program could be written.

Extraordinary efforts were made by the Commit-
tees and its experts during September and October to
develop this program. Due to the difficulty of this
task, the experts had not yet completed a working
program as of early November.

The Committees believe that it is important for
them to obtain and review this data to determine
whether it contains information significant to the in-
vestigation, and are hopeful that their continuing ef-
forts to retrieve remnants of "deleted" PROF mes-
sages will be completed at or around the time that
this Report is issued. There is no assurance that the
material extracted will be anything more than frag-
ments, and even the fragments may be unrelated to
any matters under investigation. Consequently, the
Committees decided not to delay issuance of this
report. However, if any new and relevant information
is uncovered from the PROFs system and not includ-
ed in this Report, the Committees will take the neces-
sary steps to make it available to the standing Intelli-
gence Committees and, if appropriate, provide it to
the Independent Counsel.

Another potential source of additional evidence was
data on word processing diskettes gathered from NSC
staff offices. Many critical documents, including the

689

Appendix

key diversion memorandum, were typed on such dis-
kettes.

The Committees made requests to the White House
and the Independent Counsel who had joint custody
of the diskettes themselves, and received numerous
documents that were printed off all these diskettes
and have been assured that all relevant materials
which can be printed from such diskeetes at this time
have been produced. If further "deleted" materials
can be printed off these diskettes, we are confident
that the Independent Counsel will do so.

Cooperation from Other
Governments

The Committees received unprecedented cooperation
from the State of Israel. Israel entered into an agree-
ment with the Committees to prepare and provide
extensive financial and historical chronologies detail-
ing the role of Israel and individual Israelis in the Iran
initiative from 1985 through 1986. Israel was unwill-
ing to waive its privileges of State secrecy and sover-
eign immunity and permit its officials and citizens to
be questioned by the Committees. In lieu of inter-
views or testimony, and without waiver, Israel agreed
to obtain and review relevant documents from Israeli
participants and to interview Israeli nationals. With
the specific agreement of the Government of Israel,
information from the Israeli chronologies is used in
this Report. The Committees used this material spar-
ingly and only where it was the best or only evidence
of relevant facts.

The Committees' Report

The Committees' Report was prepared as a joint
effort. The Committees directed their Chief Counsels
to organize staff attorneys into writing teams that
were responsible for drafting chapters based on the
information that the investigation had produced. As-
sociate staff acted as critical readers, and support staff
provided fact- and cite-checking as well as word
processing capability. The Members of both Commit-
tees, acting on their own or through their Chairmen,
were involved in or apprised of every important step
in the process, from drafting to reviewing and finaliz-
ing the Report.

The staff produced a draft version of the Report by
mid-September 1987, and the Committees separately
reviewed and revised the draft. Members continued to
review and revise drafts until November 5, 1987,
when the Committees adopted the Report by separate
votes.

A professional editing team edited, illustrated, and
produced the printed volumes. Design services were
provided by the Superintendent of Typography and
Design of the Government Printing Office.

Conclusion of Activities

The Committees concluded their work by filing their
joint Report respectively with the House and the
Senate on the designated days. A skeleton staff re-
mained during November to complete the publishing
program and to catalog and prepare the Committees'
documents and papers for permanent storage.

Endnotes:

1. S. Res. 23, 100th Cong., 1st Sess. (1987).

2. H. Res. 12, 100th Cong., 1st Sess. (1987).

3. Title 28, U.S.C. 1364.

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